Will Our Costly Legal System Cost You Your Job?

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By Kelly Cheung on May 21, 2013 7:03 AM

We know that the U.S is a highly litigious society, but did you know the U.S. legal system is the most costly, too?

The way our legal system works is problematic for companies, large and small. The costs of doing business will be increased by the high costs of litigation and budget cuts that will inevitably be made for businesses to survive in this economic climate. Don't let your job be on the chopping board.

A recent study released by the U.S Chamber of Institute of Legal Reform found that the U.S. Legal System is the most costly in the world. Our legal system has the highest liability costs as a percentage of GDP. Our liability costs 2.6 times more than the European average. In fact, the liability costs are four times higher than the least costly European countries in the study.

The study took liability costs of thirteen countries of similar legal protections and regulations. It found that the U.S. legal system costs were about 50 percent more than the U.K. and attributed these higher costs to the higher frequency and cost of claims.

For a general counsel of a U.S. company, this is concerning. The cost of litigation is growing as more class actions are pursued and the claims become more expensive to litigate or settle out of court. One study found that nearly 90 percent of U.S. corporations are engaged in litigation and the average company is dealing with a 37 lawsuits at a given time. Larger $1 billion-and-up companies are burdened with an alarming caseload of 147.

One thing this means for in-house counsel is that the costs of doing business in their companies are growing higher and higher. This leads to budgets needing to be decreased and strategies for your company to cut costs wherever possible, but where?

Some good news is that there is a growing trend in recent years for companies to depend more on their in-house counsel, as opposed to hiring outside counsel. Companies with in-house legal departments save because the costs involved are less than hiring outside counsel. However, in-house counsel must be able to handle the enormous workload of claims and litigation companies are facing these days. That can be a daunting task for some legal departments already spread too thin.

To handle both costs and workload, it may be best to work to prevent claims from the start. Regardless of the current state of your company’s financial health, it is important as an in-house counsel to stay on top of how your legal department is managing its claims and lawsuits so your company, and your job, both stick around.

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