On a sweltering day in NYC, AIRROC opened its Summer Membership Education Day with a panel of experts that described our own industry climate change: the social inflation that is driving nuclear verdicts and run-away inflation in losses. Just as climate change increases the intensity of storms, the social climate surrounding litigation has increased the potential for more litigation and higher verdicts; it also fuels profits in the litigation funding industry, making efforts to combat the social climate change ever more challenging.
How did we get to the over-heated environment where we now find ourselves? Dana Franzetti, Managing Director, Swiss Re Americas, Andy Meerkins, Senior Counsel, Foley & Lardner, LLP and Caryn Siebert, Vice President, Carrier Practice, Gallagher Bassett, described over-arching changes and the details we can see in everyday life that contribute to headline producing verdicts. Many of those verdicts get challenged, reversed, or reduced on appeal but do we see those stories with equally prominent headlines? The Plaintiffs’ bar has star quality roles in both fact and fiction; they advertise extensively. (Did you know attorney advertising increased during the pandemic because other companies decreased theirs and ad time became cheaper?) They network to share tactics and materials, working together to drive escalating results, attract more talent to their field and portray themselves as fighting the evil empire of corporate greed. While doctors and truckers were our heroes during the first year of the pandemic, the attitude is gradually shifting to pre-pandemic tendencies to call them out as the enemies who inflict pain and suffering on unsuspecting victims. Both industries see an inordinate number of lawsuits, broader theories of liability, and large verdicts in “hell-hole” jurisdictions but also elsewhere.
Where there is money, big money, so arises financial opportunity for investors. At one time litigation funding was used only in commercial litigation but as the potential for big returns grew for consumer legal funding, so did investment. There are many funding models, but your usual contingency fee plaintiff’s case is now supplanted with Wall Street level resources; portfolios of cases are developed and managed to achieve the highest return for investors. This raises issues regarding the discoverability of such arrangements, attorney ethics, and complicates the timing of settlement negotiations (who is calling the shots?). More often than not, you may never know there is a litigation funding entity involved. The industry is largely unregulated.
We live in an era of misinformation. This can tap into our basic instinct to join one group that is pitted against another group and we are more easily drawn into a plaintiff’s narrative against a villain. We need to recognize and combat this climate crisis on both a societal level and on the more granular level on which the insurance industry and our policyholders settle and try cases. The panel presented four myths about juror attitude as examples of how to counteract current juror biases against corporate defendants; in sum, we need to understand the jury pool and the jurors need to hear an equally compelling narrative about the defendant, including their community support, donations, preservation of jobs and caring about patrons. In evaluating cases, we need to recognize the potential for a nuclear verdict and take steps to anchor a more appropriate number in negotiations and develop a trial strategy with themes that will resonate with a potential jury. Their slides presented additional detail on each of these points.
The panel ended its presentation by quoting Business Insurance in saying “Social Inflation is one of the biggest disruptors facing the insurance industry”. If we do not take steps to impact the factors influencing climate change in the litigation sphere, we can expect severe storms and the losses those entail.
