Legal Environment


If you know someone who leads an active lifestyle, you may already know what a Fitbit is. For everyone else, a Fitbit is a wearable device that tracks steps, calories, distance and even sleep.

Now it appears data from wearable devices may be admissible in court.

Forbes.com reports that a law firm in Calgary is working on the first known personal injury case that will use activity data from a Fitbit to help show the effects of an accident on their client.

According to the report, the young woman in question, who used to be a personal trainer, was injured in an accident four years ago. While Fitbits weren’t on the market back then, her lawyers believe they can use data from her Fitbit to show that her activity level has significantly decreased and is now below where it should be for someone of her age and profession.

The article suggests that “cases like this could open the door to wearable device data being used not just in personal injury claims, but in prosecutions.”

The young woman’s lawyer is also quoted saying that such data could be useful to insurers assessing questionable claims and that just as courts requisitioned Facebook for information several years ago a court order could compel disclosure of that data.

Sounds like another case where digital information has an unintended use in the courtroom.

As the number of companies suffering a data breach continues to grow – with U.S. retailer Staples now reported to be investigating a breach – so do the legal developments arising out of these incidents.

While companies that have suffered a data breach look to their insurance policies for coverage to help mitigate some of the enormous costs, recent legal developments underscore the fact that reliance on traditional insurance policies is not enough, notes the I.I.I. white paper Cyber Risks: The Growing Threat.

A post in today’s Wall Street Journal Morning Risk Report, echoes this point, noting that a lawsuit between restaurant chain P.F. Chang’s and its insurance company Travelers Indemnity Co. of Connecticut could further define how much, if any, cyber liability coverage is included in a company’s CGL policy.

Collin Hite, partner and leader of the insurance recovery group at law firm Hirschler Fleischer tells the WSJ that whatever the outcome of this case, companies that want to be sure they are protected against cyber-related losses may have to purchase separate cyber liability policies—and make sure those policies are broad enough to encompass the myriad ways an attack could cost the firm money.

P.F. Chang’s confirmed in June that it had suffered a data breach in which data from credit and debit cards used at its restaurants was stolen.

An earlier post in the Hartford Courant Insurance Capital blog by Matthew Sturdevant has the details on the legal action between Travelers and P.F. Chang’s.

To-date the application of standard form commercial general liability (CGL) policies to data breach incidents has led to various legal actions and differing opinions, according to the I.I.I. paper on cyber risks.

One recent high profile – and oft-cited case – followed the April 2011 data breach at Sony Corp. in which hackers stole personal information from tens of millions of Sony PlayStation Network users.

A New York trial court ruled that Zurich American Insurance Co. owed no defense coverage to Sony Corp. or Sony Computer Entertainment America LLC.

In his ruling, New York Supreme Court Justice Jeffrey K. Oing said acts by third-party hackers do not constitute “oral or written publication in any manner of the material that violates a person’s right of privacy” in the Coverage B (personal and advertising injury coverage) under the CGL policy issued by Zurich.

Further expertise and analysis on cyber risks and insurance is available from the I.I.I.

Growth in U.S. liability claims could accelerate to 5-6 percent in the near future, according to a just-released report by Swiss Re sigma.

The slowdown in U.S. liability claims paid after 2008, primarily due to economic drivers such as the recession and weak recovery, is expected to reverse.

Why the change?

Cyber risk and the liability from emerging technologies including hydrofracking and autonomous cars, combined with stronger economic growth will drive liability claims costs higher, sigma says.

Interestingly the report suggests that the effects of tort reform, which contributed to a slowdown in claims growth in the mid-2000s in the U.S., were a one-off benefit and will no longer suppress claims growth to the same degree.

It notes:

Often these types of reform have only a temporary effect on claims growth, which fades as the rules eventually soften again or the legal profession learns how to optimize the pursuit of claims in the new framework.”

Tort reform in the U.S. has focused on medical malpractice and class action claims, the report says.

Many early studies concluded that medical malpractice reforms such as limits on lawyers’ fees and non-economic compensation were effective in reducing medical malpractice liability. However, some of these caps were later overturned by state supreme courts.

Despite passage of the Class Action Fairness Act in 2005, empirical evidence on the effects of federal class action reform in the U.S. remains inconclusive, sigma adds.

The report also warns that litigation funding, in which a third-party funding company pays the costs of litigation and is paid only if the litigation is successful, is still in its infancy in the U.S. but developing.

There are fears it will grow, driving up litigation and future claims costs for insurers.”

Check out this I.I.I. backgrounder on the U.S. liability system here.

Sporting organizations around the world and their liability insurers have to be keeping a close eye on the latest developments in a multi-million dollar settlement which will see the National Football League (NFL) pay out an uncapped amount to compensate retired football players suffering from certain severe concussion-related neurological conditions.

A federal judge approved the preliminary revised settlement yesterday after the original $765 million settlement proposed by the NFL was rejected by U.S. District Court Judge Anita B. Brody in January over concerns that the amount would not be enough to cover the claims from more than 20,000 retired players over the 65-year life of the settlement.

Concerns have been growing over the risks of sports-related concussions in recent years since the filing of the first lawsuits by injured professional football players against the NFL in 2011.

Young people participating in a range of sports including soccer, basketball and ice hockey are also affected. The Centers for Disease Control and Prevention estimates that 173,285 sports- and recreation-related traumatic brain injuries (TBI), including concussions, among children and adolescents are treated in U.S. emergency rooms annually.

The New York Times reports that despite being uncapped, the new settlement does allow the NFL to contest an unlimited number of requests for awards by retired players as a way to prevent fraudulent claims.

Retired players will receive packets explaining the terms of the settlement over the coming weeks and players will be deemed to be in favor of the deal unless they opt out, which would preserve their legal rights, the NYT says. They can also object to parts of the deal.

A fairness hearing on the settlement is scheduled for November 19 in Philadelphia.

The settlement provides for a $75 million baseline assessment program that will offer all retired NFL players baseline neuropsychological and neurological evaluations to determine the existence and extent of any cognitive defects.

The 65-year monetary award fund will award cash to retired NFL players who already have a qualifying diagnosis or receive one in the future.

The court order details potential awards for qualifying diagnoses of up to $3.5 million for neurocognitive impairment, $3.5 million for Alzheimer’s Disease and Parkinson’s Disease, $5 million for amyotrophic lateral sclerosis (ALS), and $4 million for players who die with chronic traumatic encephalopathy.

The awards may be reduced based on a retired player’s age at the time of diagnosis, the number of NFL seasons played, and other offsets outlined in the settlement.

Business Insurance reports that the settlement approval notes that players who receive awards from the NFL fund are not required to release claims against the NCAA (National Collegiate Athletic Association) or any other amateur football organizations for concussion claims.

A 2013 article by then National Underwriter reporter Chad Hemenway provides invaluable insight into sports-related traumatic brain injuries and how the legal fallout may change the way sports are insured.

Check out I.I.I. facts and stats on sports injuries.

While the number of lawsuits filed against U.S. companies in the past year was stable, the financial impact of the litigation they face continues to increase, according to Norton Rose Fulbright’s Annual Litigation Trends Survey.

More than one-third (34 percent) of all companies faced at least one lawsuit with more than $20 million at issue in 2013, up from just 23 percent in 2011, continuing a trend in recent years that’s left fewer respondents untouched by high-value cases.

Energy companies are much more likely to have one or more large lawsuits pending against them compared to other industries (52 percent versus 34 percent for the total sample), the study found, as are larger companies generally (51 percent versus 34 percent for the overall sample).

Among the largest companies surveyed (revenue greater than $5 billion), two-thirds reported having one or more lawsuits greater than $20 million pending against them, twice the rate for the overall sample.

Meanwhile, the percentage of larger companies spending $10 million or more annually on litigation increased to 43 percent in 2013 – the second consecutive year of growth (33 percent in 2012, 19 percent in 2011).

Another key takeaway from this year’s study is that healthcare industry respondents had the most litigation matters compared with other industries, with 55 percent indicating more than 20 suits versus 30 percent for the overall sample.

That increased activity also led to higher spending, with 49 percent of healthcare respondents reporting a 2013 litigation spend of $5 million or more, closely followed by energy at 46 percent.

The percentage of financial services companies spending $5 million or more on litigation more than doubled to 38 percent in 2013, up from 15 percent in 2012 and just 11 percent in 2011.

Labor and employment disputes once again were the most common litigation issues facing U.S. companies in 2013.

The number of U.S. companies facing regulatory proceedings increased for the third consecutive year, reflecting a stricter regulatory environment and increased scrutiny from a broad range of state and federal agencies.

Not surprisingly, legal counsel concerns over regulatory/investigation matters are also up sharply in the 2013 survey, with 41 percent of respondents indicating it as a top concern, versus just 23 percent in 2012.

Norton Rose Fulbright’s 10th annual litigation trends survey of corporate law departments in the U.S. saw responses from a total of 401 senior corporate counsel executives representing a broad range of industries.

Job bias charges reported to the U.S. Equal Employment Opportunity Commission (EEOC) dropped to 93,727 in fiscal year 2013, down 5.7 percent from 99,412 charges in 2012, and a 6.6 percent decrease from the record 99,947 charges reported in fiscal year 2011.

But the decline in the number of charges was offset by an increase in the amount of monetary relief obtained for victims.

Monetary relief obtained for victims increased by $6.7 million to $372.1 million – the highest monetary recovery from private sector employers in agency history through its administrative process, the EEOC said.

As in prior years, retaliation under all statutes was the most frequently cited basis for charges of discrimination, increasing in both actual numbers (38,539 up from 37,836) and as a percentage of all charges (41.1 percent up from 38.1 percent) from the previous year.

This was followed by race discrimination (33,068/35.3 percent); sex discrimination, including sexual harassment and pregnancy discrimination (27,687/29.5 percent); and discrimination based on disability (25,957/27.7 percent).

The EEOC noted that both race and disability discrimination increased in percentage of all charges while decreasing in raw numbers from the previous year, while charges of sex discrimination were down by over 2,600 charges.

The EEOC also received 333 charges under the Genetic Information Nondiscrimination Act, which prohibits discrimination on the basis of genetic information, including family medical history.

Despite the overall positive trend, employers should remain vigilant, legal experts say.

In a post on legal newsfeed Lexology, Hannesson Murphy, a partner at law firm Barnes & Thornburg, writes:

While employers should be encouraged by current trends, this is no time to let down their guard: EEOC charges remain well above the levels of the mid-1990’s or mid-2000’s, retaliation claims are on the rise, and the EEOC is as active as ever. In short: remain vigilant.”

Check out further I.I.I. facts and statistics on employment practices liability insurance here.

The directors and officers liability insurance market is firming, with increased pricing being experienced in many sectors, according to an annual survey conducted by Towers Watson.

Towers Watson’s 2012 Directors and Officers Liability (D&O) Survey found that 41 percent of respondents in the private/not-for-profit space, and nearly 30 percent of public companies indicated that their premiums had increased in 2012.

In a press release Larry Racioppo, vice president, executive liability group, Towers Watson, and author of the survey, says:

Increasing claim activity, including D&O and employment litigation, coupled with inadequate pricing and retentions in the private and nonprofit space, are all driving insurers’ need for pricing increases.”

In 2012, directors and officers were more likely to ask about the amount and scope of their D&O coverage than last year, perhaps due to concern over the litigious environment, Towers Watson said.

This was particularly true of private companies, where 70 percent of respondents reported receiving an inquiry as to the amount and scope of their D&O coverage, up from 58 percent in 2011.

Regulatory actions continued to be a significant source of concern among directors and officers in 2012, with 83 percent ranking it as a top three concern.

In fact the biggest jump in directors and officers liability insurance claims in 2012 was brought about by regulatory actions, increasing to 23% of responses from 19% in 2011 and 16% in 2010.

Towers Watson noted the increased concern over regulatory litigation may reflect new laws put in place since the financial crisis, including the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as an increase in whistleblower bounties.

Check out I.I.I. facts+stats on D&O liability insurance here.

Companies in the United States and United Kingdom dealt with more litigation in 2012 and see further increases in 2013 while heightened regulatory activity is also expected to continue, according to the 9th Annual Litigation Trends Survey from international law firm Fulbright & Jaworski.

The majority of all respondents—92 percent (compared with 89 percent in last year’s survey)—expect the number of legal disputes their companies will face to rise or stay the same in the next 12 months.

One-quarter of U.S. respondents and 32 percent of U.K. respondents expect litigation to rise in 2013. Companies from the retail, energy, and health care industries have the highest expectations for a rise in the number of disputes.

After a one-year decline, businesses on both sides of the Atlantic initiated and faced more lawsuits in 2012 than they did in 2011. In the U.S., labor and employment disputes and contract litigation led the way.

Meanwhile, respondents to the Fulbright survey adapted to a stricter regulatory environment in 2012, both at home and abroad, as regulatory investigations reached a five-year high.

Indeed, Fulbright’s poll of corporate law departments found that the rate of companies retaining outside counsel for assistance in a regulatory investigation jumped in the U.S. from 55 percent in 2011 to 60 percent in 2012, and in the U.K. skyrocketed from 27 percent to 72 percent.

In a press release Otway Denny, head of Fulbright’s global disputes practice, says:

As litigation rebounded in 2012, more companies, particularly in energy, health care, and manufacturing, experienced an increase in government and regulatory investigations. All three of these industries, along with technology, were involved in investigations that concerned at least six different U.S. regulators.”

The survey gathered input from 392 in-house attorneys, including 275 U.S. respondents, onlitigation issues and trends.

Check out I.I.I. facts and statistics on litigiousness.

Job bias charges reported to the U.S. Equal Employment Opportunity Commission (EEOC) remained close to a record high of nearly 100,000 in fiscal year 2012, even as the volume of cases fell.

The EEOC confirmed that it received a record 99,412 charges of private sector employment discrimination in fiscal year 2012, down slightly (-0.5 percent) from last year’s total.

Monetary relief obtained for victims totaled $365.4 million – the largest amount of monetary recovery from private sector and state and local government employers through its administrative process, the EEOC said.

The year-end data show that retaliation (37,836), race (33,512) and sex discrimination (30,356), which includes allegations of sexual harassment and pregnancy, were, respectively, the most frequently filed charges.

Retaliation charges under all statutes enforced by the EEOC again rose by 1.3 percent in FY 2012, after increasing by 3 percent in FY 2011.

The number of charges alleging sex discrimination (30,356) increased by 6 percent, while charges based on disability discrimination (26,379) were up 3 percent.

The EEOC also received 280 charges under the Genetic Information Nondiscrimination Act, which prohibits discrimination on the basis of genetic information, including family medical history.

In a press release, the EEOC said it achieved a significant reduction in its charge inventory for a second consecutive year, something not seen since 2002. The pending inventory of private sector charges was reduced by 10 percent from fiscal year 2011, bringing the inventory level to 70,312.

Business Insurance has more on this story.

The EEOC numbers again underscore the importance of employment practices liability insurance for businesses. Check out I.I.I. facts and statistics on EPL insurance.

The size of the Top 10 jury awards rose again in 2012, according to the latest annual report from Lawyers USA.

The 10 largest jury verdicts in 2012 totaled $2.03 billion, an increase of 10 percent from $1.84 billion in 2011.

Lawyers USA noted that the average award for 2012 increased by nearly $20 million, rising to $203 million from just under $184 million the prior year. By contrast, the average award for 2011 increased by around $27 million over 2010.

While the top award in 2012 was substantially greater than the top verdict the prior year – $716.5 million versus $482 million in 2011 – the drop this year was much steeper to the No.2 award of $179.7 million, and the No. 3 award of $178 million.

Other key takeaways include:

– All of the verdicts in this year’s Top 10 were greater than $100 million. The lowest award was $109 million, some $19.4 million more than the No. 10 award in 2011.

– In the year’s top verdict, a convenience store was hit with a massive $716.5 million verdict for selling alcohol to a teenager who plowed into another vehicle, killing its occupant.

– The #2 verdict went to three workers burned in an explosion at a grain silo who were awarded more than $179 million against ConAgra Foods for failing to clean up stored wheat that became combustible.

Lawyers USA compiles the Top 10 Jury Verdicts each year applying certain ground rules. Verdicts must be to an individual plaintiff, defined as a single person, family or small group of individuals injured in a single incident who had their claims tried in one case before the same jury.

The list does not include business-against-business suits, class actions or consolidated suits. Cases must have been defended and default verdicts and suits against incarcerated individuals are not included.

Check out I.I.I. info on the liability system.

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