Jury Awards Skyrocket in 2005
Class action cases have continued to account for huge dollar settlements and judgments this year, with class actions totaling $100 billion directed at auto, tire, computer, artificial sweetener, airline, and insurance firms.
Class actions accounted for an estimated 40 percent of the total tort system costs during the year 2005, according to a study by the Casualty Actuarial Society.
Of the settlement dollars, approximately half, or $50 billion, went to plaintiff attorneys. The portion going to attorneys has increased each year since 2000.
The largest settlements this year related to consumer goods. The average jury award has doubled in size since 1999, and quadrupled since 1993.
Implications for p-c insurers:
The demand for liability insurance continues to escalate.
Underwriting, pricing, and reserving for liability coverages continue to be a challenge, given the difficulty of anticipating the source of the next class action case.
The cost of defending against class action cases has risen even faster than the cost of the settlements. In fact, over the past several years, the number of successfully defended cases has risen even faster than the number settled. It is likely that the cost of defense will continue to increase at a rapid rate.
As corporate entities embrace a more holistic, enterprise-wide understanding and management of risk, demand will increase for risk-transfer mechanisms that more completely address consequences of class action cases, such as loss of reputation and market share. As the use of a common metric for risk advances, the impact of liability losses of all types is becoming more widely understood, encouraging corporations to purchase more adequate limits of coverage.
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, July 30, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
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