Report Highlights Liability Loss Trends for Businesses

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By Ebere Nwoji

The latest report from Allianz Global & Corporate speciality (AGCS), a corporate insurance carrier has stated that liability exposures for companies around the world have been on the increase since the outbreak of the COVID-19.

It noted that businesses mainly face five major liability loss trends since the advent of the pandemic.

The report listed factors such as rising litigation, collective redress and large court verdicts, costly and frequent recalls in the automotive and food sectors.

It further stated that the disruptive impact of civil unrest and riots in a growing number of countries and environmental concerns such as indoor air quality and higher fines and remediation standards would likely impact businesses and their insurers in future.

Highlighting these liability trends, the report stated that social inflation in the US and rise of collective redress globally was a phenomenon especially prevalent in the US, driven by the growing emergence of litigation funders, higher jury awards, more liberal workers’ compensation claims, as well as new tort and negligence concepts.

It said the median settlement amount of the top 50 United States verdicts from 2014 to 2018 nearly doubled from $28 million to $54 million, adding that litigation funding was not only on the rise in the US, but also in Europe and elsewhere around the world. This, it stated, contributed to a growing trend of collective redress as hurdles for consumers are lowered to embark on class actions.

The report also said countries that may not be historically associated with this development, such as Saudi Arabia and South Africa, are classified as being “medium risk,” that a company may face a collective action in these jurisdictions, according to AGCS’ litigation funding country guide.

According to the report, another factor influencing the size of settlements in the US was the increasing sophistication of the plaintiff’s bar with specialist consultants and psychologists being deployed to influence the jury’s decision.

It noted that the legal system in the US has seen a deterioration in consumer confidence towards corporations adding that this lack of confidence is driving an anger by individuals or classes of individuals towards perceived “greedy corporates” that is resulting in so-called “nuclear” verdicts.

According to AGCS experts, it’s too early to identify a reverse trend, but court closures due to the Covid-19 pandemic may slow down social inflation as plaintiffs realise that it could take years before their case is tried before a jury and therefore may be more willing to settle outside court.

The report highlighted liability two as rising automotive repair and recall costs, adding that in recent years, there has been a growing number of recalls in the automotive industry in both the US and Europe.

“In the US, there were 966 safety recalls affecting well over 50 million vehicles in 2019 – more than two every day. In Europe, the number of recalls reached 475 for 2019 – the highest figure for a single year in the 2010s and up 11 percent year-on-year.”

It said in many cases, components can be produced by one of a handful of suppliers that services the entire industry, which can make it prone to accumulation risks. It said as a result, recalls have become larger and more costly over time.