Foreign Music good afternoon, and thank you so much for joining us. I’m, Joan Woodward president of The Travelers Institute, welcome to Wednesdays, with Woodward a webinar Series where we convene leading experts for conversations about today.’s biggest challenges, both personal and professional.
So before we get started, I’d like to share our disclaimer about today,’s program.
I also want to thank our webinar partners, for today we have a lot of them, so the Metroid Metro, Hartford Alliance, the risk and uncertainty Management Center at the University of South Carolina’s, Darla Moore School of Business, the Masters in fintech program at UConn School Of Business and the American Property and Casualty Insurance Association as well.
Today we have the western New England University School of Law, welcome to all of our partner memberships.
So we really appreciate your uh your attention to this topic.
Last year we held a webinar on nuclear verdicts, jury Awards in excess of 10 million dollars and their impacts on the insurance industry.
Since then, we’ve heard from you.
We read all of our surveys and our audience asks that we’d like to hear more about related topics of litigation.
So today we’re back at the conversation about policies and judicial decisions, driving the increase in litigation, cost social inflation in the? U S and its impact it’s having on our economy, and that impact is very significant.
It is estimated that over four and a half million jobs are lost each year due to excess toward costs. To put that in perspective that’s enough jobs to employ half of New York City or the entire state of Oregon, so it’s significant.
We’re also going to take a look at some positive developments that are taking place in some states that are working to address Rising litigation costs, as well as practical risk management strategies that you and your organization can use in the increasing uncertain litigation environment.
So I’m thrilled and honored to welcome a couple of special guests today to help provide perspective on all of this Lauren sheets.
Jarrell is director and counsel for Civil Justice policy at the American tort reform Association.
The nation’s first organization exclusively dedicated to reforming the Civil Justice System with the organization now for 10 years and among her responsibilities.
Is she’s the lead author of the annual atra report that sheds light on jurisdictions across the United States, where legislative changes and judicial rulings have been contributing to an increase in the frequency and cost of litigation for all of us? She also manages uh their emikas program, working in conjunction with Fortune 200 members to file briefs around the country on various tort reform issues.
So thanks for being here, Lauren uh, and then we have my friend and colleague, Alexia Cruz, who is a panelist for our webinar on nuclear verdicts last year, and so we’re excited to be able to bring her back to the program.
Now she’s been with Travelers for over 18 years.
She’s currently senior vice president and claim general counsel.
She leads over 1300 claim legal professionals Alexia spent seven years in claim general liability and six years leading the major case and complex claim units for subrogation prior to joining Travelers Alexia was a Civil Trial attorney. Our speakers are going to kick off with opening presentations.
As always, and then we’ll rejoin the conversation for a moderated discussion and, of course take your questions.
So please drop your questions anytime during the program into the Q, a function at the bottom of your screen, so we’re going to get to as many as we can.
We always get a lot.
We appreciate everyone.’s engagement, so all right, Lauren the virtual floor is yours.
Thanks Joan and thank you uh for the opportunity to join you all today.
I’m, looking forward to the conversation um as Joan So moving on.
I’m going to talk today about the rising uh rapid rise in litigation costs and what are dry, some of the driving forces behind those and as Joan mentioned at the outset, the rising costs are having a very real impact on both state on both the State and national uh economies.
A recent study done by the perriman group has estimated that the economic or estimated the economic impact of these excessive litigation costs and they’ve, looked at the impact that it’s having on individual State economies, uh the Lost abuse that we’re seeing Across the country, and these Rising costs are creating an individual tort tax that’s being passed on to Consumers and it’s also equating to job loss and GDP costs.
Not surprisingly, uh states with the highest tort taxes often make appearances on our annual judicial hellholes report because we see the most egregious lawsuit abuses in those States. So on the screen, you see a list of the top um the states with the highest tort tax currently based on 2022 data.
We’ve seen that enactment of legal reforms that help bring in these excessive costs uh by decreasing lawsuit abuse in the states, are having an impact, and they do make a difference that’s at this level uh so moving on.
This is a list of our 2022 judicial hellholes that we released in December um.
These are the states where we’re, seeing the most egregious lawsuit abuse.
Georgia was number one for the first time in the state’s history, you have some perennial hellholes, like Pennsylvania, California, New York, Illinois, South Carolina asbestos litigation has been a newcomer to the list, but is very problematic, and then we round out with Louisiana and St Louis, so moving forward, I’m going to touch on the drivers of these costs.
What is causing this rise, and I will speak to some of these and then Alexia will complete the list, but we have nuclear verdicts, serial plaintiffs and filing no litigation, no injury litigation form shopping, fandom damages and then this open door policy for third party litigation financing.
These are Trends, as I mentioned, that we’re, seeing in judicial hellholes, where you’re, seeing the rise in cost the most and you’re, seeing the biggest cases of lawsuit abuse so moving forward, let’s discuss nuclear verdicts, as Joan mentioned.
I know you all had a webinar on this last year.
Nuclear verdicts are awards that exceed 10 million dollars.
These are subjective and immeasurable awards for pain and suffering, and they exceed what we would consider a reasonable compensation for plaintiff’s, injury and one of the tactics that’s being used to propel these nuclear verdicts is something called anchoring, which is where plaintiff’S: lawyers plaintiff’s. Lawyers suggest during trial a very high amount for the damage award and that then becomes the starting point in the juror’s mind of what should be awarded in a specific case.
Not every state allows anchoring, but those that do it.’s having a real impact on the awards that we’re seeing.
I just want to point out a few of the recent verdicts um, the more egregious ones that we’ve seen uh in Georgia.
Last year there was a 1 7 billion dollar verdict against Ford, and this really helped Propel the state to the top of our list.
For the first time, also in New York uh, they previously had a de facto cap of 10 million dollars on non economic Damages.
But now we’re seeing that cap be blown past um in several cases and just in 2021, a record setting award of over 20 million dollars was upheld by the state appellate court, so that de facto cap seems to no longer apply, which is certainly concerning, Especially in a state like New York and then finally, last year there was an 18 1 million dollar verdict in a simple slip and fall case, which is far larger than anything we’d.
Seen to that point.
Moving on, I want to discuss another type of Damages that we’re seeing inflate these costs and they’re called Phantom damages um because of collateral Source rules in many states.
The juries aren’t hearing relevant information for determining damages.
Specifically they’re. Only hearing evidence of the initially invoiced amount of medical expenses uh what can also be called the sticker price and oftentimes the sticker price is three or four times more than the amount that was actually paid, whether it was paid by an insurance company or the plaintiff Themselves or another program, and so this large gap between the actually paid amount and and the build amount is a there’s a large gap between those and it creates a windfall for the plaintiffs.
Medical damages also are the basis oftentimes for non economic damage Awards, and you know there’s a.
They would equate to three to five times medical expenses.
So if you’re using the um build amount for those medical expenses and then multiplying that by three to five times, they don’t have a very real impact on the outcome of the case and on the final damage award plaintiff’s.
Lawyers are inflating these damage Awards by ordering excess medical tests really trying to drive up those medical costs, because then, in the end, they receive larger contingency fees.
There is a legislative fix to this issue, um, basically, legislation to ensure that jurors receive accurate information on the actual value of those medical services, and over the past few years we’ve seen a few States adopt this type of approach.
Most recently, this year, Florida with House Bill 837, which we’ll touch on later in the program Montana passed a very strong bill in 2021 and then Iowa previously.
Moving on, I want to briefly talk about this trend of Serial plaintiffs and no injury litigation.
We’re, seeing lawyers recruit plaintiffs to file hundreds of the same cases against many different businesses regarding certain topics in different states, and basically you have these aggressive bounty hunter plaintiffs that are searching for payouts despite never suffering any injuries.
You’re seeing this a lot in the with Americans with Disabilities Act targeting small businesses. The plaintiffs have no intention of visiting these establishments and they’re suing over slight nitpicks Technical nitpicks and forcing companies into settlement.
Many are going bankrupt as a result of this.
You’re also seeing it in the food and beverage industry with slack filled lawsuits where plaintiffs said there,’s too much air in their bag of potato chips or with natural, flavoring and vanilla.
Flavoring specifically, has been a Hot Topic, um saying that you know they’re not using natural vanilla in their flavoring.
You’re also seeing this in California with regards to their prop 65 litigation.
Maybe things aren’t properly labeled, you have plaintiffs there filing close to 100 of the same lawsuits against companies and then, finally, in Illinois, biometric information, Privacy Act.
Litigation is a very big issue there.
Currently, they’re filing lawsuits over statutory nitpicks, accompanied in comply properly with a portion of the statute like, for example, providing written notice of how they collected their data, and then plaintiffs are filing these lawsuits.
Moving on um Forum Shopping is another big issue that we see in these judicial hellholes because plaintiff’s.
Lawyers want to bring their cases in the most friendly jurisdictions and courts in the hell. Holes are swinging open their door to out of state plaintiffs.
They’re, not following: U S Supreme Court precedent on when a case should be heard in proper jurisdiction and the plaintiffs obviously are trying to seek, are seeking to take advantage of courts that have a reputation for high damage Awards and low barriers of entry, low Standards of expert evidence we saw this most recently in Philadelphia and in Pennsylvania.
Last year, their Pennsylvania Supreme Court eliminated their medical venue, medical life, that liability venue rule that was previously enacted to address the health care crisis there.
They eliminated that rule this past year and as a result, plaintiff’s.
Lawyers are going to be able to flood uh very friendly courts in Philadelphia with this litigation, and it won’t be filed in the proper venue um that I.
That concludes my initial remarks.
I’m going to hand it over to Alexia to discuss third party litigation, finance and others thanks Lauren, that was great information um and it’s great to be back here A year later talking about what we can do and what’s going on In the environment um, so I thought I’d continue.
The dialogue Lauren started and dig a little deeper into one of the drivers of social inflation that’s become a Hot Topic in the industry as of late uh.
Third party litigation funding, so I’m going to talk a little bit about what it is why we as a society, should care and the efforts to bring transparency to the process.
So if you think about litigation funding, think about it as a third party investment and financial stake in the outcome of a lawsuit, and these can involve large scale, commercial suits or low dollar bodily injury cases. You might think why should we care it?’s? An investment and it seems like they’re, getting pretty strong returns well um.
According to a 2021 Swiss Street Institute study, they reported that 17 billion dollars in capital was committed um by litigation.
Third party litigation funders and more than 50 of that occurred in the.
U S and they estimate that could reach upwards of 31 billion dollars by 2028, So a lot of money at state care and a lot of money being injected into litigation Finance.
I I do want to break this down a bit because we use litigation Finance in a couple of contexts and there’s different types of it that are impacting our ability to defend our seats.
So there’s commercial funding and that think of that, as an investment firm that’s supplying Capital the hedge funds applying Capital to a large scale, business dispute that could be the mass torts class actions, product liability, big intellectual property cases that you see in The news and that’s an exchange for a payment based on the legal outcome of the case, so they’re going to put up front money and they’re going to get back their money and then some at the conclusion of the cakes.
Then there’s consumer funding and there’s two types of consumer funding.
We see on a regular basis.
One is Direct Loans to the plaintiff and a personal injury case.
So this is just a non report loan that they provide with a security interest in the settlement or judgment, and this is where we are seeing a rising increased usage of this and the interest rates that are charged are uncapped in some circumstances unregulated. So there’s been a lot of discussion about that.
Then we see the medical financing, consumer funding loans and those are loans for expenses for medical provider that medical providers are given and they get a financial stake in the outcome of the case.
So uh a plaintiff attorney may tell an injured party um, do not put your medical bills through insurance.
That means the hospitals and medical providers will charge a larger amount, and this finance company will cover those costs and then get it back.
If there’s a resolution of the case with interest rates upwards of 20 to 30 percent, so litigation funding along with attorney advertising, child trial strategies, changing jury attitudes, strength of the plaintiff bar and fusion of capital um.
All of this bolster bolsters the tort litigation environment.
It can have a real impact on the claim cost by creating longer cycle Times Higher settlement demands and higher verdicts.
So we really need to guard against this increasing usage, in particular in our most challenging jurisdictions.
Like New York and Florida, there’s also ethical considerations that need to be explored here and the impact, particularly on the injured party and the plaintiffs.
So a big obvious one. Is there a conflict of interest that this company, these investors, have an interest in the outcome of a case? How can this be impartial? Will it impact the plaintiff’s ability to settle a case for a reasonable amount in a reasonable amount of time whose interests are being served here? The investors or the injured party or the injured, plaintiff um in whatever way they’re injured? So we have to think about those when we think about the solution: consumer protection issues.
I mentioned some of the high interest rates that are being charged, and so this, with a lack of transparency regarding the repayment of terms we are seeing plaintiff’s, owe money at the end of a case, as opposed to receive money for their injuries and that’s not serving the consumer in a responsible way.
Consumer loans can drive longer cycle times and result in higher overall litigation costs and potential for longer, duration of medical treatment and the litigation process.
So these loans are being utilized in the health industry, as I mentioned, for medical costs and they’re driving up the medical costs, as well as the treatment and serving the investors and the plaintiff attorneys in particular, who make sure to get their share.
At the end of the resolution and these agreements just remember, the Agreements are between the plaintiff and not the attorneys.
So it is the injured party plaintiff who owes the money at the end of the case.
They cannot be between the attorney and the investor so that’s that’s an um important piece here, because there is some question of does this ever result in the unethical practice of law at some point, if it is a connection to the attorney.
So a lot of discussion in this area, but we are not able to get copies of these agreements in a lot of times um.
So that is hindering our ability to understand.
Really, what are the real issues going on here and the cases and who is it really serving so in the commercial space? There?’s also a growing concern that foreign governments or companies May invest in these lawsuits to access intellectual property and sensitive information, and that was reported by the. U S Chamber of Commerce report entitled a new threat, the National Security risk of third party litigation funding and they went so far to say by investing in specific cases and portfolio cases or through crowd, funded litigation.
Financing foreign governments or companies May seek to fund, encourage and control.
U S, litigation in a manner that harms? U S, companies and critical sectors, accesses sensitive information or can influence? U S domestic policies that’s a that’s a big concern and that that would be an investment, maybe in a patent case, and we don’t even know do they have access to the evidence.
Are they involved in handling the case um, and a lot of the agreements have access some don’t, so what you know so what do we really want to do here? What can we do as an industry? So the state and federal court rules vary regarding whether these funding agreements need to be disclosed or are discoverable in litigation.
Several federal district courts require disclosure of any entity with the financial interest in the outcome of the case, so we are able to learn more in those jurisdictions and obtain a copy of the agreement.
So we understand if it is impacting the the ability to resolve a case and and who’s really getting served in these situations.
So one of the major solutions that I think we’re making some progress on is transparency, focus on identification of the funding agreements and claims and Suits bolstering disclosure and Discovery in the litigated cases, and this will enhance our data collection um in the industry partnership.
So I think we made a little progress in this area.
We have to make more, so we can fully understand what’s going on, but certainly a major injection that’s come in the last couple years.
That’s garnered a lot of attention because it it is impacting our ability to resolve cases for a reasonable amount in a timely fashion. So I think that’s – all I’m, going to say at this point – I’ll turn it back to Joan okay, well Lauren Alexia.
That was just fantastic.
A nice high level overview to get us all um level set in what we’re dealing with um in today,’s litigation environment.
So we’re going to dig deep in lots of these uh topics that you touched on, but first everyone knows I like to ask the audience a few questions to get them engaged and find out uh kind of their level of knowledge.
So I’m going to ask two polling questions today and the first one’s going to be: how much does social inflation cost cost each? U S resident per year, so this is per person.
How much does social inflation cost each? U S resident per year, I’m going to get the um answer, but you guys can guess.
First, okay, uh looks like the last two categories: uh are the most popular here or 784 bucks.
It’s.
Actually the last uh answer it.’s.
1425 per person um because of uh social inflation, okay, so let’s go to the next question for our audience, how much was spent on attorney advertising in the United States in 2022? How much total overall advertising span? You see it all the time driving down the highway on these huge Billboards, um asking people to to call them when they have the accident or the crash so um. The answer here in this category is actually 187 million dollars plus is spent every year on uh or at least in 2022, on Advertising, so that’s a lot of dough right, um Lauren.
I want to go to you first, the report that you do every year that your foundation puts out it’s called judicial hellholes, and that makes a pretty strong statement.
Can you give us some of the background on the report? How long have you been doing it and how do you actually identify these locations? What are some of the criteria you use to have a number one and number two and number three, and obviously you’re calling out certain counties in some states specifically so give us the history of the report and how do you um? How do you decide? Certainly so the report has been: we just released uh this past December, our 21st uh report.
So we celebrated the 20th Edition two years ago and that was a big milestone.
Um.
We basically spend the whole year doing Outreach to membership local defense firms, those on the ground in these jurisdictions.
Uh listening to you know some of their examples of lawsuit abuse, hearing about what’s occurring on the ground there um and we compile all this information and then take a look at where are the the outliers which states are really off the rails and um Handling things in ways that you know other places are not um that’s.
You know that’s, how we comprise the list.
We take a look at emerging Trends which states are on the Cutting Edge, allowing an expansion of liability where that’s not being seen in other places, and then we also take a look.
We did make some changes and took a look at legislatures as well, which states are acting laws that will expand liability or adopting Innovative new theories of liability, and we, you know we will highlight those legislatures as well. Okay, thank you for that um! So Alexia you talked about this, but what specific type of claims are responsible for these? A lot of these large jury verdicts we’ve, been seeing recently tell us about the actual claim type so for sure commercial Trucking cases, so we’ve seen that not just in Texas but in other locations, um some recent ones in Texas, but uh commercial, Trucking has been one that’s been a huge driver in uh the entire.
I think Commercial, Auto industry, product liability cases.
They led the way, a nuclear verdicts and they continue to receive larger verdicts.
Medical malpractice, medical liability that’s been a hot area.
Employment law, we’ve, seen a couple um there um with the metoo movement on the rise and within some of those buckets wrongful death cases, negligence, security cases um and that’ll that goes into that theme of profits over safety.
So those are the premises.
Liability cases and certainly defective products – I would say those are among some of the top and I don’t want to exclude intellectual property um cases, because those in particular can get very high, depending on the on the issue of stake in the litigation.
Okay, great um, let’s dig in a little more to the pre litigation drivers, uh the increasing legal costs that we’re.
Seeing.
So you know, advertising Lauren is something plaintiff’s. Lawyers have used with great success to find favorable facts and favorable claims.
In fact, patterns and take them to trial so uh, you’ve, looked extensively at this: the impact of legal advertising.
What are some Trends and what are you finding? So your uh, the question that we just had you know, plays right into this and while that 188 million was spent um last year, strictly on national network and cable television and then trial, lawyers are spending hundreds of millions of dollars more in local on local advertising.
Specifically in those jurisdictions where they’re looking to file lawsuits um and to be particularly active last year, they spent the most in Florida.
Uh, no surprise, probably to those of you on the phone and Florida actually enacted legislation, while it hasn’t been signed.
Yet but the legislature just passed legislation to curb this misleading and deceptive advertising uh, specifically with regards to medical devices and pharmaceuticals.
What you’ll see with the trends is that the trial lawyer or the advertising helps lay the groundwork for future litigation.
So you can track where the plaintiff’s.
Lawyers are looking to go by where they’re spending, and what are they spending on? What types of ads are they running? Is it against a certain pharmaceutical drug? Is it a medical device? You’ve seen a lot with Camp Lejeune, and so that shows the trends and what they’re focusing on at that moment, um it’s very it’s having very real and scary impacts on consumers as well, because of recent FDA study taught Showed that um, you know people are being scared and not taking their medicine because of these advertisements, which is having a very dangerous impact.
Unfortunately, some people have died because of this or had suffered massive strokes and heart attacks. So there is a very there.’s a real public health and public safety issue uh with regards to these advertisements, which is why many of the states are looking to enact legislation to help curb uh, curb it in the medical area, specifically.
Okay, thank you for that.
So the 187, just to be clear that’s, just national television and cable news advertising, doesn’t include the Billboards.
Then it does it.
It does not include the Billboards.
It’s just strictly national network and cable television ads wow.
Okay, thank you for that.
Um Alexi! Let’s go back to you, because you talked about the third party litigation funding and how it can drive up the verdicts here.
They’re.
Also, some people say there could be National Security risks that come into play as well with the third party funding. Tell us about that, and so that I I did mention the um.
The report by the ilr, which I thought was, was great um that’s, the? U S: Chamber of Commerce report the new threat, National Security of the third party litigation funding that went more in depth on the potential issues we may be facing with some of these foreign governments and foreign companies um.
If they’re investing in cases which we’re aware – or we have some participation, but they can use the third party litigation, financing agreements and contracts and involvement in a case to Target and access sensitive information, it could be intellectual property, it could be inventions, It could just to get particular information.
It could be could be disruptive, but they will have access to information in a case if they have an interest – a financial interest, in the case that’s, why it is so critical that we understand that there is a litigation financing or funding agreement involved in A case, so we can understand what access the these individuals or companies or foreign parties have to the information available, and I did see in the question about: does it does the dependent? Are they entitled to? No? No, they’re not entitled to know and a lot of reports who have said um it’s.
It’s, not relevant.
You don’t need to you.
Can’t discover you can’t access it.
Then the defendant will not know if there is a funding agreement in place or what the terms are.
So they will not know who has access to that information? I think that they could be compromising privilege, but you wouldn’t know unless you were able to access the agreement.
So there’s going to be more work on this and focus, but there’s the possibilities are disturbing. You know that that could be going on because you don’t know, especially with the crowdsourced funding, who is an investor who isn’t an investor could be a judge, could be an investor, it could be conflicts because the if you think about Burford capital And some of the investment returns they have, they’re huge.
It could be 30 investment returns.
A lot of people could be investing and that is not disclosed at this point in most jurisdiction, most jurisdiction.
Okay, um look! So I’m Lexi.
I’m going to stay with you for a minute because we talked about a Sedgwick report found the climate to bring in legal counsel.
Much more often, they’re engaging them earlier in the process, and this wasn’t the case.
You know 20.
30 years ago, so how is the insurance industry responding to these Trends where there might be a minor incident and a person just feels the need to get a council when the insurance industry may have in the past been able to settle, uh or or take on That claim uh without the the person having a lawyer on the team, tell us that Trend and what you’re.
You’re saying so this the Cedric study uh mentions that in 2017, just under 43 of Auto liability and general liability claims that ultimately would have become litigated already had an attorney rep, a representation in place within 24 hours of the claim being reported.
But by the end of 2022, the percentages had risen to over 57 percent for auto liability and 51 for general liability. So this causes severity to grow and increase, including the litigation costs, because now you’re having an attorney in place within 24 hours of a claim in a situation where, in the past we would have just resolved the claim, maybe without an attorney or in.
In short term, but now um with the attorney involvement, the average cost of claims with attorney representation.
According to this report said, it was 14 3 times higher than the average cost that claims closed in 2019 without an attorney.
So you can imagine the impact with some of these numbers are correct, so that is coming from the? U S: commercial! In the report, they’re, quoting the trends in attorney representation.
U S commercial, auto insurance report by milliman um, but that’s part of the Sedgwick report.
The cost of litigation claims continue to increase at a rate exceeding normal inflation and market conditions, bolstered by social inflation, growing third party litigation, financing, nuclear verdicts and class action lawsuits and, and they’ve, discussed that in the report and as Laura as Lauren mentioned, higher Claim costs are are ultimately paid by the consumers.
So in the 2021 Swiss re Institute report I mentioned the higher they report that the higher claims costs drive up.
Insurance premiums reduce the availability of liability coverage and lead to higher uninsured legal liability risks, and these costs are ultimately paid by the consumers.
They also mentioned that plaintiffs often do not see the benefit of the higher rewards as we as they estimate up to 57 of the third party litigation funding, involve tort costs to lawyers, funder, funders and others.
So if you think about that, the majority of the settlement or the amount paid is going to the funders and attorneys and expenses, as opposed to the person who actually allegedly injured so really really disturbing information. Yeah um, okay, Lauren back to you and your report until fairly recently, the multi district litigation mdls was a little known tool out there in the federal courts that could use they use it to save time by consolidating lawsuits right on similar issues.
So in your report it’s now being used.
It seems to overwhelm defendants forcing them to settle, like you know, for Kings, Ransom and some of these some of these settlements under clearing blank bankruptcy.
So can you give us some insight of what went wrong potentially with the mdl idea? Yes, so the mdl multi district litigation is part of what we’re now calling the mass tort machine and this machine has become a multi billion dollar industry.
For the plaintiff’s, lawyers we’re, seeing you know, law firms and businesses are spending millions of dollars on Advertising receiving some of this financing from third parties to use at the at the outset, to scare consumers and encourage them to file these claims and To fill the mdls, they also, the planus bar, will pedal misinformation and use the media to get out junk science that then taints the Public’s perception and judges and judicial hellholes will then allow that junk science to come into their courtrooms, and so the defendants Already know that they’re going to be facing an uphill battle.
But then the trial bar is able to exploit these procedural advantages that are in the mdl and they flood the mdl with thousands of claims, knowing that’s impossible for the judges and the defendants to go through each of these claims to make sure that they’re legitimate to make sure you know that the plaintiffs actually did use their product or that a medical condition, isn’t from another cause, and so once these cases are filed and then Consolidated, they don’t have certain protections that are available to them.
In single trials, and so these businesses and defendants now face two options: do they file for bankruptcy or do they settle? As you said, for King 39, s, Ransom and those are really two choices that no one wants to face, but um it’s.
What’s happening with this mdl situation right now and 70? Currently, 70 percent of all cases pending in federal courts are part of an mdl and that skyrocketed from just 10 years ago, when it was only 30 percent, so it’s going to continue to rise and they’re going to Leverage The mdls to you Know Force defendants, hands, wow, okay, those are amazing numbers.
It went from 30 to 70 in just 10 years.
You said yes, um, okay, um Alexa back to you uh, with all these tools that the planets are leveraging. You think we’re going to see a propensity for for settlements.
However, settlements.
Might that impact? You know what does that impact on litigation going forward? Then there’s a big impact.
I’d love to see that there isn’t going to be an increased propensity for settling cases and not trying the cases.
We really should try, because we don’t feel like we have any liability, but the reality is with not knowing how large the verdicts are going to go, or you know jurisdictions where they have uncapped or they have non economic damages that are uncapped or looser Requirements for punitive damages there are entities in the industry that are settling cases that they probably would have tried um, as we figure out um.
Is there going to be responses from the legislature in the states to control some of this and trying to figure out what is a reasonable amount to settle if these verdicts continue to come out is is going to be challenging so when you think about the price Of litigation going forward, you have a longer cycle time, you have more money and funding the case so that they can have more experts and more Discovery, and it takes more time all that drives pasta and also maybe that what is the value of the case, if One carrier is willing to pay this amount and other carriers paying this amount in a settlement the same as a trial verdict.
So I I think it’s an interesting time and I would encourage everyone to pay cases.
You think you owe on try the cases you think you should try and that’s honestly what we should be doing, but the reality is we’re in this environment that we’re trying to figure out, and there’s all these different factors That Lauren – and I are talking about that – are influencing people’s decision on whether to settle or not.
That sometimes have nothing to do.
If there is more value of the case right now, okay, so Alexia, I want you to take us inside a courtroom. Maybe dust off your litigator hat for a moment with us.
What are the tactics that some of these uh attorneys are using to drive up these costs and you know: explain the reptile quote: unquote the reptile Theory and how it’s really used in the courtroom.
Sure the reptile theory is one of probably their successful strategies that we’ve seen time and time again in a lot of different types of cases, but essentially it’s, appealing to that reptilian part of your brain, the the fighter fight the fear element.
So when I mentioned the themes of profit over safety that’s a a favorite one from the plaintiff’s bar it’s really telling a jury scaring them that um they’re, not safe, and appealing to that reptilian part of the brain that They should be concerned and it’s their duty to protect Society so a lot of times.
Unfortunately, it’s not about what your insurer did.
According to the law and the safety standards of the code, it’s, what could they have done? Could they have done something more um? Could they have made things more safe, and that is an effective strategy that we’ve seen used in the courtroom, especially appealing to jurors in many jurisdictions? Okay, um alarm: we have a number of questions coming in and the Q a feature here from our audience.
They want to know what anchoring is.
Can you explain what anchoring is and and how it’s used in the courtroom? Certainly so anchoring is another tactic that the trial lawyers are using to drive up the damage Awards and basically during trial, they will suggest a high number that the jury should award their client and this number becomes the starting point in the juror’s mind during Deliberation and there have been psychological studies that really show the true impact this is having and they’ve.
They’ve looked at what are the suggested numbers and where are the final verdicts and the higher the suggested number the higher higher the verdict? Even in cases with very similar um similar facts, so it’s not allowed in every state.
That is a legislative fix. You can states, can pass bills sort of disallowing this practice, but where it is allowed, for example, Georgia and New York uh.
Those are two of the states you’re, seeing you know the highest verdicts come out because they’re able to use this tactic.
Okay, so we talked about anchoring.
We talked about the reptile Theory.
Those are two kind of examples of the tactics um from a public policy standpoint which I always like to think about.
Are there limits to how high these jury Awards can actually go in in these states? Lauren, maybe take that one um.
Certainly I mean some states.
Do have you know, caps on non economic Damages and certain you know in certain instances, medical liability cases and others, so that does help rein in um.
You know some of these Awards, but in states where they they don’t have them.
You know men got limits on Damages is a very heavy lift um, even for you know very pro business legislators, so it’s difficult to get across the line and even in states where they have enacted them. They’re often challenged on in courts for constitutionality, okay, so folks we spent 41 minutes talking about the problem uh.
We actually think there’s some solutions and there’s some opportunities in these states.
So I want to get into the solution.
Part of our conversation uh so Laura uh Alexia, I’m, going to go to use States like uh Florida, Wisconsin, West Virginia have enacted tort reform recently.
Obviously uh lots of activity down in Florida.
Can you provide us some insights on what these new laws can? Do uh, do you see momentum picking up for other states that maybe on Lauren’s list uh today, so give us a give us a quick rundown of some of these Memorial recent, especially Florida? I guess people are putting a lot in the Q, a about that sure I mean Florida, it it’s, I guess it’s a great story and then um.
On the eve of the tort report, we’ve passed uh.
The plaintiff attorneys file the whole pile of lawsuits to make sure that the Old Law could apply.
So we’re addressing that.
So we probably won’t see the impact of the positive Court reform for a little for a little bit um as we work through the older cases or the ones that were filed before the legislation came into effect. So for those of you who didn’t hear um, the Florida passed some great liability to reform that actually passed from property tort reform.
We won’t talk about that today, but the liability one um is.
It should, in theory, help a lot um, so we have a repeal of the one way attorney fee, meaning that um for a lot of years there was a lot of incentive for a plaintiff attorneys to just bring these little suits frivolous suits over and over again, Because they could be awarded their attorney’s fees and it was driving the litigation numbers to be very high in the GBP impact and sort of to continue to increase, and that was clogging the courthouses and the person that was benefiting was always the the plaintiff Attorney in these cases there’s also a limited um.
We reduced the statute of limitations for dental negligence from four to two years.
Um, we’ve modified the bad framework.
So um you actually have a chance to respond.
You have 90 days after receipt of the claim you have to get sufficient evidence to respond before they can claim.
There was bad faith and then um negligence alone will not support that Faith.
Claim I’m just touching on a few things: the um I didn’t even mention the um moving the the negligence standard um.
So that was the big I’m just trying to hit some of the highlights. Lauren.
Would I missed half of these things I’m trying to make sure I don’t.
I would also include the Phantom damages provision, which requires that the jury is be informed about costs the actual cost of Medical Treatments to eliminate fandom damages for years.
They can put in with builds not actually paid, so this is really help in Florida.
Again, there’s going to take some time for us to see the impact and then shortly thereafter Montana did pass some very favorable Court reform, which is exciting as well.
So um good for Montana and then short, oh, go ahead.
Lauren, I think, on the Montana bill.
You know it.’- s, probably not a state that’s on a on top of many companies list, but what we’ve found is that things that are being done in Montana are then positive.
Things are them being exported to other states and it’s being it’s being used as a model.
We saw that with Phantom damages and so um it’s good that that’s happening there, because then we can use that to propel efforts in other states. Okay great, so I want to talk about the role of data and analytics and artificial intelligence.
We just had a webinar if you missed it on chat gbt about a month ago, so go back and look at the replay of the chat.
Gbt use cases for the insurance industry uh on Travelers institute org, where we house all of our replays but Alexia.
How do you think uh, AI or data analytics play in the process to kind of understand how a claim might have the potential to kind of be a nuclear verdict? Um is there? Is there any work being done there yeah? I think there’s a lot of opportunity there in chat, TBT or some kind of AI um generative AI could be a game changer there.
But before that started exploding you know just even identifying cases that could potentially be a nuclear verdict.
So whether you’re looking at the type of loss, the type of injury, the particular plaintiff attorney on the other side, or even the amount of policy when it’s available, those could be triggers to that people could think.
Okay.
These are cases that have that potential to be a nuclear verdict.
Um, you may want to take a look at these or assign them to a different level of handling if we think that um, so those are options, I think everybody has at this point.
I think identifying it early in the process is important so that you decide if you’re, going to settle or defend a case, and then you um obviously plan accordingly. So I really get excited about the potential of these data and analytic tools right now.
All the info information state and federal report is publicly available on judges, the rulings, the Motions the attorneys, so there are endless possibilities of what you could do with that information.
As a predictive model, even in the most complex cases, so I think there’s there should be a lot more dialogue and and thought around the the use of data and analytics and the future of these complex, litigations, okay, great um.
So I want to talk to our producers.
We have a lot of Agents Brokers on our call today.
What advice do you have? Maybe Lauren you want to take this and we’ll get Alexia too.
What advice do you have for our producers and agents and Brokers and Advising their clients their customers risk management loss control? What can they do? Give them some practical tips in helping other customers um Alexa, I’m, probably gon na hand this over uh to you.
Might be better um student answer that question I have a great tip, so I talked about profits over safety.
The most important thing you can possibly do for your client is encourage them to put in safety protocols, but even more importantly, to follow them.
So if you’re going to put in place safety protocols or processes if they do not follow them, that is one of the largest triggers. Were you seeing for juries to get inflamed and upset? I talked about the reptile Theory where they make up additional things.
You could do outside of your procedures or the the law.
You’re, you’re bound by, but this is this is the you know.
These are your own procedures.
So if you don’t follow them, we are we’re finding.
That really does.
In flanger, so I always say, put them in place, but also make sure to follow them.
Okay, great advice, uh Lauren, back to you.
One reaction to hearing about this massive jury verdicts is that you keep hearing these defendants have Deep Pockets and they can handle these uh, these vertex, so uh.
Taking in the aggregate. We know it is a tax on consumers, a tax on all of us.
So what’s being done to kind of tell that story out there in the media, maybe or obviously your report shines a light on this um tell us about what can be done here.
Well, that’s, the purpose of our you know our judicial health, or one of the purposes of our judicial hellhose report, is to shine the light on the abuses and get them out there and also have business owners.
Talk about the impacts, talk about um.
You know how the you know, how it’s impacting their businesses and then I think, most importantly, the tax that’s being passed on to the consumers.
The average person doesn’t care don’t think doesn’t think that they care about this, that they don’t think that they’re being affected by it.
But then, when they hear about the tour tax paying over a thousand dollars a year or four thousand dollars per household um, that can start to get them to care, so I think getting that story out there as well, that you know this ha.
This impacts everyone.
It’s driving up the cost of goods.
In a time when we already have inflation um. You know this is another added inflation to good the price of goods and if we’ve found you know if legal reforms are enacted, that will and lawsuit abuse is um you know is driven down, then that will help uh with those costs, and so I I think just getting that message out is important: okay, terrific! So now we’re going to go to audience questions.
We got a lot of them.
Almost 60 came in uh.
We actually encourage you if you’re interested in asking questions of our panelists.
Put it in your registration, because if we have it kind of early on we can we can address it.
I’m going to do a shout out to David Kane, who did that he’s at the Hodge agency.
Uh David asked when a plaintiff is truly injured.
Is it not less costly to settle up front rather than taking it to the court system, so Alexia? How about that one? For you? Yes, absolutely um! We don’t have a choice, a lot nowadays uh.
We we have knowledge um in particular, important that there is higher contingency fees charged by the plaintiff attorneys if it’s in litigation versus not in litigation.
So there’s incentive to file litigation quickly. Um, I think any carrier in the industry just wants to evaluate a case, get the information and pay what they think they owe um as soon as possible to help the plaintiff.
But we we can’t control if an attorney comes in, slows things down files, litigation right away.
We have no choice but defend it.
So I would love to keep up more of this out of litigation so that we can really put the money in the hands of the interview party and not more in the hands of um the other individuals in the case, okay, good.
Another question coming in from Debbie weisser shout out to Debbie former colleague at Travelers.
Why do you think the planus bar is so much more organized than the defense bar and what could the industry do about it? They have a lot more money.
It’s economic incentive, so they if they can get verdicts like this and get paid, let’s say 40 contingency fee when it used to be.
I thought it used to be 33 um.
They are making a lot of money and reinvesting they are.
They are, I saw in the in the question chapter. They are investing in the Judiciary, so they’re putting their own um candidates forward to the state judges where they can and and funding those campaigns they have the money to do it.
They also are funding uh Senate Senator House Seats to influence the legislation and have their own lobbyists.
So there’s a lot of money being thrown away, thrown around um and put strategically not just in advertising, but in key areas that serve them well and help them keep the legislation that keeps everything uncapped and and um.
They’re able to get their nuclear verdicts.
So what can we do? We can put money to counter it.
I mean that’s.
One thing we can also do.
What we’re already doing is to work with industry groups, to challenge the legislation and and make changes and really try to educate people on the impact of some of these um legislative changes or lack of legislative changes.
So there’s things we can do um, but the definitely an economic incentive for the plaintiff attorneys here and Lauren.
I don’t know if you agree, yeah absolutely, and I think also it’s important for different Industries to band together to support reforms or to support defensive efforts, because even if it may not directly impact your specific industry um, it affects all of us. It affects everyone, and so it’s important for them all of us to come together the different businesses and fight things together.
Um to you know, we do have less resources so to merge our resources and just make sure that we’re doing a unified front.
Okay, thank you.
Another question coming in uh from Brian Hall: is there a way to report any of these nefarious claims and lawsuits? We have a couple uh coming in completely bogus.
Is there like a Better Business Bureau for lawyers out there Lauren you want to take that one Alexa.
You look like you were about to I’m, not that I know of I mean I think you can always challenge the Merit of the case in court um, but I’m not aware of anything else out there.
Okay, then, on a malicious prosecution too, but then you’d have to prove that it was Focus, but it sounds like you may have the evidence for that.
So there’s legal recourses, but I’m not aware of uh consumer place.
You can report that um, okay, all right.
Another question coming in you can jump in whoever wants to take it. Where are you having the most success in increasing transparency with regard to third party litigation? Financing agreements is the success coming mostly from the court orders or state public policy makers.
Legislators.
We have some states that the legislation would be easier to do it apply everywhere.
So when we’ve had some success in the court system um, it could be just a particular judge like in Delaware.
It was one federal judge versus the whole federal court so that doesn’t quite get to the scale we would like.
We continue to be aggressive and I I’m hoping the whole industry is about using Discovery to get the information and challenge the judges and get the ruling so that we can obtain these agreements that’s a slower process than changing the legislation so um There was a good Montana part of their legislation.
Was the disclosure of third party litigation funding, so we have had some successes.
It looks like you, um are not permitted, they’re actually not permitted in Pennsylvania North Carolina.
I’m.
Looking at some of these studies, but the disclosure it looks like we have only a handful of states that will require the disclosure. Now they may allow the disclosure through Discovery um, but that’s a it’s a longer process.
So we have some work to do.
We’ve made little progress here and there I know in Illinois they had a a disclosure on the the consumer loan so that they would disclose the interest rates.
So there was a little bit of a victory there, but um this week, Illinois is passing a really um bad punitive damage.
Uh legislation that looks like the governor will sign um that can be packed on too long for death cases.
So again, we grab a little uh lever in Florida and then we have Illinois come out there.
New York has a currently a pending um wrongful death legislation that would be unfavorable to the industry as well.
Okay, thank you.
Another question coming in Bob nyhen hi Bob: does the presence of a Judicial hell Hall label dampen business investment or retention in that area is very, very good question, so our business is leaving.
I mean you,’ve, been doing the study for 20 years Lauren and have you seen a trend and maybe their economies have not flourished because of their litigation environment? Is there a correlation? There is – and I think you know we’ve – seen businesses leave States specifically because of lawsuit abuse, and you know we’ve seen it in Louisiana with the energy industry. They’ve.
You know lost jobs, they’ve moved because of all the coastal litigation that was going on down there.
Um we’ve also seen it.
You know the being labeled a Judicial whole work in the other way, though, for example, Governor DeSantis mentioned it in a lot of his remarks this year, that you know that he didn’t want to be known as a Judicial hell, hole anymore, and these reforms Were necessary to stop the league, the lawsuit abuse? The similar situation happened in West Virginia.
It was used by the Senate President um there as sort of a catalyst for change.
So I think certain legislators understand um.
You know what a Judicial household is and why they, don’t want to be one, and I think they understand that there is an economic impact on their states and their economies, and they want to remove that label from their state.
Great great question: okay, uh! This is a definition question, but I think it’s good to to hear it Colleen Peck.
Would you please explain the difference between social inflation and economic inflation, so I think most people understand what economic inflation is right.
When gas prices go up or housing prices economic? What do you? How do you define social inflation Alexia, I’m, just as simplified. There are things going on in the society and around us that are impacting the cost of claim the cost of um insurance, and so it’s been defined a couple different ways.
There’s actually a lot of discussion on the definition, but I simplify and say there’s different societal factors that are increasing the cost of claim um in this environment.
I think that’s the simplest one in the current environment.
Okay, thank you uh.
Maybe this is for Lawrence coming in from Jennifer real.
Do you see a difference among various age groups in the attorney representation or self representation statistics? Are there people more comfortable dealing with insurance companies? Maybe if they’re able to do some legal research online or you’re, seeing a trend, do older people more likely get represented younger people? What do you, how do you slice and dice it that’s not actually something we’ve looked into? I don’t know Alexia.
If you have some data on that um, we’ve, never that’s a really interesting question.
We have yeah, it is dug into the that aspect, yeah and then there’s a changing environment with how people want to communicate as well.
So I think um.
I’m aware of certain studies that looked at it in the past, but I think you,’d have to look at it again in the current environment with all the technology, because even if um, you’re reaching out to someone to see if they Would like to handle the case differently, or you know, aren’t really don’t want to work with an attorney. Is technology going to give a comfort level to a different generation that could factor in or is somebody in the older generation like mine, where you have attorneys or you’ve, been exposed to more? Are you more comfortable handling it yourself? I think it could work both ways and it’s a tricky restart.
You’d have to be carefully done.
I think um to get it right into the cover.
Okay.
Last question: for whoever wants to take it from Jessica foscolo.
What can be done to combat the anti insurance messaging permeating this advertising and contributing to these nuclear verdicts? I mean what what can our industry do or what have we done, or maybe it’s not working, but it seems like all the comments coming in this is, should just be outlawed right and and what can we do to combat the anti insurance messaging have Lauren talk at more things about the tortex and I think it’s important to educate people on the impact and and where the money’s going.
Of course people know that, and I think that would be helpful.
It’s hard to throw that out.
There and have people believe you um, but I I think Lauren’s.
Work is very important to that goal. Absolutely I think, as I mentioned, you know where we can, where you can partner with other Industries, small businesses, um partnering with other groups – that, I think is important too, to have a you know, like I said, a unified message and show, as Alexia mentioned just the Impact it’s having on everyone: okay, terrific, we’re gon na – have to leave it there.
Thank you so much to both you Alexia and Laura, and really really great work, and I know you’re still going to be working on it in the future.
So we’ll have you back to discuss.
Maybe next year’s report um really appreciate it.
So now I want to um just talk for a few minutes about our upcoming programming on June 7th, I’m going to interview our chief diversity, inclusion officer, Lauren Young.
Actually, my colleague’s, going to interview her Jessica Kearney, who is our fantastic head of The Travelers Institute? We’ll be interviewing Lauren Young and she’s going to give you tips and advice and strategies for uh your diversity journey and all of your organizations and things that have worked for us things.
That may have not worked so well.
So she’s going to share her ideas and thoughts of where we are in our diversity Journey now and then, on June 14th we’re going to be live from the Insurance Institute for Highway Safety iihs in rural Virginia, and we’re going to Do some crash testing and it’s going to be lots of fun, so uh excuse any glitches.
We’re gon na have in technology we’re going to come to.
You live from IHS and then on June 28th we’re going to have a conversation about advancing disability, hiring and inclusion in the workplace with a diversity. Uh, excuse me with disability experts in the field, both internal and external, so visit us at travelersinstitute, org and watch some of our replays folks.
We’re thrilled that you join us every week and uh be safe and we’ll see in a little while foreign Music .