The growing number of costly lawsuits are adversely impacting insurer profitability and their ability to provide coverage, according to panelists who convened last week at the Insurance Information Institute’s (Triple-I) Joint Industry Forum (JIF).
"Excessive growth in insurance settlements is top of mind for many. Some refer to that growth as runaway litigation while others use the term social inflation," said Frank Tomasello, J.D., executive director of The Institutes Griffith Insurance Education Foundation.
Tomasello, who moderated the JIF’s Runaway Litigation panel last week, explored definitional issues and controversies surrounding this phenomenon and discussed its impact and what is needed to inform next steps.
"Certain observers dismiss runaway litigation, suggesting it’s a phantom threat used to justify premium increases," said Tomasello. "Industry leaders, however, point to data evidencing its existence in various lines of business, including commercial auto liability."
Michael Menapace, an Attorney with Wiggin and Dana LLP, and a Triple-I non-resident scholar, noted that while there are different definitions around, insurer claim expenses are increasing faster than inflation "due to a combination of increased litigation defense costs, higher percentage of plaintiff verdicts, and increased jury awards."