The New Landscape of Risk That Every Business Should Prepare For
Businesses are facing larger and larger liability claims throughout the country, driven by a number of legal trends that are resulting in bigger lawsuit awards and new risks that many companies are unprepared for.
A recent study by Liberty Mutual Insurance found that the U.S. insurance industry's liability-related payouts have been growing steadily due a number of factors, including:
- Higher average claims costs
- Increased number of claims
- Higher legal costs and settlements
- Higher medical costs for injured parties (in terms of hospital, rehab and pharmaceutical costs).
There are a number of trends that business managers and owners should be aware of so that they can take the necessary precautions to protect their organizations to the best extent possible. If you run a business, you should be aware of these trends, some of which could seriously financially damage your organization.
Legal trends
The report first looked at some trends that are not only increasing the amount of litigation businesses must contend with, but also higher awards.
Litigation funding - Outside investors are fronting legal fees to pursue lawsuits on behalf of aggrieved or damaged parties in exchange for a percentage of any ultimate settlements or judgments. In these scenarios, the claimants are more likely to want to take the case to trial and refuse settlement offers.
They may also push for unnecessary medical treatments. Attorneys may also present complex legal arguments that draw out the case and increase legal costs.
Traumatic brain injuries - More plaintiffs are claiming that they suffered traumatic brain injuries even for non-serious incidents. Claiming brain injuries requires additional medical treatment, more frequent doctor's visits - and even settlements that would pay the person for a lifetime of care.
Higher jury awards - Juries seem more inclined to award higher and higher awards for breach of contract, intellectual property, product liability and wrongful death lawsuits. This is likely due to a growing sympathy from the public - and hence jurors - for injured parties (in their eyes, victims). In 2016 alone, four verdict awards amounted to $1 billion or more.
Medical costs increasing
In many liability lawsuits there is a claim of physical harm that necessitates medical treatment, and costs are on the rise for several reasons:
Medical inflation - Overall medical costs are on the rise. And general liability claims are costly because they can sometimes require years of treatment and rehabilitation for the injured party. Hospital services are increasing, as are drug costs.
Medical management challenges - Insurance carriers have little control over the medical treatment choices and costs of general liability claims. Because of this, it's easier for the plaintiff's lawyer to direct medical treatment to favored clinics or doctors. This has driven up medical costs for liability claims exponentially.
Other costly trends
More violence - As active-shooter incidents increase, you should know that more than 50% of them occur in places of business, government buildings or educational institutions.
Technology - Technology is advancing at a rapid clip and with an increasing number of data-driven companies, the use of the Internet of Things, 3D printing, social media and more, there is a whole new area of liability for companies.
Sharing economy - The sharing economy, while good in many ways, has created a lack of clarity about when coverages begin and end. This is forcing the insurance industry to devise customized insurance products.
The takeaway
Each industry has its own unique set of risks and you should work with us to tailor your insurance policies to meet your potential liabilities.
You should also discuss with us how to best put together a strong risk management policy for your organization, focusing on the largest risks that your company faces.
In terms of insurance, you may need specialized policies beyond your general liability policy.
And you may want to consider an umbrella or excess liability policy, so you have the additional protection you may need in case of one large claim.
Thank you for visiting the Partners Insurance Agency blog. We hope you found our content helpful and informative.