Catastrophic Casualty Claim Trends
At the 2017 Advisen Casualty Insights Conference, a panel discussed trends in large claims.
The panel included:
- David Bradford – Co Founder and Chief Strategy Officer, Advisen (moderator)
- John Denton – Managing Director, Marsh
- Andy Barberis – Global Head of Excess Casualty Claims, AIG
- Marissa Beyers – Senior Vice President, Trial Behavior Consulting, Inc.
When you talk about catastrophic claims in the casualty space, you are talking about very large dollar events. These used to cost $1-5 million dollars and now they routinely exceed $10 million. Catastrophic claims usually involve significant bodily injuries and can emulate from many different lines of coverage, including general liability, auto, premise and property. We are seeing more of these claims in a variety of industries.
For one carrier, their top-20 claims paid in 2016 cost over $600 million. In prior years, those claims would top out at half that amount. It is clear that the litigation marketplace is getting much more expensive. The challenges in litigation go beyond what the panel referred to as “traditional judicial hell holes” and we are seeing high-dollar claims from a wide variety of jurisdictions.
The top-10 verdicts for one carrier in 2016 were mostly product liability cases, with the most-expensive award reaching over $1 billion. There were also cases for trade secrets and invasion of privacy in the top 10. The two invasion of privacy cases were high-profile cases with celebrities (Erin Andrews, Hulk Hogan). These cases are not something that were typically seen in the past.
In handling these types of claims, best practices starts before the claims actually occur. There needs to be broad discussions with risk managers, brokers and legal to identify emerging potential exposures. There needs to be a thorough review of the insurance program to ensure that there is coverage for these claims and if the coverage is sufficient.
Notice letters to the carrier are extremely important in large cases. When the policy is occurrence-based, that notice must be timely. While most states require the carrier to show prejudice to deny a claim for late notice, there are cases where the courts ruled that the late notice was per se prejudice to the carrier.
On a claims-made policy, only claims made and reported during the policy period are covered. Courts in many jurisdictions have declined to extend the prejudice rules to claims-made policies.
The right and duty to defend is a significant issue on large claims. When is this triggered? Who controls the defense? Who has the right to select counsel? What are reasonable rates and qualifications for defense counsel? These are all very significant issues when it comes to the duty-to-defend requirements in insurance contracts. Selection of the correct attorney is extremely important and, often times, this requires finding an attorney practicing in that jurisdiction regularly, instead of a “corporate” legal attorney from another state.
Cooperation with carriers in the defense of claims is also important. Insurance policy “cooperation clauses” may require the insured to share privileged information with the insurers. Unfortunately, disclosure of privileged work product information to an insurer may waive privilege to other parties. The “common-interest doctrine” is most likely to preserve the privilege where the insurer has retained counsel to defend the insured. This doctrine is less likely to apply if the insurer has issued a reservation of rights.
Trial consultants can help in many areas. First, to assess the risk of taking the case to a trial. The second is conducting mock trials to see how the test jury responds to the way you are presenting the evidence. Shadow juries can also assist in assessing risk on a daily basis during the trial, which can help the defense attorney in framing the witness testimony to ensure the message was being received accurately.
Juries are becoming increasingly challenging to predict. They tend to be more liberal, and more anti-corporate than ever before. Jurors continue to overlook liability when there is significant sympathy or internalized fear. Because of political polarization, it is much easier for plaintiff attorneys to identify potential jurors who would tend to offer more-conservative verdicts and keep them off the jury.
Much of this is driven by millennials on juries and the entitlement mentalities associated with this group. The largest jury verdicts in their study tended to have millennials as the foreperson. They were very quiet during jury selection, but very vocal during deliberations.
Juries are awarding damages on premise liability claims involving violent crime in over 80% of cases. Clearly, the property owner did not cause the harm, but juries want the victim to be compensated for what they suffered. Increasingly, juries are not awarding a percentage of liability to the criminal because they know that will reduce the award to the victim.