An explosion of litigation leads to exorbitant court costs
In today’s world, especially in the United States, there’s been an explosion of litigation, which has led to exorbitant court costs and large insurance claims. This has been described as “social inflation” because insurance claims costs have risen well above economic inflation. Jury awards and settlements are not only more expensive than in years past, but social inflation also leads to:
Despite these challenges, CIS is actively pushing back on social inflation and defending members. In 2022, CIS took eight cases to court and won seven. CIS’ Supervising Litigation Attorney Dave Lewis is one of CIS’ attorneys who is working hard to win in court.
“We’re fighting for our members — not just settling cases,” he said. “Often, whether a case is good or not, comes down to whether the member had strong policies and robust training programs that were actually followed.”
Dave is not alone in his efforts to defend members. Managed by CIS’ General Counsel Kirk Mylander, the litigation team also includes attorneys Lauren Nweze and William Stabler.
“The work these loyal attorneys do, standing with our members during difficult times cannot be overstated,” according to Executive Director Patrick Priest. “CIS is developing the next generation to defend cities and counties, enhance our expert defense panel and provide succession planning of litigators specializing in city and county cases.”
While a lack of trust in government may be a larger issue, according to CIS’ Property/Casualty Trust Director Dave Nelson, “there’s a belief that the city or county — or their insurance company — has deep pockets and can afford to pay more.”
Even if jurors appear to have empathy for the public employee — or the entity — that CIS is defending, the opposing council will portray the trial as a “David vs. Goliath” dispute where the jurors are to act as the conscience of society to protect the public from the government.
A few years ago, CIS had a $5 million settlement for a jail-death claim. This amount was unprecedented, but since then, we’ve seen more and more punitive jury awards. The legal fees to defend the eight cases in court in 2022 came in at nearly $1.1 million. By the end of the year, we had 249 open claims in litigation with total incurred costs (payments + reserves) of nearly $60 million.
One strategy to fight social inflation on jury awards is to carefully evaluate the risks and costs of each claim or lawsuit early, and, if warranted, attempt to settle to protect the member and the risk pool. When we settle, we can avoid the expense of litigation and the potential risk of a large verdict.
CIS will continue to actively fight social inflation and defend cities and counties. Inevitably, higher settlements and jury awards will lead to increased insurance rates and may impact our ability to secure the financial backing of reinsurers at affordable rates.
However, there are also things our members, agents and partners can do to prevent lawsuits from arising. CIS offers customized online and tailored in-person trainings — as well as expert advice to enhance your city or county’s written policies.
Working together — with CIS risk managers, claims representatives and attorneys; elected leaders; LOC and AOC; legislators; courts; regulators; fellow CIS members; local agents; reinsurers; and other Oregon public entities — we can reverse this expensive and unsettling trend.