Legal system abuse and social inflation: We must work together toward a fair and balanced legal system

When most people hear about social inflation, legal system abuse, or tort reform their eyes often glaze over. They either don’t know what you are talking about, or they comment, “Well that has nothing to do with me.” But, when you talk about these issues to those involved in the insurance industry and business community, you get a completely different reaction. In their worlds, tort litigation and claims costs are concerning not only to them, but to their customers. Insurers and businesses see first-hand that these costs are ever on the rise.  

Just recently the U.S. Chamber of Commerce Institute for Legal Reform noted that costs to the U.S. tort system reached over $529 billion in 2022 or over $4,200 per U.S. household. These same statistics further demonstrate that these costs rose approximately 7.1% per year which was faster than average annual inflation at 3.4% and faster than average annual GDP growth which was at 5.4% for that same time. The trend shows no signs of stopping.

The impact goes beyond the insurance industry and business community to every one of us. In addition to the cost per household, these phenomena result in increased costs for businesses and individuals. They are often in the form of higher insurance premiums and higher prices for goods and services which then get passed along to consumers. For example, nuclear verdicts—those in excess of $10 million—which most know are paid by the defendant companies or their insurance companies, have ramifications for everyone. These verdicts often go beyond compensating injured parties to make them whole and ultimately cost the consumer when all the associated costs trickle down.   

At Zurich North America, we saw the effects of legal system abuse on our customers and their businesses and families and decided proactively to take action. Realizing that no one could take on this issue alone, in 2022, Zurich formed a coalition that includes insurers, our customers and brokers, businesses and trade and civil justice associations. In October 2022, Zurich led this movement and hosted the first annual Legal System Abuse Symposium, where our Chief Claims Officer, Keith Daly, emphasized our call to action, “No one company, no one industry is going to be able to enact change. We need to collectively come together,” he said.

In that first symposium, about 50 people met in person to discuss the issues fueled by legal system abuse. Momentum has built since then, with various members of the coalition hosting subsequent symposia continuing in the spirit in which it was founded. Fast forward to October 2024; over 250 people came together to discuss these issues and plan for future actions to reform the legal system. Not only has the coalition grown in numbers, but its purpose has grown as well.

In just two years since its inception, the coalition’s members have:

•  Pushed for federal and state action on third party litigation funding (TPLF), which successfully has passed in several states. Left unchecked, TPLF undermines our judicial system
•  Assisted in passing historic overarching tort reform legislation in Florida and Louisiana,
•  Assisted in changing the narrative in states like Texas, Georgia, and Illinois while continuing the effort in other states, as well.
•  Defeated onerous legislation in New York, Virginia, Illinois and California,
•  Educated legislators, policymakers, businesses and customers on the issues and impacts of legal system abuse, and
•  Worked to assist defense counsel in combatting the abusive tactics they encounter in their jurisdictions.

No one said it would be an easy task. This is a long term, state-by-state effort. While the effort’s momentum continues to build, there is much work to do to level the playing field and ensure the justice system treats litigants fairly and gets back to a system that makes injured parties whole. The coalition faces many challenges, but as it grows larger, so does its ability to be heard.

Civil justice organizations and businesses - along with the insurance industry - must work together toward a fair and balanced legal system – a true group effort! Zurich is proud to have taken the first steps in starting this coalition and hosting the first symposium. We also are proud of the collective efforts and successes the coalition has made in its first two years. It still continues to take more than just us. We all need to be involved and lend to the coalition voice. The stronger our numbers, the stronger our voice and the stronger our opportunity to make a change.

NOTE: If you are interested in joining the Legal System Abuse Coalition, simply email lsacoalition@zurichna.com.