Not exactly a RR related article but...In case anybody wonders why your liability premiums are going up (and up and up) or why the Burlington Southern refuses to allow fantrips or steam...

Article in Newsweek detailing how every walk of life is affected by fear of lawsuits-including some volunteer activities. Of course we as jurors (and those seeking excuses from jury duty) bear some responsibility. This is the "lawscape" we operate in.

Who was it that said "a little revolution now and then is a good thing?". -well thats a thought for another website.

"Civil Wars"
superheater@rrmail.com

The other half of the problem is a bit more mundane. Insurance companies are businesses. They keep a cash reserve to cover your loses. With all that cash laying about, during the last decade, they invested heavily in the stock market. So the income derived from stock appreciation greatly reduced their need for premiums through the ‘90s. When the DotCom bubble burst about three years ago, much of their capital as well as their earnings disappeared. Along with a couple bad natural disasters, i.e. hurricanes and wild fires, they have had a bad time trying to get ends to meet. So the insurance rates have sky rocketed to cover the loss of capital in the stock market and covered losses along with being much more conservative in covering only things that have very measurable and predicable risk.

I agree that our sue happy society is a bit out of control and it can be argued that it’s part of a “chicken or egg” situation between the legal and insurance industries, but we are also paying for insurance companies bad business management as well. Since steam operations only amount to 10s of thousands of miles of operation per year, the statically variability of the actuary tables is quite high (not many claims but the possibility of a very large claim(s) is very real) so steam ops pay through the nose if they can find an insurance carrier at all.

Ed


ff1044@aol.com

Ed thats only partly true. Liability crises have been a subject of discussion for 30 years and we've had great bull runs, the Oct 87 crash and just about all possible market scenarios during that time.

Insurance companies have traditionally (more so life than property-casualty, because of the greater predictability of losses) charged less in premiums than they had in paid claims and made up the difference in investment income. Thats been a decades long phenomonon-not just something for the past 5 years.

Keep in mind that insurers, while heavily invested in the stock market also hold things like mortgages in order to get away from the "market risk". If "much" of the capital of an insurer disappears-they will have a supervision or liquidation order placed on them by their state regulator.

As for the notion that there's been more restrictive underwiting, thats true-however it's a basic element of an insurable risk that potential losses must be measurable and predictable. Of course jackpot awards throws this on its ear and so companies won't assume the risk.

Having previously worked for an insurer from 89-99 and having spent a year in the 80's working for a state (government regulatory) insurance department-I can tell you some of the mismanagement is forced on insurers by state regulatory agencies. I could tell you more about it off line- but until the 90's- most insurers were mutuals-who kept their books according to "statutory accounting principles (SAP)". In the 80's when the microcomputer revolution came along-insurers were forced to maintain expensive legacy mainframe systems-because the annual statement required of all insurers didn't allow you to count a computer as an asset for capital purposes unless it cost $100,000. HUH?

Some of the tumult now IS related to conversion to stock companies and the better measuring capacity of Generally Accepted Accounting Principles (GAAP) over SAP but there's no huge increases in life insurance rates (actually declining over same period) or property insurance for natural perils (keeping rough pace with property values and inflation).

The only crisis of every increasing premiums and diminished coverage is in the liability market-so the vast majority of these ills are related to the underlying losses. The mere threat of a suit can cause a 6 figure check to be written.

By way of full disclosure- I hold the following insurance designations-Chartered Life Underwriter (CLU) and Chartered Financial Consultant (ChFC) from the American College and the Master Fellow, Life Management Institute (FLMI/M) from the Life Office Management Association.

>

superheater@rrmail.com

I served on a civil jury a couple of years ago and in the end the jury gave the person $1.00.

The judge said he agreed with our call and wished the case had never been in his court room wasting his time.

People can and do get injured and they get their medical bills paid; that's fine. But they should not expect to get a lifetime of income from one accident. After all they are accidents!

ted_miles@nps.gov

Our President, Congress, and various state legislatures could fix this problem fairly easily, but they spend their time invading other countries or campaigning for the next election
(and a lot of them are lawyers).
I would hesitate to support a cap on actual damages, since some lawsuits are legitimate. It's the punitive damages that are ridiculous. A simple solution to this would be to send all punitive damage awards to the federal or state
governments. This would still punish the guilty defendants. The government wouldn't get much cash because lawyers and plaintiffs would quickly lose interest if they couldn't keep the money, and many lawsuits wouldn't be filed at all. This idea wouldn't completely solve the liability/insurance cost problem, but I believe it would put a large dent in it.
mw


p_michael_warren@yahoo.com

> lawyers and plaintiffs
> would quickly lose interest if they couldn't
> keep the money, and many lawsuits wouldn't
> be filed at all. This idea wouldn't
> completely solve the liability/insurance
> cost problem, but I believe it would put a
> large dent in it.

Go back and read Superheater's 10:49 post again.

The "problem" isn't always lawyers - they're easy targets because they get headlines, and they're fun to pick on, but in the total cash flow of the insurance industry they are barely a blip in the data.

JAC

> Go back and read Superheater's 10:49 post
> again.

> The "problem" isn't always lawyers
> - they're easy targets because they get
> headlines, and they're fun to pick on, but
> in the total cash flow of the insurance
> industry they are barely a blip in the data.

> JAC

John, I'd hate to contradict myself but I think the legal profession IS THE problem when it comes to the liability mess. The point of my post was that few other insurance markets are as out of whack as liability- with the notable exception of medical-which of course is also heavily controlled by government and lawyers.

Many of the checks and balances on the legal system that worked from English common law days have been shunted aside- consider Ted Mile's post-in the old days that judge would've been able to toss out the meritless case with a "demurrer" (i think that was what it was called). THe remaining checks-such as nailing repeat plunderers as "vexatious litigants" are so rarely used as to be nonexistent.

Even if the award is a dollar, there's lots of fees and retainers.

I worked with lawyers for several years and while I liked them personally, I see the bar association as a self-serving cartel desperately in need of scrutiny from antitrust regulators and RICO actions. Of course that won't happen since said prosecutors are lawyers.

superhear@rrmail.com

> Go back and read Superheater's 10:49 post
> again.

> The "problem" isn't always lawyers
> - they're easy targets because they get
> headlines, and they're fun to pick on, but
> in the total cash flow of the insurance
> industry they are barely a blip in the data.

> JAC

I know a few lawyers personally and they are generally, nice, hard working people. One I know handles business transactions and says he doesn't remember what the courtroom looks like(the courthouse is across the street from his office). But I've encountered some sleazeballs too, and in this world a few sleazeballs will do more damage than a million good people.
As for the insurance industry investment problems, a very well known insurance company that operates in my state just posted the highest annual profits in its rather long history. Overall the industry seems to be doing quite well even in the slow economy.
Insurance companies have contributed to the liability problem by encouraging cities, hospitals, and private companies to settle questionable cases out of court instead of fighting then to the end, which only encourages the deadbeats, and yes, the sleazeball lawyers.
mw



p_michael_warren@yahoo.com

...A teenagers death at a crossbucked crossing in Ohio was settled out of court for something like six or seven MILLION dollars ...can't blame that on the jury.

Settled in court, a gentleman electrocuted by a live wire in a bus stop shelter ...12 something MILLION dollars.

Very nice lawyers fees collected in both cases ...then again why do we hire those lawyers with the best stage presence ?

lamontdc@adelphia.net

I just found out that our premium for next year will decline substantially, possibly 50%. It is a combination of several factors (not necessarily less coverage). I am loath to quote exact numbers until I see the actual policy, but this is a huge reduction if verifiable. Our agency is HMBD on the West Coast. They have worked their butts off for us.

wyld@sbcglobal.net