Subprime Litigation Concerns

Every day another news headline appears on the subprime loan crisis in the U.S., so a release out of the London offices of Marsh on this topic makes for interesting reading. In it Marsh warns that the European financial services sector, including insurers, hedge funds, banks and ratings agencies, may be exposed to greater Directors’ and Officers’ liability (D&O) and Errors and Omissions (E&O) liability claims in the wake of the subprime meltdown in the U.S. Citing a  recent NERA Economic Consulting primer, Marsh says potential litigation arising out of D&O and E&O liability could include: lenders’ lawsuits versus banks; shareholders’ lawsuits versus lenders, accountants, trustees and underwriters; insurers’ lawsuits versus lenders; investors’ lawsuits versus trustees; trustees’ lawsuits versus lenders and underwriters on behalf of investors; as well as individual investor lawsuits. Marsh goes on to caution that European insurers, hedge funds, banks and ratings agencies must continue to assess the risks raised by the crisis and to examine their D&O and E&O exposures. What do you  make of this analysis?

Dean Update

As Hurricane Dean, now a Category 4 storm strengthens on its way to Mexico after brushing the south coast of Jamaica yesterday, we bring you the results of a survey by Access America. According to its findings, just one in five Americans (21 percent) has factored hurricanes into their choice of vacation destination. Ok. But the survey goes on to note that only 41 percent of Americans know when hurricane season is. We hasten to add that the National Hurricane Center defines the Atlantic hurricane season as running from June 1 to November 30. It just goes to show that we can never repeat ourselves too much. Check out further info on hurricane season at the I.I.I.’s disaster insurance information site.

Workplace Safety Focus

We blogged recently (see Aug 6 posting) about the continued declining claims frequency for workers comp injuries in 2006. A PowerPoint report by I.I.I. president Robert Hartwig, presented at the 62nd Annual Workers Compensation Educational Conference in Orlando, Florida, earlier this week, offers further details on the state of the workers comp line. Dr. Hartwig notes that workers comp insurers should be justifiably proud of the historical role they have played in reducing workers’ injuries. In fact, workers comp insurers and the entire workplace safety community have contributed to a 14 percent decline in workplace fatalities since 1994. Further, the rate of fatal work injuries continues to drop and is down 26.4 percent since 1994 – nearly double the 14 percent decline in the number of on the job fatalities. The report underlines that workers comp insurers are a major force in saving workers lives, increasing productivity and preserving worker incomes. For additional data on workers comp insurance, access Mega-Trends Influencing the Workers Compensation Insurance Industry online.

Dean Strengthens

Look out, here comes Dean†¦ The first hurricane of the 2007 season is currently a Category 1 storm and expected to strengthen, potentially to Category 4 status (winds >131 mph) by Monday. In the Caribbean, hurricane warnings are already in place for several islands, including Dominica and St. Lucia. We note that the most recent hurricane forecasts continue to point to an above-average season and above-average landfall probabilities for the U.S. coastline. In its latest forecast, Colorado State University’s Tropical Meteorology Project also predicted above average major hurricane landfall risk in the Caribbean.   It’s worth mentioning that 2004’s Hurricane Ivan, which ranks as the fifth most costly hurricane in the U.S. ($7.1 billion in insured losses in 2004 dollars), also caused severe damage to Grenada, as well as Jamaica and Grand Cayman. As Hurricane Dean approaches, check out I.I.I.’s main Web site and disaster insurance information site for further updates.  

Product Recall

Yesterday’s announcement by toy company Mattel of the recall of 19 million toys made in China is a reminder of the importance of product safety in any business and may be the tip of the iceberg as the holiday shopping season gets underway. Whether it’s toys, toothpaste or pet food, product recall as a precautionary step or worse following actual injury or damage can be costly to a business and its reputation. Just one example is the 1990 worldwide recall by Perrier when traces of benzene found in the water eventually led to the recall of 160 million bottles of Perrier. The bottom line is if you manufacture, sell or distribute any product there is the possibility that the product could cause bodily injury or property damage for which you would be legally liable. Even if you only sell or distribute the product, you could still be liable depending on the circumstances. According to Jury Verdict Research, the average jury award in product liability cases jumped by 68 percent from 1999 to 2005. Check out further I.I.I.  facts  & stats  on  litigiousness and I.I.I.’s small business owners’ guide to insurance.

Texting While Driving

Strange but true that even though the majority of Americans (89 percent) believe sending text messages or emails while driving is distracting, dangerous, and should be outlawed, 57 percent admit to sending text messages from behind the wheel. These are the key findings of a new survey conducted by Harris Interactive and commissioned by mobile messaging service Pinger, Inc. According to its results, 91 percent of adults thought that drivers distracted by texting or email were as dangerous as drivers who had a couple of drinks. Yet two in three adults (66 percent) who drive a car and have used text messaging said they had read text messages or emails while driving. Even more compelling, 64 percent of adults who admitted to sending text messages while driving were between the ages of 18 and 34, while only 6 percent were 55 or older. On a separate but perhaps not completely unrelated note, we  understand that motor vehicle crashes are the leading cause of death among 15- to 20-year olds. According to the U.S. Department of Transportation, 3,467 drivers in this age group died in motor vehicle crashes in 2005 and an additional 281,000 were injured. As the Harris Interactive survey indicates, state governments have begun to address the dangers of drivers distracted by text messaging. In May 2007, Washington became the first state to ban texting while driving. A number of other states are considering similar legislation. Check out further I.I.I. info on cell phones and driving.  

Katrina Two Years On

Much has been written about the post-Hurricane Katrina litigation facing insurers, so last week’s decision by the U.S. Court of Appeals for the Fifth Circuit in favor of insurers was an extremely important one. As the second-year anniversary of Hurricane Katrina approaches, it’s worth revisiting some of the numbers from the single largest loss in the history of insurance. Firstly, the overwhelming majority of the claims have been settled. In fact, despite the focus on litigation following the storm, the actual number of claims in litigation accounted for a tiny percentage of the total number of claims filed, and most of those are no longer in contention. The I.I.I. estimates that fewer than 2 percent of homeowners claims in Louisiana and Mississippi were disputed through mediation or litigation. Insurers have paid an estimated $40.6 billion to policyholders on 1.7 million claims for damage to homes, businesses and vehicles in six states. Louisiana ($25.3 billion) and Mississippi ($13.6 billion) received by far the most insurance claims dollars to aid in their recovery. Check out further I.I.I. Katrina-related facts online.  

Two Sides to Workers Comp

The saying that there are two sides to every story really resonates in workers compensation and the latest research brief from the National Council on Compensation Insurance (NCCI). On the one hand workers, employers and their insurers can take comfort from the fact that the decline in claim frequency for workers compensation injuries continued into 2006 and continues to be widespread. For example, NCCI notes that all geographic regions of the country experienced significant declines over the last five years and despite some variation the decline in claim frequency occurred in all major industry groups across almost all occupations. But while workers comp claim frequency is down, NCCI cautions that indemnity and medical severities continue to rise. Indemnity severity increased by an estimated 5.5 percent in 2006, while the estimated rise in medical costs for 2006 is 7.5 percent. Medical price inflation and the utilization of medical services (including prescription drugs) are significant drivers of this trend, according to NCCI. What do you think? Check out further I.I.I. facts and stats on workers comp.  

Aging Infrastructure

As the recovery process continues following the Minneapolis Interstate 35W bridge collapse Wednesday night, many of us have given it more than a passing thought during our commutes via roads, rails, bridges and tunnels. Naturally the collapse is prompting questions concerning the quality of the nation’s transportation infrastructure. The insurance industry plays a vital role in helping individuals and businesses recover from an event like this. It underpins the economic security of individuals and businesses and helps sustain a number of related industries across the country. But maintaining and strengthening the existing outdated transportation infrastructure is a mammoth task that will require public and private input. For insurers, the potential liability exposure is enormous and certainly something to think about. Check out I.I.I.’s publication “A Firm Foundation† for further information on how insurers support the economy.

Back Pains Large States

Employee back problems are frequent and costly. That’s the upshot of a new study from the Workers Compensation Research Institute (WCRI). The report analyzes data from 14 large states (AR, CA, FL, IL, IN, LA, MA, MD, MI, NC, PA, TN, TX, and WI) from claims with an average of three years’ experience. WCRI found that nearly 14 percent of medical costs were paid to treat workers with back conditions involving disc conditions or radicular symptoms (e.g. radiating pain into the limbs). Nonspecific low back pain accounted for about one in seven claims and 11 percent of medical payments. Conditions involving the neck accounted for nearly 4 percent of claims and nearly 8 percent of medical payments. WCRI also found that shoulder or arm conditions – both inflammation due to overuse as well as sprains and strains – accounted for a significant share of medical costs and claims. For example, sprains and strains represented close to 7 percent of medical payments and nearly 6 percent of costs. Another interesting stat, carpal tunnel conditions were diagnosed in about 1 percent of cases, but accounted for more than 3 percent of medical costs. We’re wincing just thinking about it. Check our further I.I.I. information on workers compensation and workplace safety.  

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