Legal Environment


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.

A just-released list of the Top Ten Most Ridiculous Lawsuits of 2012 by the U.S. Chamber Institute for Legal Reform (ILR) is as good a place as any to start the New Year.

Heading the list? An intoxicated Florida driver who pleaded guilty to manslaughter and then sued the victim he killed.

In a blog post, ILR President Lisa A. Rickard notes:

This poll reminds us that as a society, we sue too much. In turn, these abusive lawsuits inflict harm on lives, jobs, and our economic growth.”

The ILR puts together the top ten ridiculous list from votes cast throughout the year by visitors to FacesOfLawsuitAbuse.org. The lawsuits were selected from those featured in the website’s monthly polls for 2012.

Here’s the complete list of the Top Ten Most Ridiculous Lawsuits of 2012:

1. Intoxicated Florida driver pleads guilty to manslaughter, then sues victim he killed
2. Michigan woman files $5 million suit for the leftover gas still in her repossessed car
3. 13-year-old Little Leaguer sued by spectator who got hit with baseball
4. Maximum security inmate who went to jail with five teeth sues prison for dental problems
5. Anheuser Busch sued when longneck bottle used as weapon in bar fight
6. National Football League fan sues Dallas Cowboys over hot bench
7. California restaurateur sued for disabilities act violations in parking lot he doesn’t own
8. Colorado man wins $7 million blaming illness on inhaling microwave popcorn fumes
9. $1.7 billion suit claims City of Santa Monica wireless parking meters causing health problems
10. Bay Area parents sue school after their son was kicked out of honors class for cheating

Check out additional facts and statistics from the I.I.I. on litigiousness.

Food manufacturers are the target of a wave of new lawsuits filed by consumers who allege the companies are mislabeling their products and ingredients.

The New York Times reports that lawyers of Big Tobacco lawsuits searching for the next big payday are now taking aim against food manufacturers. Some 25 cases have been filed against industry players like ConAgra Foods, PepsiCo, Heinz, General Mills and Chobani.

According to the NYT article, the tobacco lawyers are moving particularly aggressively and seeking billions of dollars in damages. For example, they have asked a federal court in California to halt ConAgra’s sales of Pam cooking spray, Swiss Miss cocoa products and some Hunt’s canned tomatoes.

In response, the food companies say the suits are without merit, frivolous and being driven largely by the lawyers’ financial motivations.

The NYT writes that the lawyers are not the only ones who appear to be targeting the food industry. Recently, the Center for Science in the Public Interest has sued General Mills for using the term “natural” on its Nature Valley products.

A glance at the CSPI website reveals that Welch and Splenda Essentials are also facing deceptive health claims on their products.

It’s worth noting that Ferrero, the manufacturers of Nutella recently agreed to pay $3 million to settle a class action lawsuit over misleading advertising that claimed the chocolate-hazelnut spread was healthy.

In an earlier blog post, we noted the potential liability risk facing food manufacturers, advertising agencies and ingredient manufacturers to name a few from obesity-related tort actions.

But this new wave of lawsuits appears to be very specific. As the NYT says, the latest litigation
argues that food companies are violating specific rules about ingredients and labels and misleading consumers. This is why it’s so important that food companies comply with federal regulation.

The ongoing revelations surrounding the manipulation of interest rates by big banks during the financial crisis are making headlines around the world.

On Saturday the New York Times reported that fallout from the scandal is prompting greater scrutiny of bank regulators, amid questions over whether they allowed banks to report false rates before and during the 2008 financial crisis.

For an understanding of the potential risk costs to banks involved in the scandal, a recent post on the Financial Times Alphaville blog covers the latest estimate of Libor risk from Morgan Stanley, including litigation risk.

And what about the implications for insurers?

Over at the D&O Diary, Kevin LaCroix has been keeping readers updated on possible implications of the Libor scandal in the world of directors’ and officers’ liability.

In a July 13 post about the filing of the first securities class action lawsuit by a Barclays shareholder, LaCroix noted that the Libor scandal shows that the financial institutions arena remains a risky neighborhood.

In another post earlier in the week, LaCroix said that it remains to be seen what the fallout from the scandal means from an insurance perspective:

The ultimate consequences for the companies involved and their insurers will only emerge over the coming months and years as this scandal continues to unfold. It does seem likely that the related civil litigation will continue to accumulate. To the extent additional derivative claims are filed, or if shareholders of target banks file securities claims, the follow-on civil litigation could develop into a significant event for the D&O insurance industry. At this point, the one thing that is clear is that it will pay to watch closely as the investigation unfolds and the follow-on civil litigation continues to emerge.”

Check out information from the I.I.I. on specialty risks.

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