The Effects Of State Tort Provisions And Perceptions Of Litigation Risk On Malpractice Insurance

Abstract

This study is an empirical examination of the use of malpractice insurance by independent auditors. Higher insurance premiums are found in states that utilize the foreseeable third-party standard. Auditors who perceive higher litigation risk are found to be willing to bear higher insurance premiums and to opt for higher coverage. Overall, the results suggest that state tort provisions influence litigation risk and malpractice insurance is used to mitigate this risk.¹