How High Claim Payouts Are Impacting Insurance Rates
Just recently, a transportation and logistics company was slapped with an $89 million verdict in a fatal crash involving a student driver. Nuclear verdicts such as this are described as jury awards in which penalties exceed $10 million. In this instance, a vehicle lost control due to icy road conditions, crashed through the median into oncoming traffic and was struck by a tractor trailer, which resulted in significant injuries and loss of life. The jury agreed with the plaintiff’s attorney, who argued that the entry-level driver should have pulled off the road due to icy road conditions, especially since the National Weather Service had issued a winter storm warning less than two hours prior to the crash.
Skyrocketing jury verdicts such as this in the pharmaceutical, medical, transportation and product liability segments seem to be more prevalent in today’s legal climate. This phenomenon has become known as ‘social inflation.’ This term generally refers to the rising costs of insurance claims as a result of societal trends, views toward increased litigation, plaintiff-friendly legal decisions and larger jury awards.
There are several major factors driving social inflation:
- 24/7 news cycles and the explosion of social media, which have the potential to create a public reaction to any headline, often with swift and ruthless reactions.
- Litigation funding through third party financiers. The financier agrees to cover the cost to pursue litigation in return for a share in the proceeds of the verdict. Although this concept is not new, the prevalence of incidents has been on the rise in recent years. Many fear this will drive more suits to trial.
- Tort reform is evolving, specifically in the area of regulations designed to limit the length and time in which a lawsuit can be filed. Monetary caps on punitive and noneconomic damages that can be awarded are also being modified.
- Public sentiment is making trial defense more challenging. Juries are more willing to sympathize with the plaintiff while awarding damages regardless of the level of fault.
- Medical costs have risen considerably while the average life span has also risen, and juries must take these factors into account when considering long term care.
Insurance rates continue to rise in an already hardening insurance market as insurers try to offset the high claim payouts and prepare for the increase of future verdicts.
So how can pest control businesses navigate this changing legal climate and protect themselves? Consider the following items as you review your insurance needs:
- Safety training is extremely important in today’s environment. Consider the NPMA Quality Pro program, document your activities and follow through with your own best practices.
- Purchase an umbrella liability insurance policy that covers your auto fleet as well as your liability exposures. Make sure this is done to satisfy your contractual requirement, and also have it evaluated to ensure that it covers all of your business exposures.
- Update your employment practices liability (EPL) manual and policies. Having these updated and enforced will help in the defense of an employment claim. However, beyond training and implementing detailed policies, it is also necessary to have the proper financial protections in place. From discrimination to retaliatory discharge, companies with a hundred or more employees can expect at least one employment liability claim every three years. With EPL insurance, your company is protected against claims of sexual harassment, along with the following:
- Wrongful termination
- Employment-related emotional distress and invasion of privacy
- Retaliatory/constructive discharge
- Workplace torts such as slander
As the insurance market continues to harden and social inflation continues, business owners can minimize costs and transfer risk in 2020 by putting an emphasis on effective risk management practices. Work with an experienced insurance advisor who can help you navigate through the current insurance environment and advise you on the strategies that will put your organization in the best position.
BY GARY SHAPIRO, SENIOR VICE PRESIDENT, WEISBURGER INSURANCE BROKERAGE
For an expert consultation or information on insurance and risk management solutions, please contact Weisburger Insurance Brokerage at 800-431-2794, [email protected], or visit our site at www.weisburger.com. Weisburger, a division of Program Brokerage Corporation, is the nationally endorsed insurance broker of the National Pest Management Association (NPMA). With over 80 years of experience, our experts are able to review your current coverage and identify ways to best protect your pest control business during the dips and peaks of the industry.