How many new lawsuits do you think are filed in the United States each year? 2,000? 20,000? 2,000,000? Would you be surprised to hear that all of these choices are wrong? Nearly 20 million new civil lawsuits will be filed this year in the state and federal court systems. That equates to about one every 14 seconds.

This means that the odds of an adult American being sued in any one year are close to 1 in 8. This means the average 40 year old American can expect to be named in at least 4 lawsuits over the remainder of his lifetime. If you consider that physicians face much more litigation risk than the average American because of malpractice risk, you can see why litigation is such a serious threat to every doctor's financial security.

While only about 2% of lawsuits ever make it to trial, the cost of this litigiousness is truly staggering. Many studies have studied the causes and effects of such litigation on the nation's economy as a whole. Defense costs and the time wasted dealing with depositions and interrogatories are both financial costs the defendant must bear. These are in addition to the less quantifiable costs associated with reduced production from the increased stress from a lawsuit. In this article, we will focus on explaining why lawsuits are so prevalent, why this trend will not subside, and what doctors can do to protect themselves.

Why Americans Sue So Often

a. Everyone Wants a Piece of the Action
Why are there so many more lawsuits today than in the past? Partly, we think, because in today's society, the lawsuit is seen as a way to "get rich quick" rather than as a method of creating justice. Our culture seems to have embraced the belief that whenever something goes wrong, someone should pay, regardless if anyone was really at fault. Unfortunately, juries have adopted this idea as well. They often disregard the facts of the case, and rule on emotion and bias, giving away large sums of money in the process.

You read about these spectacular awards every day in the newspapers. A woman receives $2.6 million because her coffee was a few degrees too hot, a home-owner is forced to pay thousands of dollars to a trespasser who was injured while trespassing on the home-owner's property. Would-be plaintiffs see these same awards and ask, "Why not me?" They want a piece of the lawsuit payoff. Their first step is to look for a person and a reason to sue. It is only a matter of time until that person is you or me.

b. Too Many Lawyers
The excess of lawyers in this country also feeds the lawsuit fire. For every person with a lawsuit of questionable merit, there is a hungry lawyer ready and willing to file the suit. If you don't believe us, just open your local yellow pages or watch daytime television. You will see the many advertisements by lawyers waiting to start a lawsuit for you, even if you cannot pay the lawyer a dime. The lawyer may harass a defendant into a settlement or take a chance on a legal lottery at trial, whichever way he thinks he can get the most fees.

The legal business has grown tremendously in the last twenty years. All these lawyers need ways to make a living, and the lawsuit is a great source of instant income, whether it be defending the suit or prosecuting it. In many areas of the country, there are just too many lawyers. That means each attorney has to go out and "drum up business." Often, this "drumming up" means finding any client willing to sue, whether or not their suit is legitimate.

c. People Are Abusing the System
Another factor adding to the explosion of lawsuits is that many people are simply abusing the legal system for their own personal satisfaction. This trend has gotten so severe in the state of California that the state legislature passed a law called the "Vexatious Litigant Act." This law created a list to which judges throughout the state can add names of people who are abusing the legal system by filing too many lawsuits without merit. Of course, these individuals cannot be denied their "constitutional right" to sue, but they are prevented from filing suits without attorneys, unless they have a judge's permission. The list is available to every court officer in the state.

What type of people are on this list? People who, in a judge's opinion, have repeatedly filed, without attorneys, motions and lawsuits without merit or engage in other "frivolous tactics." Here are two awful examples:

1. One man outside of Los Angeles had filed over 200 lawsuits over a seven year period. Few of them were successful.
2. A court clerk recommended to a judge that he put certain individuals on this list. When these individuals heard about his recommendation, the clerk became a lawsuit target himself. He has since been sued 11 times in two years � all unsuccessfully. The clerk's reaction: "I am not exaggerating when I say I am extremely frightened by some of these people."

What You Can Do About It
There are two things you can do to limit our exposure to litigation: (1) try to behave so as to reduce the chance that you will be sued (risk management) and (2) shield yourself from the damaging effects of lawsuits (asset protection). Certainly reducing one's liability exposure by changing one's behavior is important (in fact, Mr. Mandell has co-authored a CME monograph entitled Risk Management for the Practicing Physician). Nonetheless, no matter how carefully one behaves, one is still a lawsuit target. Better, then, to engage in asset protection to reduce the ability of a lawsuit to threaten one's savings and property.

The goal of asset protection planning is to protect a client's assets from future potential lawsuits within the framework of their general financial plan. This goal is achieved by (1) using existing state and federal exemptions to shield personal savings, (2) creating protective legal structures, such as limited partnerships and trusts, to safeguard assets; and (3) using real economic transactions involving (1) and (2) as much as possible.. Even more importantly, asset protection planning often can discourage possible claimants from bringing lawsuits against you at the outset.

In today's litigious world, risk management and asset protection are desperately needed. With each endeavor approached wisely, you can significantly reduce your exposure to potential lawsuits and creditor claims.