New York’s legal bloat cost taxpayers and businesses a whopping $96.3 billion last year in excessive litigation — and reformers fear Mayor-elect Zohran Mamdani’s administration could make it worse.
Trial lawyers are abusing and defrauding the state court system, turning it into a “national embarrassment,” according to a new report by the group American Tort Reform Association.
“We’re seeing staged car crashes, slip-and-fall schemes, and even unnecessary medical procedures — all orchestrated by unethical lawyers and corrupt doctors who prey on vulnerable people,” said Tiger Joyce, president of the ATRA, in a statement.
“When judges allow these practices to flourish and lawmakers refuse to act, honest New Yorkers foot the bill for the city’s Judicial Hellhole reputation.”
The group again ranked the Big Apple as No. 2 on its list of Top 8 worst judicial hellholes in the country, with Los Angeles taking the crown from the Philadelphia Court of Common Pleas and Pennsylvania Supreme Court, which tied for first last year.
The total came out to each New Yorker paying about $2,534 in “tort tax,” or excessive civil litigation costs, last year — with legal waste up by 8.5% over 2024 due to the ongoing “fraudemic,” according to consulting firm The Perryman Group, which compiled the report.
Things are already so bad that the report calls the city’s courts “a playground for opportunistic trial lawyers and fraudsters to coordinate complex schemes spanning multiple industries,” the report states.
And with Mamdani’s top adviser Lina Khan, the progressive former Federal Trade Commission head, eyeing the use of novel legal strategies to push the mayor-elect’s agenda, those legal costs could reach new heights next year, tort reformers fear.
Khan’s promise to dig up “outdated laws for the sake of having the unchecked power to sue” would go against Mamdani’s promise of reducing red tape for small businesses in the city, Tom Stebbins, head of the Lawsuit Reform Alliance of New York, wrote in a letter to Mamdani Tuesday.
“The threat of costly litigation will discourage business development, undermine job creation, and further increase the cost of living,” Stebbins warned.
“Solving New York’s affordability crisis means avoiding unnecessary, ideologically driven lawsuits — not actively pursuing them.”
The ATRA’s report estimated that nearly 430,000 jobs are lost every year due to lawsuit abuse and excessive torts, and that targeted reforms could increase the state’s economy by almost $50 billion — if Albany lawmakers decide to act.
The group singles out specific fraud schemes that often target foreign-born workers who can sometimes barely speak English, making them especially vulnerable to predatory attorneys looking to cash out.
New York’s “fraudemic” also includes bogus trip-and-falls, business scams targeting Medicare and Medicaid and staged car accidents, the report says.
The overall cost from excessive litigation expenses statewide is up about $7 billion from ATRA’s report last year, which the group attributed to rampant fraud and skewed state laws and policies.
Policies, like the state’s no-fault insurance system and the scaffold law, which hold insurers and companies liable regardless of fault, have created a perfect storm for lawyers to abuse the system for maximum payouts, with the costs passed along to consumers, the group claims.
The state’s Department of Financial Services said that reports of no-fault and healthcare fraud cases doubled over the last four years, jacking up insurance premiums across the state.
“New York’s tort tax is exploding because courts let fraudsters run amuck, sometimes even after they’re caught staging accidents and running elaborate schemes, even pushing vulnerable people to get unnecessary and expensive surgeries, all to run up potential insurance payouts,” Joyce said.
“The strict liability standard in New York’s outdated Scaffold Law balloons construction costs and the state’s no-fault insurance system holds insurers fully liable regardless of fault, creating fertile ground for abuse.”
Over $154 million was doled out in just three headline-grabbing Big Apple tort cases this year:
Tech companies are also facing expanded liability, citing a novel lawsuit pursuing claims against TikTok and Instagram after Zackery Nazario, 15, died from subway surfing in 2023.
A slate of bills fresh on Gov. Kathy Hochul’s desk could help amend the situation — including one that would rein in the “legal lending” industry that fuels many bogus claims, but two others would actually make it worse, reformers say.
Those bills would help encourage legal bloat and fraud by expanding New York’s jurisdiction and allowing plaintiffs to collect damages from third party defendants, the group says, with many business groups pushing Hochul to veto both.
But the report also notes that some companies are fighting back with an extraordinary tool: civil racketeering suits.
Those suits, filed against both specific plaintiffs and law firms, allege that fraudulent accidents are staged and that some construction injuries are faked — claiming that some attorneys go so far as to tell their clients to get serious and unnecessary surgery, only to increase the final settlement.
“RICO lawsuits shouldn’t be necessary to achieve accountability, but New York City’s courts are so entrenched in fraud and abuse that businesses are left with no other choice,” Joyce said.
“It’s not just legal jargon — this is a real and growing crisis driving up insurance rates, inflating housing costs, and siphoning away billions from the economy.”
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