Negligence Jury Verdicts Increasing

I have anecdotes only to support this, but it is a New Jersey statewide phenomena. Negligence jury verdicts, i.e. automobile accidents, dangerous condition of property, etc., have increased dramatically in the past few months. So much so, at least one national liability insurance carrier, it is rumored, has remarked that it may just settle cases they would try in the past. Can FReepers from other states comment whether this is going on there as well?

I will need to convince a judge that one of these verdicts should be set aside, in part because of a ruling we believe to be erroneous. In that case, the defendant remarked, unsolicited, in testimony before the jury that he was presently unemployed. The Plaintif's attorney convinced the Judge that, as a result, the Jury should know that the defendant was covered by liability insurance.

I will argue, in part, that the disclosure of the defendant's liability insurance in this day and age is far more unduly prejudicial than in the past for these reasons:

It is submitted that during the present times, the Court should be more vigilant than in the past in exposing defendants to the undue prejudice of association with the insurance industry. With the repeal of Glass-Steigel prohibitions under Grahm-Leach-Bilaley, financial institutions have come to be far more closely associated with liability insurance than in the past. As a result, the negative light cast upon well known Wall Street firms shines as well on the insurance industry. The public perception is that the insurance industry as a whole, which profiteered from the fear that followed 9-11, squandered income from premiums on risky investments and unwarranted executive compensation. Given the enormity of the figures associated with transactions closely associated with insurance companies, the public perception is that there is more than enough in the insuranjce deep pocket to cover verdicts that are far less generous than an executive retreat.

It is well established that insurers viewed the post 9-11 market as presenting an opportunity for increased profits. For example, Lloyd’s of London told its members in a newsletter that the September 11th terrorist attacks were a “historic opportunity” to make money, adding that premiums “had shot up to a level where very large profits are possible.“Lloyd’s slammed for ‘national disgrace” BBC News, October 29, 2001. Additionally, Henry C.V. Keeling, the chief executive of KL Re, a Bermuda insurer, told an industry conference on that “[t]he opportunity out there is tremendous.” Joseph B. Treaster, “Insurers’ Outlook (Unexpectedly) Good, Despite Big Claims,” New York Times, December 17, 2001. Likewise, commenting on predictions that premiums would probably rise over 200 percent in 2002, Chubb Corp. CEO Dean R. O'Hare said, “This business is back and is headed straight up.”61 Pallavi Gogoi, “Insurance: The Coverage Crunch,” Business Week, November 19, 2001. In yet another example, Maurice R. Greenberg, chairman of American International Group, “told investment analysts recently that opportunities for his 82-year-old company have never been greater.” James Flanigan, “Higher Premiums Are Likely to Slow Economy,” Los Angeles Times, October 21, 2001.

The public is also generally aware that insurance companies enjoyed great profits over the past few years. For example, Allstate has quite publicly engaged in a stock buyback program, including $3 billion in the first nine-months of 2007, “Allstate's Smart Policies,” Barron’s Online, December 10, 2007. This was only a “compliment” the $12.8 billion program that was completed at the end of 2006.18 “Allstate Posts Solid Earnings,” National Underwriter Magazine, October 19, 2006.

Similarly, Warren Buffett recently wrote to his Berkshire Hathaway shareholders that he was seeking large new investments:

“We continue, however, to need “elephants” in order for us to use Berkshire’s flood of incoming cash. Charlie and I must therefore ignore the pursuit of mice and focus our acquisition efforts on much bigger game… The larger the company, the greater will be our interest: We would like to make an acquisition in the $5-20 billion range.”

2006 Berkshire Hathaway Annual Report, Chairman’s Letter and Acquisition Criteria, February 28, 2007. So, Mr. Buffett is out there, big game hunting using his insurance riches as his weapon:

At 77, Mr. Buffett, the country’s most famous investor, is in the midst of his hottest streak in almost a decade. And he is capping his run with a flurry of deal-making. On Friday, Mr. Buffett stunned Wall Street by announcing that he would enter the troubled bond insurance business. He also spent about $440 million for a unit of ING Group, the Dutch financial giant. Three days earlier, on Christmas, he agreed to buy a $4.5 billion stake in the industrial conglomerate owned by the Pritzker family. And a few weeks before that, he waded into the junk bond market, buying $2.1 billion of debt issued by the TXU Corporation, the electric utility. As the fortunes of big Wall Street firms sink, Berkshire Hathaway, the holding company that Mr. Buffett runs out of Omaha, is on a tear. Its Class A shares have jumped 27 percent this year, their best showing since 1998, when they soared 52 percent. The Standard & Poor’s 500-stock index, by comparison, has gained a mere 4.24 percent this year. “A Deal Maker with a Hot Hand Opens His Wallet,” New York Times, December 29, 2007.

More recently, Mr. Buffet invested $5 Billion in Goldman Sachs, a firm that can be viewed as a symbol of the excesses that lead to the financial shock that has engulfed Wall Street. Ben White, “Buffett Deal at Goldman Seen as a Sign of Confidence” New York Times, September 23, 2008.

Similarly, the financial industry has become the source of increasing public skepticism, which has called into question whether insurers have squandered premiums for claims on highly questionable relationships with financial institutions and risky investments. There can be little doubt that Citigroup is front and center of the financial crisis stage. Citigroup was formed from one of the world's largest mergers in history by combining the banking giant Citicorp and financial conglomerate Travelers Group on April 7, 1998. Martin, Mitchell, "Citicorp and Travelers Plan to Merge in Record $70 Billion Deal: A New No. 1: Financial Giants Unite", International Herald Tribune, April 4, 1998. The company spun off its Travelers Property and Casualty insurance underwriting business in 2002.

More recently, Travelers Cos. agreed to pay $77 million to settle a securities fraud lawsuit brought by the State of New Mexico and others, disseminated inflated financials as part of its participation in an industry-wide cartel, which allegedly used bid rigging, kick backs and the payment of illegal contingent commissions that resulted in higher premiums for customers, according to the Attorney General. Gary King, New Mexico Attorney General, “Attorney General’s Office Settles Securities Fraud Lawsuit” January 3, 2008 .

The excesses of AIG are likewise well within the public consciousness. It suffered from a liquidity crisis after its credit ratings were downgraded below "AA" levels, and on September 16, 2008 the Federal Reserve Bank created an $85 billion credit facility to enable the company to meet collateral and other cash obligations. In exchange, AIG issued a stock warrant to the Federal Reserve Bank for 79.9% of its equity. This AIG liquidity crisis was precipitated largely by purchases of credit default swaps and collateralized debt obligations that had lost value. Gretchen, Morgenson, "Behind Insurer’s Crisis, Blind Eye to a Web of Risk", New York Times, September 27, 2008. Not long after accepting this bailout, AIG came under intense scrutiny for continuing to provide its executives with lavish benefits, such as paid retreats at exclusive resorts. Brian Ross and Tom Shine, ABC News “After Bailout, AIG Execs Head to California Resort” October 7, 2008. This negative image is so engrained into the public consciousness that Jay Leno, soon before the jurors in the case at bar deliberated, quipped that, "The total cost of the [January 20, 2009 Obama] inauguration was $170 million. They say this is the most of the expensive celebration since that last AIG retreat on our bailout money."

I can’t speak to trends but check out Safeco Ins. Co. of America v. Jamie Lynn Parks, a long-running insurance PI case. The latest appeal was handed down last week, January 28. Court of Appeal of California, Second District, Division Six. It is a convoluted case which went through a tremendous effort to reach liability insurance.

In essence, drunk boyfriend gets violent against sixteen-year-old girlfriend and, as a result, he gets kicked out of the car they were in as passengers. As he’s walking home, he is hit by another vehicle and eventually loses his leg. He settles with driver of the car he was kicked out of for limits of policy and sues girlfriend. He then tries to collect his $2 million judgment from girlfriend’s mother’s boyfriend’s homeowner insurance. When that is unsuccessful, he goes after girlfriend’s grandmother’s renter insurance and claims the insurance company was exercising bad faith in not disclosing the existence of the insurance policy while he was pursuing the first policy. Cases have been wending their way through the courts for ten years and this appeal consolidated two cases and found against the insurance company. On to the state supreme court, I imagine.

Yes, I am an attorney.

The exclusion of evidence of insurance coverage is not such a hard and fast rule:

The reason for this exclusion is that such injection will cause a jury to award larger damage awards because of the “deep pockets” of the insurance company. Krohn, supra, 316 N.J.Super. at 482; Wenz v. Allstate Ins. Co., 316 N.J.Super. 570, 574 (App.Div.1998). With the advent of compulsory insurance, however, the prejudice caused by reference to insurance has diminished. Krohn, supra, 316 N.J.Super. at 482, 720 A.2d 640. And the mere disclosure of, or reference to insurance, has not been considered prejudicial error. Ibid., Roman v. Mitchell, 82 N.J. 336, 347-348 (1980), Pickett v. Bevacqua, 273 N.J.Super. 1, 4 (1994). In Runnacles v. Doddrell, 59 N.J.Super. 363, 368 (1960), we noted that “so long as the insurance is not featured or made the basis at trial for an appeal to increase or decrease the damages, the information would seem to be without prejudice.” Ibid. In order to reverse the trial court’s decision, there needed to be “a clear and unequivocal manifest denial of justice.” Pickett, supra, 273 N.J.Super. at 5.

I am trying to argue that given the present state of our society, that exclusion of evidence of liability insurance needs to be more of a hard and fast rule. The Judge needs to be convinced he made a mistake.

So what is your perception of liability insurance companies presently? Has your perception changed recently? If so, based upon what?

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