YesterdayÃ¢â‚¬â„¢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 itÃ¢â‚¬â„¢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.Ã‚ factsÃ‚ & statsÃ‚ onÃ‚ litigiousness and I.I.I.Ã¢â‚¬â„¢s small business owners’ guide to insurance.
Much has been written about the post-Hurricane Katrina litigation facing insurers, so last weekÃ¢â‚¬â„¢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, itÃ¢â‚¬â„¢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.Ã‚
The filing of a lawsuit against Con Edison less than a week after the New York City steam pipe explosion underscores the importance of liability insurance for businesses everywhere. According to reports, the womanÃ¢â‚¬â„¢s lawsuit accuses Con Edison of negligence, saying the utility failed to properly maintain the pipe that ruptured outside her offices in mid-town Manhattan and is seeking unspecified damages. At least 30 people were injured and one died as a result of the July 19 explosion. Litigation risk is one of the major exposures facing U.S. businesses. A recent study by the Pacific Research Institute put the total annual cost of tort litigation to the economy at $865.37 billion, or $9,800 per family. ItÃ¢â‚¬â„¢s worth noting that this figure includes direct as well as indirect costs. The study also estimates that America wastes $589 billion each year on excessive tort litigation. Check out further I.I.I. info on the liability system.Ã‚
June is Pride month, so itÃ¢â‚¬â„¢s time to highlight a few recent developments affecting the lesbian, gay, bisexual, and transgender (LGBT) community that may be of interest. WeÃ¢â‚¬â„¢ve blogged before about how a more diverse company is a better performing company and another study from research and advisory group Catalyst supports this theory. Titled Ã¢â‚¬Å“Making Change: LGBT Inclusion Ã¢â‚¬“ Understanding the ChallengesÃ¢â‚¬ the report explores how LGBT issues are a key component of any comprehensive diversity and inclusion strategy in business. Meanwhile, a growing number of states in the northeast (CT, VT, NJ, ME) and west (CA, HI, WA) now have civil union or domestic partnership laws in place andÃ‚ same-sex marriage has been legal in Massachusetts since May 2004. New Hampshire recently signed into law a civil union bill and Oregon will soon join the list. ItÃ¢â‚¬â„¢s important to recognize that the laws in each state are different and offer varying legal protections to same-sex couples. Also, the state laws do not extend any of the benefits on the Federal level. Nonetheless, these developments perhaps point to an underlying trend with a potential impact for many businesses, including insurers. We welcome your thoughts.
An interesting announcement by the worldÃ¢â‚¬â„¢s largest cereal maker today. Kellogg Co. is raising the nutritional value of the cereals and snacks it markets to children and will no longer promote foods in TV, radio, print or online ads to children under age 12 unless a single serving of the product meets the following standards: no more than 200 calories; no trans fat; no more than 2 grams of saturated fat; no more than 230 milligrams of sodium; no more than 12 grams of sugar. The company is also introducing new front-of-pack nutrition labeling. The move, which comes amid growing concerns on childhood obesity, effectively averts a lawsuit that had been threatened by parents and nutrition advocacy groups in January 2006. A recent Federal Trade Commission (FTC) study found that highly sugared cereal accounts for 84 percent of childrenÃ¢â‚¬â„¢s exposure to ads for cereal, while candy accounts for 52 percent of childrenÃ¢â‚¬â„¢s exposure to ads for desserts and sweets. Check out I.I.I.Ã¢â‚¬â„¢s report on Obesity, Liability and Insurance and info on the liability system.Ã‚ Ã‚
A hearing down on Capitol Hill today titled Ã¢â‚¬Å“Liability Reform and Small BusinessÃ¢â‚¬ highlights the growing litigation risk faced by small businesses and the need for good liability risk management and adequate insurance. The hearing before the House Small Business Committee includes testimony from the president of the U.S. Chamber Institute for Legal Reform (ILR). The ILR has just released two studies showing the impact lawsuits can have on small businesses. According to the studies, the tort system in the U.S. cost small businesses $98 billion in 2005. The threat of lawsuits also alters the way small business owners make decisions, with 62 percent saying they make business decisions to avoid lawsuits. These decisions can have significant effects on the business, such as making products and services more expensive, or making a product or service unavailable to customers. For more information on insurance and risk management for businesses, check out I.I.I.Ã¢â‚¬â„¢s new insuring your business website.Ã‚
While weÃ¢â‚¬â„¢ve purposely stayed away from the topic of gun liability or risk management lessons to be learned from last monthÃ¢â‚¬â„¢s shootings at Virginia Tech, an article in the Chicago Sun-Times detailing how a father obtained a gun license for his 10-month-old son forces us to visit this contentious issue. According to the May 13 article, the infantÃ¢â‚¬â„¢s father applied on his behalf for the license after his grandfather bought him a shotgun as an heirloom. The application for the license was approved on the third go, after being turned down twice due to technicalities. While the father fully expected the application for the license to be rejected due to his sonÃ¢â‚¬â„¢s age, it appears that in the state of Illinois there are no age restrictions on issuing a firearms ownerÃ¢â‚¬â„¢s identification card (FOID). At risk of stating the obvious, we note that 16 remains the age at which a teen, subject to successful completion of driver education, can apply for a driverÃ¢â‚¬â„¢s license in Illinois.Ã‚ AsÃ‚ many states have legislation in place that restricts or prevents lawsuits against the gun industry, the question is should we be concerned? Following the Virginia Tech tragedy and given the lawsuits targeting Ã¢â‚¬Å“Big TobaccoÃ¢â‚¬ , and more recent suits against the alcohol industry and fast food industry, could we be looking at a potential rise in claims under liability coverages? What are your thoughts? Check out further I.I.I. info on the liability system.