Legal Reforms, Trial Attorneys & Third-Party Litigation

Stef Zielezienski is the executive vice president and chief legal officer for the American Property Casualty Insurance Association (APCIA). His organization and Munich Re US commissioned a Harris Poll on legal reforms and found that 90% of us want legal reforms.

Of those surveyed, 88% say there needs to be more transparency from all of the parties involved in a lawsuit.

The words “all of the parties” are where the rubber meets the road when it comes to legal system abuse. And this is where some might call trial attorneys — or plaintiff attorneys — an enemy of the people. While that sounds like a very harsh and accusatory statement, it’s kind of true.

This is where the “all of the parties involved in a lawsuit” comes into play. It is the use of third party financing to help plaintiff attorneys with their lawsuits.

For those third parties — mostly made up of Hedge fund operators — these lawsuits are an investment. In the end, the third-parties and the law firms get a piece of the settlement pie.

Often it’s a very big piece. The survey found that 47% did not know that plaintiff attorneys are gobbling up a significant percentage of any settlement or award by a court or a jury.

“Legal system abuse is rampant and plaintiff lawyers’ use of predatory advertising tactics and third-party litigation funding have turned the U.S. legal system into an investment market, benefiting secret funders rather than the victim,” Zielezienski said. “The survey results are clear — the majority of Americans agree state and federal lawmakers need to address these abuses of the legal system. Common-sense reforms, including full transparency and disclosure of all parties with an interest in the outcome of civil litigation, are needed to restore balance to the civil justice system.”

All of this comes down to what people know or don’t know. The APCIA’s poll found that almost 60% of us don’t know third parties are helping to finance the legal expenses of lawsuits.

Maura Freiwald heads up the casualty department of Munich Re US. She said the survey is “an important step in raising awareness and educating the public about the tactics being used and the negative impacts of legal system abuse.”

And, she notes, it’s abuse that won’t be going away anytime soon.

“If left unchecked, it will lead to higher insurance costs, financial strain on insurers, depletion of municipal resources, and disincentives for businesses to take risks,” Freiwald said.

As emphasis, both organizations refer the “tort tax.” It’s a term used by The Perryman Group in a report it issued on excessive tort costs from the nation’s legal system. The financial analysis firm said excessive tort costs account for $285 billion a year in direct costs to the U.S. economy. That means every household in the U.S. is paying about $3,621 each year because of third party litigation and the working of the legal system by plaintiff attorneys.

Other groups are also paying attention. The Insurance Information Institute (Triple-I) recently authored a paper on the abuse of the legal system by trial attorneys and third parties.

The report said the third party groups funding lawsuits often “discourage prompt and reasonable settlements.” The goal is to increase the cost of claims. In addition to that problem, the lack of transparency in third party litigation funding “makes it impossible to hold attorneys or their clients accountable to good-faith standards.”

Worse, the third party litigation market — now very much a money-making business — continues to grow. With a third party involved, the plaintiffs find themselves getting less compensation for whatever issue befell them.

Both the Triple-I and the APCIA have put legal system abuse at the top of their priority list for 2024. The Triple-I says several states are catching on to the abuses and so are many in the federal government.

Florida asked the Triple-I to testify on a bill that would put an end to the practice but because of the lobbying power of the plaintiff attorneys, the bill got stopped in committee and did not become law.

“The abuses of our judicial system by the plaintiffs’ bar and their allies are wide-ranging, impacting insurance affordability and availability in many states, as well as the ability of businesses to remain viable,” Zielezienski said.

Source link: Insurance Journal —

About PIA Western Alliance

The Professional Insurance Agents Western Alliance is a membership organization promoting and enhancing the success of independent agencies seeking to grow, learn and be heard within the industry.


More Industry News