Third-Party Litigation — Insurers Want Change

Over 200 companies want tort reform when it comes to third-party litigation. Many of the 200 companies are among the largest insurers in the United States. On September 14th the group sent a letter to the Advisory Committee on Civil Rules of the Administrative Offices of the U.S. Courts asking for change.

The letter was signed by the 214 companies representing a number of different industries.

Insurers Allstate, AIG, Arch Insurance, AXA XL, Chubb, Cincinnati Insurance Group, Erie Insurance, Farm Bureau, Federated Mutual, Grange, Great American, Hanover, Hartford, Hiscox USA, Hudson Insurance Group, Intact Insurance Specialty Solutions, Jewelers Mutual, Liberty Mutual, Markel, Munich Re, Penn National, RLI, Selective, Sentry, Shelter, State Farm, Travelers, United Fire Group, USAA, Utica National, Westfield and Zurich North America signed the letter.

The letter was sent in support of Lawyers for Civil Justice. It is made-up of businesses, law firms and national legal defense organizations and has proposed a rule to require third-party individuals, or other entities, giving funding to litigants, to identify themselves and have the funding agreement available to be inspected.

"The Federal Rules reflect and enforce a prevailing principle: courts, parties, and the public should be able to identify the persons and entities that have a financial interest in litigation,” the letter said. “That principle underlies rules requiring litigation to proceed ‘in the name of the real party in interest’ (FRCP 17), disclosure of business organizations with a 10 percent or greater ownership interest in a party (FRCP 7.1), and disclosure of insurance agreements where nonparty insurers may be liable for all or part of a judgment, which may give those insurers influence over the litigation or its resolution (FRCP 26(a)(1)(A)(iv)).Disclosure of nonparty financial interests is essential to the function of all of these.”

The letter notes the 214 businesses cannot understand the lack of transparency in the financial interests of litigation.

"These actions have become necessary because the Federal Rules are silent regarding the disclosure of nonparty funding arrangements," the letter states. "But as the Advisory Committee well knows, the absence of such local rules and standing orders in many federal courts is allowing many nonparty funders to continue their operations in the shadows. Further, the cacophony of disclosure practices is confusing to courts and litigants, allows for forum shopping by funded parties and is inconsistent with the Advisory Committee's mandate to provide uniform procedures."

The insurers and the other businesses want the Advisory Committee to consider the request at its meeting in October.

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