Global claims professionals are facing one of their most challenging periods ever, said John Attey, Global Claims leader for GE Insurance Solutions, during the company’s inaugural European Claims Conference held recently in Croydon, England.
“I don’t think anyone is surprised that we live in a world that when something bad happens, somebody gets sued,” said Attey. “But I’m still coming to grips with the fact that we now appear to live in a world that when something bad happens everybody gets sued.”
Attey addressed an audience of nearly 120 industry attendees. He said the climate of growing litigiousness makes it very hard for claims professionals “to try to tell the other folks in your business what the probable exposure, what the probable ramifications are, because it’s hard to anticipate all the liability trends that might happen.”
He pointed to the aftermath of Hurricane Katrina, when lawsuits were quickly filed against oil companies and construction companies. “I feel pretty confident that that list isn’t finished yet.”
He went on to say that there is another worrying trend which is creating a whole new set of challenges for the industry. “Some politicians and legal professionals are looking to reform policy language and rewrite it – after the fact – because they believe that long-accepted policy wordings don’t provide a fair result for the policyholder.”
However, if the terms of contracts are expanded after the fact, it’s very difficult for insurers and reinsurers to charge the proper premiums for their own balance sheet protection and long-term financial viability, he emphasized. Given that insurance underpins the economy, it’s vital to have a financially healthy industry, Attey went on to say.
And once you get into the courtroom, things don’t get any easier – when you find judges who are interpreting the law to maximize insurance coverage, which is also a goal of claimants and defendants, Attey said. “So you get complaints that are drafted with insurance in mind, you get demand-letters that are drafted with insurance in mind, and you get settlements that are crafted with insurance in mind.”
Attey went on to say that this has created a situation where plaintiffs and defendants find themselves on one side of the argument, while insurers are on the other side.
This is leading defendants to file bad-faith lawsuits against their insurers, he said, citing the example of a USD 9 million bad-faith judgment against a U.S. auto insurer, which related to its claims handling on a policy that had a premium of only USD 50,000.
“What you find is that at a time when it’s probably more important than ever for claims professionals to be watchful of attempts to expand coverage, it’s also more risky and more problematic than it’s ever been to do just that,” Attey added.
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