Friday, November 5, 2010
Apologies for the break in the Roundup.
From New England, where I'm dealing with an ear infection (and now understanding why my kids wailed like someone was jabbing them with a sharp stick when they had ear infections):
- Bedbugs lead to lawsuits lead to bad publicity. (Crain's New York)
- Suit claims Toyota required silence as condition of buying back cars with alleged unintended acceleration issues. (TopSpeed.com)
- Medical care provider sued in claim it failed to prevent prison suicide. (Yakima Herald)
- Major liability predicted in death of Notre Dame videographer. (Forbes/SportsMoney)
- Starbucks prevails in hot-tea double-cupping lawsuit. (Reuters)
Reform, Legislation, Policy
- NY Times opines against money in judicial elections. (New York Times)
Trials, Settlements and Other Ends
- Delaware county settles wrongful shooting case with victim's roommate. (Star News Online)
- Johan Santana seeks dismissal of sexual assault lawsuit brought by anonymous plaintiff. (ESPN New York)
- Happy 1,000th post to friend-of-Torts-Prof Eric Turkewitz! (Even if he still could use a shorter blog name; might I suggest "Eugene"?) (New York Personal Injury Attorney Blog)
- We'd like your nominations for senior TortsProfs from whom we can get inspiration. (TortsProf)
Thursday, November 4, 2010
Michael L. Wells is the Marion and W. Colquitt Carter Chair in Tort and Insurance Law at the University of Georgia School of Law. His recent scholarship includes a new edition of Constitutional Torts (with professors Tom Eaton and Sheldon Nahmod) and Constitutional Remedies (with Professor Eaton). He has also published numerous articles in such leading journals as the Cornell Law Review, Duke Law Journal, Virginia Law Review, Georgia Law Review, William & Mary Law Review, Constitutional Commentary and Yale Journal of International Law.
Select recent articles include: "A Common Lawyer's Perspective on the European Perspective on Punitive Damages" in the Louisiana Law Review (2010), "State-Created Property and Due Process of Law" in the Georgia Law Review (2009) (with Alice Snedeker), "Scott v. Harris and the Role of the Jury in Constitutional Litigation" in Review of the Law (2009), "International Norms in Constitutional Law" in the Georgia Journal of International and Comparative Law (2004) and "Proximate Cause and the American Law Institute: The False Choice Between the 'Direct Consequences' Test and the 'Risk Standard'" in the University of Richmond Law Review (2003).
Wells is fluent in French and has served as a visiting professor at the University of Lyon (III) in Lyon, France, on six occasions and as a professor in the Duke-Geneva Institute in Transactional Law. He is a member of the American Law Institute.
Wells earned his bachelor's and law degree from the University of Virginia, where he served as articles editor for the Virginia Law Review. He clerked for Judge John D. Butzner Jr. of the U.S. Court of Appeals for the 4th Circuit and practiced with the law firm of Covington & Burling in Washington, D.C., for two years before joining the law faculty at the University of Georgia. He has also served as a visiting professor at the College of William & Mary and Boston University, and has been a visiting scholar at the University of Aix-Marseille in Aix-en-Provence, France.
Tuesday, November 2, 2010
In conjunction with the AALS Torts & Compensation Section (Mike Rustad, Chair Elect) we'd like to introduce a new feature at TortsProf, "Tuesdays With..." Many of you may be familiar with Mitch Albom's popular book, Tuesdays With Morrie. In the book, Albom rediscovered his former college professor and mentor Morrie Schwartz. Albom visited Schwartz in his study every Tuesday for the rest of Schwartz's life. The book captures the wit and wisdom of these visits.
On selected Tuesdays this spring, we invite you to join us for conversations with senior Torts professors. To that end, we seek nominations of torts scholars, age 70 or older, who have made outstanding contributions to the field of torts. To junior professors, their careers should be both an inspiration and a challenge. Please submit nominations by e-mail to Sheila and/or Chris by December 1, 2010.
--Sheila & Chris
Monday, November 1, 2010
There is widespread acceptance of the idea that tort law and insurance are intimately related. The growth of liability insurance permitted the expansion of tort liability through the twentieth century, and the expansion of tort law in turn spurred the further development of liability insurance. The compensation objective of tort would not be served without the presence of insurance. First-party insurance obviates the need for tort in some circumstances and, through the collateral source rule, effectively funds contingent fees in other circumstances. And so on.
All of these ideas are based on the assumption that insurance works—that companies assess risks, insureds purchase policies against those risks, and the companies pay claims that are within coverage. Unfortunately, the facts about insurance are increasingly at odds with this assumption. Most companies pay out most claims most of the time, of course. But more and more, insurance companies deny valid claims in whole or part and force policyholders and tort victims to litigation to obtain the benefits to which they are entitled.
The economics of insurance creates this potential for opportunism. Every dollar a company does not pay out in claims is a dollar it keeps in profit. Outright denials, reduction of the amounts paid, and using litigation to diminish and deter claims potentially provides a greater benefit to a company than it loses in disappointed customers and a negative reputational effect.
Insurance companies have always been subject to these temptations. Since the early 1990s, however, the strategy has become more systematic and institutionalized across auto, homeowners, and disability insurance and extended even to commercial lines. Three factors led to the change.
First, there were a series of external shocks that put insurance companies under financial pressure. An extended soft underwriting market forced companies to continually cut premiums to attract customers. Medical costs, a principal part of the payouts of auto insurance companies, rose dramatically. Mother Nature intervened and made things worse as hurricanes, earthquakes, and wildfires imposed losses for which companies had inadequately reserved.
Second, attitudes changed. As elsewhere in American finance, a mania for growth and profits took hold. Many companies shifted from mutual to stock ownership to tap the capital markets as a source of growth. Allstate, newly demutualized, embarked on an extreme strategy of reducing underwriting standards and expanding its base of agents to increase its market share, and as it spun off from its lifelong association with Sears, shareholder value became primary. GEICO began spending half a billion dollars annually on advertising to attract customers, triggering a price war fought with premium and advertising dollars.
Third, a change agent entered the picture. Allstate and other companies hired the mega-consulting firm McKinsey & Company to redesign their claim strategies. At Allstate, McKinsey defined claims as a “zero-sum game,” with the policyholder and the company competing for the same dollars. Its goal was “to redefine the game . . . to . . . radically alter our whole approach to the business of claims.” Computer systems would be put in place to set the amounts policyholders would be offered, claimants would be deterred from hiring lawyers, adjusters would be rewarded for underpaying claims, and settlements would be offered on a take-it-or-litigate basis.
As a consequence, the claims department has become a profit center rather than solely the place that honors the company’s promise to pay what it owes, no more but no less. The results have been dramatic: For the property/casualty industry as a whole, the pure loss ratio—the amount paid in claims—has declined sharply; the industry pays out about a nickel less for every premium dollar compared to ten years ago and a dime less compared to twenty years ago.
The new reality of the insurance industry poses a number of challenges for the tort system. Most obviously, tort law’s compensation goal is undermined if compensation through insurance is less readily available. Beyond that, other perverse effects are possible.
For example, there may be both more litigation and less litigation.
If insurance companies are less willing to pay under liability policies at the full value of claims and more willing to contest claims through litigation, fewer claims will be settled and more brought to court. If they are less willing to honor first-party claims, insureds who are the victims of torts and might otherwise be satisfied with the benefits of their own insurance coverage may sue their injurer. And there will be more litigation about the claims practices themselves, under the rubric of bad faith.
At the same time, there may be less litigation, and less litigation in ways that challenges some of our conventional ideas about tort. One type of claim singled out by insurers and their management consultants is the minor auto accident producing soft tissue injuries, the so-called MIST case (Minor Impact, Soft Tissue). Companies over-invest in the defense of individual MIST claims in order to deter future claims, in part by changing the economics of law practice to make unprofitable the pursuit of such claims on a contingent fee. The argument is often made that the tort system tends to overcompensate small injuries and undercompensate large injuries. As MIST claims are singled out, at least half of the argument is undercut; victims of such accidents are often undercompensated.
These challenges may require some rethinking by tort scholars. Even more important is the threat posed to insurance as an institution. Insurance is the great protector of the standard of living of the American middle class. Illness, injury, and death will occur, and insurance can ease the financial burden of loss, but only when it works.
--Jay Feinman, Distinguished Professor of Law, Rutgers-Camden