Study: insurers facing more lawsuits than any other sector.

The average U.S. insurance company faces nearly 1,700 separate lawsuits pending in U.S. courts, according to law firm Fulbright & Jaworski's annual U.S. litigation trends survey. That's more than five times the average posted by the next highest sectors: energy, with 364; retail, with 333; and financial services, with 300.

Because of these suits, the average insurer spent $36 million on litigation in 2005, the survey found. Only engineering and construction firms, averaging $39 million spent on litigation, topped the insurers' legal costs. Ann Spragens, senior vice president and general counsel for the Property Casualty Insurers Association of America, said "the general concept that insurers have a great deal more litigation to contend with than other kinds of businesses is not a surprise--indemnification under the American tort system is largely funded by policies of insurance."

"Since the majority of civil litigation arises from torts, with only a modest fraction arising from contract and other causes of action, one would expect insurers to have significantly higher numbers," Spragens explained. "What we can't tell from this is whether these number are increasing for insurers over time, and whether they are moving in relationship with any easily observable factors such as overall claim frequency or severity or shocks such as catastrophes."

In a position paper, the American Insurance Association said the U.S. civil justice system is the most expensive in the industrialized world, with an estimated $246 billion spent annually, or about 2.2% of gross domestic product. AIA said this is much higher than in any other industrialized nation and that these tort costs hurt the economy and consumers by adding to the cost of products and services and keeping some products from even coming to market because of fears of litigation.