Excessive litigation is compounding the problem of rising auto insurance costs, according to a new report by the Insurance Information Institute.
Legal System Abuse – State of the Risk examines the tactics used to initiate more lawsuits, to drive up a defendant’s litigation expenses and settlement payouts, and to secure outsized monetary awards after jury verdicts. Plaintiff attorneys (also referred to as billboard attorneys) often use aggressive marketing and advertising techniques to attract potential plaintiffs. These practices are prevalent nationwide as plaintiff’s attorneys hint at the promise of a financial windfall for their clients through multiple channels. Specifically high traffic channels such as highway billboards, television advertisements, and social media.
“There are real costs behind what we all know and see plaguing our roads with promises of settlement dollars. All as billboard attorneys are racking up fees, and consumers are found to be getting less and less. The price of insurance is the effect, not the cause of risk. There must be more work done to curb legal system abuse. Auto insurers – both personal and commercial – are seeing significant increases in claims costs when attorneys enter into the picture,” stated Sean Kevelighan, CEO, Triple-I. “What’s more, there are multi-millions of dark money investor dollars entering into the fray to try and get their share. Some of these investors are sovereign funds, which may very well pose increased national security risks.”
Our Litigious Society
Third-party litigation funding (TPLF), a multi-billion-dollar global industry where hedge funds and other financiers invest in lawsuits. The investment is in exchange for a percentage of any settlement or judgment. It allows plaintiff’s attorneys to finance more litigation through dark money.
Few states outside of either Montana or Indiana even require the disclosure of a third-party litigation funder’s involvement in a civil lawsuit. An effort was made to implement TPLF regulations in Florida this year. However, it appears to have stalled in the state’s legislature due to efforts of the trial bar. This lack of transparency makes it difficult to hold plaintiff attorneys and their clients accountable to good faith standards.
“We’re seeing publicly traded and private third-party litigation funders getting more than 20% in investment yield. Where else can you get that kind of return?” said Dale Porfilio, FCAS, MAAA, chief insurance officer, Triple-I.
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