Why Pressure Is Building on the Casualty Market
As a result of several years of massive awards in tort cases, new tactics from the plaintiffs’ bar and other troubling trends, many in the casualty space may be hearing the refrain of the classic rock hit: “pressure pushing down on me, pressing down on you.” The word that best describes the current situation is “more.” There are more liberal jurors, more litigation funding and more mega verdicts.
For example, in August 2017, a jury awarded $148 million to a woman who was paralyzed after an accident at an airport – the largest single plaintiff award in Cook County history. In 2018, there was a $4 billion punitive damage award in a talc product liability case, a $260 million award in a trucking case in Texas, and a jury in Missouri awarded $76 million in a premises liability case.
There has also been an explosion in “pile on litigation.” Now, when regulators announce an investigation or a recall it creates a chain reaction of more lawsuits and investigations by states, counties and municipalities, class action attorneys, investors and consumers. Our clients are forced to navigate an unpredictable and costly maze of endless enforcement actions.
Research from the U.S. Chamber of Commerce Institute for Legal Reform reveals that the number of television commercials seeking clients for potential lawsuits have more than tripled in the past decade.
Why? First, the plaintiffs’ bar is not just running ads on billboards anymore. They have become experts at using social media, paying more than $100 per click to recruit people for lawsuits. In 2016, more than $1 billion was spent on legal advertising and marketing in the U.S. To put that in perspective, the 2016 Presidential candidates spent less than $500 million dollars on television ads combined.
Research from the U.S. Chamber of Commerce Institute for Legal Reform reveals that the number of television commercials seeking clients for potential lawsuits have more than tripled in the past decade. They estimate that law firms spent nearly $1 billion on advertisements in 2017 – about 116 percent more than they did in 2006.
Secondly, many times the court house is not a level playing field. Today there is a culture of fault. Many people believe when any accident happens a human or corporate error must be to blame and somebody must pay, preferably somebody with deep pockets.
Corporations have been so tarnished by scandals over the years that the average American may be more amenable – even eager – to hand down giant awards against large corporations. A million dollars is not what it used to be, and judges and juries have been so desensitized to the value of the dollar that they often feel that only a stratospheric award will effectively “send a message.”
Finally, litigation finance is one of the fastest growing areas of the business of law. Its use by American law firms quadrupled between 2013 and 2016, and it’s growing in Europe, Australia and Asia. Third party litigation finance increases the volume of litigation. It’s pretty simple, more litigation funding means more litigation. There is little reason to hope that the legal environment will change in the future. In order to adapt to the “new normal,” the casualty market needs more rigorous underwriting analysis, closely managed capacity deployment and considerable rate increases.