Tort Reform — The Danger & High Cost of Third-Party Litigation

The American Property Casualty Insurance Association (APCIA) and insurance economist guru, Dr. Robert Hartwig are taking on the dangers of third-party litigation. As the APCIA puts it, the civil justice system is being used for “profit instead of fairness.”

Hartwig’s assessment of the issue says the nuclear verdicts we’re seeing is costing the typical household $6,000 a year because they generate higher prices and reduced choice.

The average nuclear jury award in 2023 hit $44 million. That’s double the median we saw in 2020. That rise is fueling double-digit premium increases in commercial auto, umbrella and excess liability.

How serious is the problem and the need for reform? Capital committed to litigation financing for profit has hit $13 billion. It’s estimated that capital commitment will go up to $50 billion by the mid-2030s.

And the biggest market for that money? It’s not hard to guess but if you haven’t, it’s the United States.

Supporters — and those doing this very profitable funding — say the capital invested by third parties improves access to justice. Insurers and groups like the APCIA and Dr. Hartwig, say this funding will prolong disputes, push settlement demands sky high and add to social inflation.

Less predictable liability costs push prices higher.

The APCIA tort reform campaign calls this legal system abuse as a “hidden cost-of-living tax.” The cost of defending the third-party financing and the increased litigation costs eventually ends up affecting household budgets. Higher insurance prices and prices for every day goods are the main worry.

In the campaign, Hartwig and the APCIA are pushing for some common sense reforms. This includes more transparency around the litigation funding, some reforms on legal advertising and procedural changes aimed at larger awards.

Source link: Insurance Business America — https://bit.ly/4uoP699