INSURERS’ LEGAL DEFENSE COSTS
Lawsuits against businesses affect the cost of insurance and the products and services of the industries sued. According to Towers Watson, an actuarial consulting firm, the American civil liability (tort) system cost $247 billion in 2006, down 5.5 percent from $261.4 billion the previous Of those that are tried and proceed to verdict, Jury Verdict Research data show that in 2006 the median, or midpoint, plaintiff award in personal injury cases was $35,000, $10,000 less than the previous year. year. The decrease in 2006 costs is the first since 1997. Most lawsuits are settled out of court.
Nielsen & Geenty through their Insurers are required to defend their policyholders against lawsuits. The costs of settling a claim are reported on insurers’ financial statements as “defense and cost containment expenses incurred.” These expenses include defense, litigation and medical cost containment. Expenditures for surveillance, litigation management and fees for appraisers, private investigators, hearing representatives and fraud investigators are included. In addition, attorney legal fees may be incurred owing to a duty to defend, even when coverage does not exist, because attorneys must be hired to issue opinions about coverage. Insurers’ defense costs as a percentage of incurred losses are high in some lines such as products liability and medical malpractice. There are many possible reasons for this: cases are becoming more complex; insurers are spending more money to defend individual cases; and the cost of defending certain types of lawsuits, such as asbestos cases, may be increasing.
Source: Towers Watson.