A Global Conversation
The Trials of Litigation
Insurance industry experts discuss with AMBestTV the new trends in litigation affecting the industry.
- September 2019
“What used to be a really hot item for plaintiffs' attorneys is not so much anymore. There are two reasons, one is the industry has clearly gotten much better at the way and manner in which they handle claims. In addition, a number of jurisdictions have passed what they call unfair claims practices statutes. We like to call them fair claims practices statutes. But what that does is limits the kinds of claims that might be the subject of bad faith. You can't just come in anymore and say everybody knows how bad insurance companies are. That doesn't get you anywhere. You have to be able, as a plaintiff's lawyer, to grab one of the sections of these fair claims practice statutes and say that I can prove to you that this was done.
That's not as appealing as it was. They're very smart about getting those cases resolved in favor of the policyholder who has generally brought that claim.
It's not the big deal it was anymore. It's still out there and carriers have to be very careful about it but most of them are doing a better job of managing the claims the way they should be managed.”
“One of the disturbing trends that we see [facing D&O underwriters] is the litigation fund, litigation financing, as an asset class that is emerging. There are plenty of investment funds that are allocating some money towards litigation.
The essential objective of these funds is to go around looking for cases to file. Whether those cases have merit or not, the insurers have to start contributing towards the defense cost containment expenses. Therefore, that aspect of loss ratio is definitely going to increase.
We don't know whether this is a sustained trend, this litigation financing as an asset class, if it's just a flavor of the time, or is it going to be a permanent asset class in the future. For now, it's definitely a troublesome trend that's going to cause increases in frequency.”
Director, Industry Research
“If you go back 20 years, you really don't see assignment of benefits being used in the property context. It wasn't until about 2006 or 2007 where you actually had an attorney who innovated this idea. He went out and educated a bunch of restoration contractors and told them you can have homeowners sign this assignment of benefits agreement. It'll give you a lot of leverage in order to make the insurance company pay your bills within a timely manner. What was very interesting once it came out in 2006 and 2007 was the widespread adoption. There was just a dramatic explosion of litigation that related to assignment of benefits to the point where it was tens of thousands of lawsuits in the last year.”
Senior Vice President of Public Policy
Florida Association for Insurance Reform
“We've also seen more litigation, more cases going through litigation as opposed to settling earlier. From that standpoint, you'll end up seeing sometimes higher loss adjustment expense costs in terms of those cases staying open longer. That's actually factored in.
From a macro standpoint, things like the nation's roadways still being in ill repair from an overall standpoint. That's definitely had some impact on loss frequency.
When you put all those things together, it's been a confluence of different factors that have impacted commercial auto results. Underwriters are having to plan for, understand, and try and work with making better decisions to combat those factors.”
“The big deal is now the court has permitted cases to be simultaneously heard at a state and federal level.
This is kind of a big deal because the states have the reputation of being more plaintiff friendly. Cases can take longer to decide on in state courts.
Now you're faced with a situation where you're defending a case federally and state at the same time.
What's going to apply? The statute of limitations on IPOs is three years, so there is more exposure period for federal and state litigation.
In particular, California may see an elevation in lawsuits, too.”
Senior Industry Research Analyst
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