COVID-19 having dramatic effects on the course of social inflation
COVID-19 has had a dramatic impact on almost everything else about our lives. What effect will it have on social inflation?
We’ve written about social inflation before. It refers to the ballooning cost to business and society of lawsuits. Changes in society’s attitude toward business and toward what plaintiffs are entitled to have driven jury awards way up in recent years.
Some see an alarming rise
Recently, we shared on social media a report saying that COVID-19 would make social inflation even worse, by encouraging businesses to sue their insurers to recover business interruption costs.
And indeed, such lawsuits exist and could lead to rising costs in the insurance industry.
But there are also indications in some areas of the reverse, that maybe COVID-19 could lead to plaintiffs settling for smaller amounts because of the way coronavirus shutdowns in recent months have backed up the court system.
Seeing the opposite happening
That has happened, too:
“I have had a flurry of phone calls… from plaintiffs who are now willing to take that [settlement] amount I had offered before,” said defense attorney Ellen Greiper during an insurance industry webinar back in June. “Those plaintiffs are realizing that they are not going to get a trial for at least two years, no matter what status their case may be and whether it’s discovery or past that. So now they are coming out of the woodwork.”
Also, she said, “They are starting to realize that when we all come back and the jurors don’t have jobs or they’ve been furloughed, they’re not getting $10 million… They may realize that’s a ridiculous amount of money.”
Big picture still murky
So what’s the big picture? Is social inflation getting worse, or better? So far, it looks like the answer is “both,” but given the pace of legal matters, it will be a while before we see whether the overall trend is headed up or down.
We will continue to monitor this. And remember as always, give the professional brokers at South Risk a call whenever you need help with risk management.