August 2007 NEWSLETTER to clients of Knox Insurance Brokers Ltd. From Randy Bushey, A.I.I.C., General Manager	Close newsletter
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TOPIC: U.S. Legal Liability

It has been the case for many years and remains true today: the U.S. continues to be the most expensive civil justice system in the world.  Earlier in the decade, politicians indicated a desire to curb civil litigation; however, reformers are now finding America’s legislators less welcoming of civil justice initiatives.  The resulting growth in U.S. tort costs is expected to be 4.5% in 2007 and again in 2008.  The real problem for liability underwriters is projecting what claims occurring now will cost when they are settled in 6, 8 or 10 years.

Plaintiff lawyers have demonstrated creativity in developing new areas for recovery of civil damages.  Some recent examples:

• Data Breaches – Many well publicized cases of computer-data theft have occurred on both sides of the border in recent months.  The U.S. has seen a number of negligence-based suits, wherein the plaintiffs (typically seeking class action certification) attempt recovery by showing that no matter how sophisticated   the data security system was, the fact that is was breached proves negligence.
  
  
• Climate Change – This litigation alleges that defendant parties fail to safeguard against the effects of climate change.  For example, following Hurricane Katrina, plaintiffs in Mississippi sued various energy sector companies seeking recovery for damaged property due to a belief that hurricanes are a result of global warming, which, in turn is caused by the defendants’ greenhouse gas emissions.
  
• Punitive Damages – U.S. cigarette manufacturer, Philip Morris USA was sued by the widow of a 3 pack-a-day smoker who died at age 67 of inoperable lung cancer in 1999.  The company was found equally at-fault along with the deceased smoker; however, in addition to US$821,000 in compensatory damages, the jury also awarded an alarming US$79.5M in punitive damages.  Earlier this year (February 20th, 2007) the Supreme Court overturned (by a vote of 5 to 4) the punitive damages award; however, this decision and its reasons for overturning the lower court, have left significant confusion on the future of punitive damages.

Insuring U.S. liability is risky business requiring strong underwriting discipline. The magnitude and complexity of losses has severely damaged the financial stability of many insurers causing them to retreat quickly when market conditions change. Well-placed confidence in an insurers’ ability to provide long-term protection, and to respond when needed, is important. High levels of insurer financial strength is critical.

If you or your company have an exposure to liability because of product, operations or premises in the U.S, trust Knox Insurance to provide experienced, practical advice on managing your risk.