The Evolution Of Litigation & Risk Management: A 50-Year Retrospective

Transcription

1 The Evolution Of Litigation & Risk Management: A 50-Year Retrospective By: Robert P. Hartwig, Ph.D. CPCU President, Insurance Information Institute Christopher G. Kopser President, Excess Casualty, Chartis Steven E. Lessick Vice President, Issue Management, Chartis Bruce D. Margolin Senior Vice President, Issue Management, Chartis Richard C. Woollams President of Claims, Global Commercial Insurance, Chartis

2 Introduction Over the past five decades, the modern risk manager has progressed from an insurance buyer to a critical partner in enterprise risk assessment. In this new century, risk managers are at the forefront, addressing such considerations as worker safety, product liability, litigation risk, information systems security and mergers & acquisitions. As the field becomes increasingly integrated with company planning and strategy, the business challenges shaping the role of the risk manager are many and multi-faceted. This paper, the first in a series, examines this evolution from one important perspective: significant developments in the law and legal community and their impact on the risk management discipline. 1

3 A Brief History The field of risk management has advanced tremendously over the past 50 years. Today s typical risk manager is an expert in all manner of business risk, from contract interpretation to litigation, laws and regulations, both foreign and domestic. The risk manager s role matured in the 1960s when the field evolved from straightforward insurance procurement to more active participation in the mitigation of business risk. In the 1970s, risk management aligned itself with business growing systemic approach to safety and saw an increased separation from the insurance industry. In the 1980s, the passage of far reaching environmental legislation, such as The Comprehensive Environmental Response, Compensation, and Liability Act and The Resource Conservation and Recovery Act, had a profound effect on business risk, as environmental liabilities at owned properties and outside waste disposal sites expanded exponentially. Superfund and other government mandated cleanups proliferated. Partly as a result, liability capacity decreased. Risk managers drove a shift in the insurance industry, as they considered selfinsuring risk to a greater degree and pursued the creation of captives and other alternative risk programs. Further, as a recession and ensuing inflation took their toll, companies needed to control costs. With an emphasis on workers compensation, risk managers became increasingly attuned to the need for safety and loss control programs. In response to stiff domestic competition, the 1990s were marked by trends toward global expansion and acquisition. Historically, not all risk managers were part of a company s mergers & acquisitions team, and businesses were bought with limited risk management involvement. During this decade, beginning with this growth by acquisition strategy, many risk managers became integral in evaluating these deals and essential to the assessment of potential future acquisitions. The role of risk management increased to encompass broader, organization-wide programs. Consequently, risk managers focused more on compliance with federal regulations and helped make their businesses more profitable and competitive. More recently, market conditions have led many companies to unwind acquisitions no longer deemed relevant to core competencies. Risk managers have proved pivotal in these divestitures and realignment with company priorities. Today s risk manager is charged with a diverse array of responsibilities, including: assessing the hazards of acquiring non-core businesses and divesting when necessary; working closely with their legal department to combat the growing number of lawsuits and claims; and reviewing the increase in exposures outside of the United States. 2

4 Litigation Risk Just as the risk management profession has evolved over the past fifty years, so has litigation in the United States. Risk managers have gained increasing responsibility over a broad array of concerns, requiring new skills and competencies for mitigating risk throughout their companies. At the same time, litigation in the United States has changed dramatically. More lawyers, lawsuits and remedies available to litigants have tipped the civil justice system in favor of the plaintiffs bar. The effects of these changes on corporate risk management have been no less profound. Changes to Procedural and Substantive Law In the past half century, there has been a marked change in the ability of plaintiffs to recover money damages against corporate and business defendants. In a 1996 poll, the plaintiffs bar deemed strict liability the most significant change to tort law in the previous fifty years 1. Strict liability as a legal principal was first adopted in the 1944 case of Escola v. Coca Cola Bottling Company. 2 In that case, a waitress sued Coca Cola alleging that she sustained serious injuries after a bottle exploded in her hand. Brought by the infamous Melvin Belli, dubbed the King of Torts, the case ushered in the use of the liability theory res ipsa loquitur, literally the facts speak for themselves, holding a manufacturer strictly liable for any defective product it placed into the stream of commerce. Strict liability was ultimately included in the Second Restatement of Torts in 1965, which incorporated the expanded theories of design defect and failure to warn components of product liability litigation. As one result, extensive warning labels have been pasted on a host of products, from sophisticated machinery to benign everyday household items, in an attempt to avoid imposition of strict liability. Such warnings are a necessary response to this risk, albeit leading to some wacky warnings, as compiled by the Foundation for Fair Civil Justice: Remove child before folding on a child car safety seat. This product moves when used attached to a motorized go-cart. Use of a headset that covers both ears will impair your ability to hear other sounds on a Bluetooth headset. Harmful if swallowed on a brass fishing lure with a three-pronged hook. 3 Another more sobering result was the rapid expansion in the number of product liability lawsuits, from roughly 100,000 in 1966 to nearly 1,000,000 in Other changes to recovery principles have also allowed product liability and other claims to flourish. Since the 1960s, the ability of plaintiffs to recover despite their own contributory negligence has become commonplace. Until that time, forty-five states barred recovery by a plaintiff found a mere 1% at fault. Comparative negligence, on the other hand, allows for recovery to be reduced by the plaintiff s degree of fault. It originally arose in the context of injured workers maintaining lawsuits against their employers under the Federal Employers Liability Act and the Jones Act. The theory was more broadly adopted through state legislation in the 1960s to distribute increasing costs of automobile accident lawsuits. By 1974, at least twenty-five states were applying some form of comparative negligence to tort actions. By 1994, forty-six states, Puerto Rico and the U.S. Virgin Islands had adopted this principle through legislation or common law. 5 The most recent example of the shift towards comparative negligence is in the law of Pennsylvania. This year, Pennsylvania eliminated joint and several liability, except where the defendant has been found liable for: 1) intentional misrepresentation; 2) an intentional tort; 3) 60% or more of the total liability apportioned to all parties; 4) the release or threatened release of a hazardous substance; or 5) drunk driving. Comparative negligence is clearly the prevailing doctrine for apportionment of fault in the United States today. 3

5 The last fifty years have also seen a rise in the assertion of punitive damages. Prior to the 1950s, claims for punitive damages were infrequent. Since then, they have proliferated. Punitive damages are awarded in many types of cases. Lawsuits most often resulting in these awards involve fraud, employment discrimination and product liability. This expansion may be due to juries looking to send a message to defendants or the seeming mistrust of corporations. When rendered, such awards can be enormous, involving hundreds of millions or even billions of dollars. Another major change in the litigation landscape is the increase in class actions. Class actions have been available in some form in the United States since However, not until the 1960s did their use gain momentum, when procedural rules governing class actions (specifically, Rule 23 of the Federal Rules of Civil Procedure) were amended to bind all potential class members and offer a provision for their ability to opt-out. In the 1970s, corporations were being targeted in at least five types of class action lawsuits: antitrust, securities, consumer, environmental and employment. More recently, class actions have been the vehicle of choice for mass torts. The watershed lawsuit centered around Agent Orange and was brought by Vietnam veterans alleging injuries from exposure to dioxin during the war. The 1984 settlement of these claims provided incentive for other mass tort class certifications, including breast implants, contaminated blood products, pharmaceutical products, medical devices and tobacco. 6 reversed the 9th Circuit Court of Appeals and decertified the class. However, proving large scale class actions remain viable, a federal judge approved a $3.4 billion settlement in a class action alleging U.S. officials mismanaged Indian royalties the same day Dukes was handed down. 8 Of course any survey would be incomplete without a word or two about asbestos, the granddaddy of all mass torts. The longest running mass tort in U.S. history, asbestos litigation has been resistant to class certification, with over 600,000 individual lawsuits filed from 1966 to the present day. Costs associated with the litigation to date are in the tens of billions of dollars and estimated to reach up to $250 billion. 9 A single case in 2010 yielded an award of $208.8 million to a worker s wife exposed to asbestos-laced laundry. 10 More than eighty bankruptcies have been filed as a result of these litigations. 11 Risk managers beset by asbestos or other mass tort litigation know first-hand the significant financial impact such claims may have, particularly when insurance limits prove inadequate. Adaptive, proactive risk management strategies can help mitigate future litigation and risk of damage. However, notwithstanding the merits or potential defensibility, the dangers of class actions or punitive damages can significantly impact the decision to settle or proceed to trial. In managing risk, corporate defendants (with their risk managers) weigh the costs and benefits of resolving such cases, thereby avoiding the potential for negative publicity, impact to stock price and adverse verdicts. The latest attempt at class action manipulation was seen in Dukes et al. v. Wal-Mart Stores Inc., 7 a case involving the certification of a 1.5 million member class who claimed that Wal-Mart s female employees received lower pay and fewer promotions than their male counterparts in violation of Title VII of the Civil Rights Act of Finding the allegations against Wal-Mart too vague and the evidence too weak to establish sufficient commonality among the claimants, on June 20, 2011, the United States Supreme Court 4

6 5 The Game Changes Rise of the Lawyers Sweeping changes in the practice of law and the administration of justice over the last fifty years have transformed the legal landscape. The causes are numerous and complex, including the dramatic rise in the number of attorneys; commercialization of the legal profession as many constraints on attorney advertising were lifted; globalization of legal services; and advances in information technology. Risk managers must account for this ubiquitous, well-equipped army in assessing potential exposure. A. More Lawyers, More Ads, More Cases From the 1970s to the present, the number of lawyers in the U.S. has almost quadrupled from about 300,000 to almost 1.2 million. 12 Also in the 1970s, attorney advertising was first sanctioned. Today, legal advertising by personal injury lawyers is commonplace in print, on television and, more recently, through the Internet and social media. Such advertising allows attorneys to reach and keep their name before a large audience. While some limits on the content and techniques in marketing legal services exist, the ability to solicit U.S. Population vs. U.S. Lawyers clients through these media is a powerful tool. As the number of lawyers rose, the number of lawsuits also climbed. The average annual number of civil lawsuits filed in federal court in the 1970s was 64,000. By 2010, this number had more than quadrupled to 282, Also increasing is the amount of time required for case disposition by dismissal, settlement or verdict. In the 1970s and 1980s, about 60% of all civil cases were disposed of within one year of filing. 14 By 1992, this number had dropped to approximately 44%. 15 By 2008, disposition in the majority of tort cases took twenty-one to twentysix months roughly double the time needed in the 1970s. 16 Concurrent with rising caseloads, courts are now facing major budgetary constraints. According to the National Center for State Courts, the judiciaries in twenty-nine states currently face significant budget cutbacks in The impact of these cutbacks judicial vacancies, limited court administration and reduced court hours translates to an even slower litigation process with greater attendant costs. From the 1980s forward, more lawsuits and longer case disposition put even greater pressure on managers to improve internal risk assessment. Risk managers, beyond determining the amount and type of coverage needed for their organizations, assumed greater responsibility for loss prevention. Increased exposure to product liability litigation certainly played a significant role. Another factor was the increase in environmental, health and safety regulations. At the same time, business frequently explored the use of greater deductibles or self-insurance and alternative risk vehicles such as captives and insurance pools. Taken together, the risk manager s role was increasingly linked to overall company performance and profit. The position s influence in organizational decision-making is reflected in changes in the corporate reporting structure. About 28% of senior risk managers now report to the chief financial officer, 18% report to the treasurer, 13% to the general counsel or other position in the legal department, and 11% to the president/ceo. 17

7 B. A Global Footprint That globalization is changing the world is axiomatic and its impact on the legal community, corporate enterprise and risk abatement is no less pronounced. The growth in international commerce brings new products and players into the marketplace. As trade barriers are reduced, lawyers and risk managers now operate on a global stage, requiring familiarity with laws beyond their own borders. The growth in the volume of international trade also comes at a price. Such trade may raise safety, environmental or health concerns. Foreign-exported products, particularly imports from China, have caused widespread apprehension among U.S. consumers. Lead-containing toys and contaminated drywall put experience to these concerns, creating significant financial exposure for business and industry. Supply chain issues can also pose significant challenges for some companies. Natural catastrophes, political turmoil and changed economic conditions may all disrupt distribution channels. As the food supply chain is globalized, the safety of America s groceries has increasingly come under scrutiny. Food production has shifted from small businesses and family farms to large regional, national and multinational centralized food producers. Single enterprises now often handle growing, production and distribution. A solitary instance of contamination from one grower s crop or one manufacturer s facility can produce an outbreak of national or international proportion. Recent multi-state and international recalls of contaminated produce, peanut butter and beef highlight examples of the widespread impact of food contamination claims in our modern industrialized society. The responsibility for paying consumers harmed by adulterated products resides with all parties in the chain of distribution. C. Advances in Information Technology The business of litigation has changed dramatically with the burgeoning use of technology in the practice of law. Technology can increase the costs of litigation as the universe of discoverable information expands exponentially. The burden of e-discovery increases case duration and may force settlements to avoid protracted and expensive litigation. However, technology also leads to new resources to better and more effectively manage litigation. In the workplace, electronically-stored information has all but replaced paper, alleviating costs associated with storing and maintaining documents. For litigants, technology has eased the burden of gathering documents. For court administration, paper filing has all but disappeared in favor of electronic transmission of pleadings. Conversely, technology has strengthened the network of plaintiffs attorneys allowing for greater exchange of documents, research and information. Now, any attorney can join forces with the nationwide army of plaintiffs counsel. Consequently, certain types of tort actions, including those involving widely used consumer products, are potentially transformed into mass tort actions seemingly overnight as information is assembled, packaged and disseminated by and amongst the plaintiffs bar. 6

8 7 Civil Justice Reform Efforts By most measures, the 1950s and 1960s saw a broad expansion in the ability of plaintiffs to win tort victories in the United States. As noted, fault-based defenses to recovery were substituted in many jurisdictions by strict liability and comparative fault principles. Suits were advanced targeting whole industries or claiming injury from conduct occurring many years earlier. Concomitantly, the plaintiffs bar took advantage of unfettered limits on soft damages for pain and suffering and punitive damages to obtain greater awards. Lax rules on venue shopping allowed suit filing in favorable jurisdictions. Confronted with the increasing numbers of lawsuits and damage awards, beginning in the 1970s reformers sought to bring greater fairness, predictability and efficiency to the civil justice system. Attempts to legislate a level playing field with plaintiffs continue in statehouses around the nation. Efforts include the abolishment of joint and several liability, caps on non-economic and punitive damages, the prevention of venue shopping, limits on medical and products liability and class action reform. Reform efforts yielded many victories in these areas. However, judicial overturn of legislation as unconstitutional has tempered these results. Battles in state and federal legislatures and in courtrooms continue with cycles of gain for defendants followed by renewed plaintiffs bar efforts and a swing of the pendulum in their favor. Finding long-enjoyed procedural and statutory advantages challenged, and its image among average Americans tarnished, the plaintiffs bar retrenched in 2006 seeking a reputational facelift by renaming itself the American Association for Justice ( AAJ ). Well-funded and more politically savvy under its new leadership, AAJ has sought to both roll back hard won legislative gains and drive a new, liability expanding agenda. Its recent activities at the federal level are illustrative: Efforts to banish medical liability reform from President Obama s landmark healthcare reform legislation were largely successful. Legislation passed at the close of 2009 provided a meager $50 million in grants to states for demonstration projects to allow them to develop alternatives to traditional tort litigation. The scant attention paid to liability reform in Congress was best summed up by the candid remarks of Howard Dean, former DNC chairman and Vermont governor: The reason that tort reform is not in the bill[s] is because the people that wrote it did not want to take on the trial lawyers and that is the plain and simple truth. 18 A consumer incident database mandated by regulations implementing the 2008 Consumer Product Safety Improvement Act received strong plaintiffs bar support. The database created by the Consumer Products Safety Commission ( CPSC ) allows consumers to submit reports regarding harm or potential harm caused by consumer products and search for consumer product complaints and product recall information. The establishment of this free wheeling public database raises concerns that individuals will post inaccurate or inflammatory information that could unnecessarily alarm consumers, harm companies and spur lawsuits. The new database was launched on CPSC s website in March In 2010, AAJ barnstormed Congress advocating for a tax code amendment allowing lawyers to deduct litigation expenses in the year they were incurred. In its letter to the U.S. Treasury Department opposing the effort, the U.S. Chamber of Commerce s Institute for Legal Reform noted: Contingency fee lawyers, enticed by the ability to immediately deduct their reimbursable expenses, would be more willing to take on new, spurious and highly speculative cases. Such a change in policy would further shift the litigation cost-benefit calculus to encourage pursuit of even more litigation. Ultimately, American taxpayers [through this tax break] would bear the costs of this subsidized form of litigation. 20

9 The Result Rising Costs At the state level, few wide-ranging legislative initiatives were attempted much less secured by civil justice reformers in the last five years. Most wins were achieved either by repelling trial bar efforts to roll back existing reforms or through rejection of pro-plaintiff legislation. Although the need persists and victories continue for targeted reforms, prospects for comprehensive reform remain uncertain. As risk managers are aware, the increase in litigation, expansion of liability theories and proliferation of a well organized trial bar has led to the inexorable and unrelenting swell of all costs related to compensation for damages and personal injuries. The measure of increase over the past decades is truly remarkable. Consider a claim for medical costs in According to the Bureau of Labor Statistics, a claim costing $1,000 in that year would cost about $17,450 in 2011, a seventeen fold increase. The year-over-year boost in medical costs is affected by, but regularly outstrips the pace of, inflation. The disparity can be wide, e.g., in 1982, medical costs increased 11.6% vs. 6.2% overall. 21 The rate of medical cost increase has been greater than the overall inflation rate for each of the last twentynine years. Medical Cost Inflation 8

10 Tort Costs Relative to U.S Population A more focused but still wide view is found within a long running study by Tillinghast (n/k/a Towers Watson) on the costs of the tort system in the United States. 22 Tillinghast studies three major components to arrive at its figures: losses measured as monies paid or expected to be, defense costs and administrative expenses attendant to these losses. The conclusions are telling: Since 1950, growth in tort costs exceeded the increase in Gross Domestic Product by an average of 2%. The average annual increase in tort costs from was 8.7%. The U.S. tort system cost $248.1 billion in 2009 (the latest year studied), costing each individual in the country $808. A drill down to jury awards from the recent past provides further proof of rising costs. Jury Verdict Research ( JVR ) maintains a nationwide database of verdicts and settlements in personal injury claims. In 1999, the average jury award was just over $640,000. By 2008, JVR s latest year of reporting, the average award was over $1 million and had reached that plateau in four of the previous five years. The mean award (the point where half of the awards are below and half above) reveals a similar jump, nearly doubling from $25,000 in 1999 to over $47,000 in Even a look at the largest verdicts rendered by juries on an annual basis leads to the conclusion that the costs surrounding the litigation system in the U.S. continue to rise. Lawyers USA recently published its list of the top ten verdicts of The average verdict increased for the fifth consecutive year to just under $157 million. Just two years ago the top ten awards averaged $112 million and three years prior averaged only $51 million. The top award grew significantly from $370 million in 2009 to $505 million in Since 2007, the cumulative value of awards has increased more than 2.5 times from $615.5 million to $1.568 billion. 24 The Chartis 25 insurers own numbers also support this view. Since 1995, the number of excess claims resolved by the Chartis insurers exceeding $10 million has exploded from only six in 1995 to seventy in 2010, a more than ten fold increase. Over just the last seven years, the number of claims resolved has more than quadrupled. Such claims can represent a bet the company risk, particularly to smaller companies. Early proactive risk assessment can reduce the incidence or severity of such claims. When unavoidable, procuring appropriate coverage and limits with a carrier recognized by the trial bar and experienced in resolving large, complex claims is essential. When so many studies using different methodologies and data consistently and unwaveringly point to the same conclusion, the answer is unmistakable. The costs to litigate and resolve the diverse claims presented to business and insurers continue their unrelenting press upward. 9

11 The Future Modern litigation can often take on global dimensions. Risk managers today must have a global mindset. Loss prevention and control must be integrated at the outset rather than the end of a product life cycle, applied to new contracts, products or corporate acquisitions before they are finalized. Understanding litigation trends is critical to the long-term success and sustained profitability of global companies. Domestically, third-party litigation financing is a growing phenomenon. It is the practice of providing money to a party to pursue a potential or filed lawsuit in return for a share of any damage award or settlement, typically 25% to 40%. The practice originated in the 1990s in Australia. In jurisdictions where contingency fees are prohibited, such as in the U.K., third-party funding has gained momentum. Although not yet widespread in the United States, state legislative efforts to legitimize and foster the availability of third-party financing are gaining traction. Inherent tension with the attorney-client privilege by the injection of a profit-driven third party into the process raises obvious concerns. These problems can be even more dramatic in mass tort litigation where the monetary stakes can threaten a company s viability and lead to the settlement of mass tort cases with little merit. The specter of increased litigation of dubious claims cannot be dismissed. Efforts to seek U.S. court enforcement of judgments against U.S-based companies rendered in foreign courts are also on the rise. These cases are conducted in foreign courts under local law, often without appropriate procedural safeguards for the defendant. These biased judgments are then pursued in targeted U.S courts in an effort to coerce settlements. Historical review of the litigation environment and future predictions of change demonstrate a continuing need for adaptability by those in the business of assessing and managing risk. The role of the risk manager is of monumental importance in today s businesses and will only continue to expand over the next five decades. While the issues may vary, increased litigation with its attendant costs is a certainty. The 21st century risk manager needs to be intimately familiar with the challenges of managing and resolving litigation. Partnering with insurers that have the demonstrated capacity to effectively respond to widespread risk is paramount. With a 90-year history, one of the industry s most extensive ranges of products and services, deep claims expertise and excellent financial strength, the Chartis insurers have that capacity and enable their clients to manage virtually any risk with confidence. U.S.-style litigation, including class actions, consumer protection and product liability suits, are gaining a foothold across the world. In the European Union, for example, new mechanisms of collective redress are being considered. Concern over European momentum towards support of class actions appears well founded as changes in the political and economic landscape suggest a shift from a culture reliant on public enforcement to one of private lawsuits and remedies. 10

12 Footnotes 1 Jeffrey Robert White, Top 10 in Torts: Evolution in the Common Law, Trial, July 1996, at 50-53, cited in Trial Lawyers Inc.: K Street, A Report on the Litigation Lobby 2010, Center for Legal Policy at the Manhattan Institute. 2 Escola v. Coca-Cola Bottling Company, 24 Cal. 2d 453, 150 P.2d 436 (1944). 3 Remove Child Before Folding: The 101 Stupidest, Silliest, and Wackiest Warning Labels Ever, Jones, Bob Dorigo, Grand Central Publishing, January National Underwriter; Then & Now: A Look at Excess Casualty Over the Decades, 10th Annual Excess Casualty Producer Conference. 5 Comparative Negligence, Fifth Edition, Schwartz, Victor E., Class Action Dilemmas, Pursuing Public Goals for Private Gains; Hensler, Pace, Giddnes, Gross, and Moller, Rand Institute for Civil Justice, Dukes, et al. v. Wal-Mart Stores, Inc., 222 F.R.D. 137 (ND Cal. 2004), aff d, 603 F. 3d 571 (CA9 2010) (en banc), vacated by 564 U.S. (2011). 8 Cobell v. Kempthorne, 569 F. Supp.2d 223, 226 (D.D.C. 2008); Cobell v. Salazar (Cobell XXII), 573 F.3d 808 (D.C. Cir. 2009); Cobell v. Salazar, United States District Court for the District of Columbia, Case No. 1:96CV Asbestos Litigation Costs and Compensation An Interim Report, RAND Institute for Civil Justice, Lawyers USA Top Ten Jury Verdicts of Asbestos Bankruptcy Trusts Information, Mesothelioma Resource Center, The Vanishing American Lawyer; Morgan, Thomas, Oxford University Press, Judicial Business of the United States Courts 2010 Annual Report of the Director, Duff, James C. Washington, D.C. 14 Statistical Overview of Civil Litigation in the Federal Courts, Dungworth, Terence, Pace, and Nicholas, Rand Institute for Civil Justice, Bureau of Justice Statistics Special Report, 1992 Civil Justice Survey of State Courts, April Examining the Work of State Courts: An Analysis of 2008 State Court Caseloads, Court Statistic Project, National Center for State Courts. 17 Role of Risk Managers Survey, 2010 RIMS Benchmark Survey, A Place for Medical Liability Reform in Healthcare Overhaul? The Front Line, 3rd Quarter Federal Legislation and Regulation, The Front Line, 1st Quarter The Plaintiff s Bar Pushes for a Tax Break, citing US Chamber of Commerce, Institute for Legal Reform, Coalition Letter to the US Treasury Department, The Front Line, 3rd Quarter Bureau of Labor Statistics, Consumer Price Index Medical Component, Towers Watson, 2010 Update on U.S. Tort Cost Trends. 23 Current Award Trends In Personal Injury, Jury Verdict Research, 49th Edition, Nolf, Lisa, Lawyers USA Top Ten Jury Verdicts of 2010 and Top Ten Jury Verdicts of Chartis is the marketing name for the worldwide property-casualty and general insurance operations of Chartis Inc. For additional information, please visit our website at All products are written by insurance company subsidiaries or affiliates of Chartis Inc. Coverage may not be available in all jurisdictions and is subject to actual policy language. Non-insurance products and services may be provided by independent third parties. Certain coverage may be provided by a surplus lines insurer. Surplus lines insurers do not generally participate in state guaranty funds and insureds are therefore not protected by such funds. 11

13 About the Authors Robert P. Hartwig, Ph.D., CPCU President, Insurance Information Institute Robert P. Hartwig is President of the Insurance Information Institute (I.I.I.), generally recognized to be the most credible and frequently used single source of information and referral for the widely diverse insurance industry. Since joining the I.I.I. in 1998 as an economist and becoming chief economist in 1999, Dr. Hartwig has focused his work on improving understanding of key insurance issues across all industry stakeholders, including media, consumers, insurers, producers, regulators, legislators and investors. Dr. Hartwig previously served as director of economic research and senior economist with the National Council on Compensation Insurance (NCCI) in Boca Raton, Florida, where he performed rate of return and cost of capital modeling and testified at workers compensation rate hearings in many states. He has also worked as senior economist for the Swiss Reinsurance Group in New York and as senior statistician for the United States Consumer Product Safety Commission in Washington, D.C. He is a member of the American Economic Association, the American Risk and Insurance Association, the National Association of Business Economics and the CPCU Society; and from May 2005 to May 2008 served on the board of directors of the Independent Insurance Agents and Brokers Association of New York. In 2005 and 2006 Dr. Hartwig served on the state of Florida s Task Force for Long-Term Homeowners Insurance Solutions. Dr. Hartwig received his Ph.D. and Master of Science degrees in economics from the University of Illinois at Urbana-Champaign. He also received a Bachelor of Arts degree in economics cum laude from the University of Massachusetts at Amherst. He has served as an instructor at the University of Illinois and at Florida Atlantic University. Dr. Hartwig also holds the Chartered Property Casualty Underwriter (CPCU) credential. Christopher G. Kopser President, Excess Casualty, Chartis Christopher G. Kopser is President of the Excess Casualty Division of Chartis. He is responsible for driving executive-level strategies, including profitability and growth initiatives, new product development, broker and client relationship management and ensuring effective coordination with Chartis U.S. s other casualty units. Chris joined the organization in 2001 as a Business Development Manager, and has since held increasingly senior roles in underwriting and marketing, including Senior Vice President of Field Operations, Strategic Relationship Group; Senior Vice President of National Accounts, Chartis U.S.; and Executive Vice President of National Accounts, Risk Management Group. Most recently, he had responsibility for the Greater New York Region as Regional President. Previously, Chris held senior management positions at Metcalf & Eddy, a prominent global environmental engineering firm and Zenon Environmental, a publicly-traded environmental equipment company, where he headed the Defense division. Chris is a graduate of Purdue University where he earned Bachelor of Science degrees in Chemical Engineering and Chemistry. 12

14 Steven E. Lessick Vice President, Issue Management, Chartis Global Claims Services Steven E. Lessick is Vice President of Issue Management, one of the resource groups comprising the global claims organization of Chartis. Steve has over 25 years of claims and legal experience. He joined the organization in 1990 in the Environmental Claims Department, and has since held a series of claims technical and management positions in Claims, Litigation Management and Product Development. Previously, Steve served for three years as Deputy Attorney General for the State of New Jersey. Steve is a graduate of Temple University and the Rutgers School of Law. He is admitted to practice law in New Jersey. Bruce D. Margolin Senior Vice President, Issue Management, Chartis Global Claims Services Bruce D. Margolin serves as Senior Vice President of Issue Management, one of the resource groups comprising the global claims organization of Chartis. Bruce has over 23 years of claims and legal experience. He joined the organization in 1997 in the Toxic Tort Claims Department and has held various claims technical and management positions of increasing responsibility in Chartis claims organization. Previously, Bruce worked for nine years as a defense attorney with a New York-based law firm and as a Senior Trial Attorney for Fireman s Fund Insurance Company. Bruce is a graduate of the University of Massachusetts and New York Law School. He is admitted to practice law in New York and Connecticut. Richard C. Woollams President of Claims, Global Commercial Insurance, Chartis Richard Woollams is the President of Claims, Chartis Global Commercial Insurance, with worldwide responsibility for Claims operations supporting the five Commercial business lines: Global Casualty, Global Financial Services, Global Property, Global Risk Solutions, and Global Specialty. Prior to this role he held the title of Chief Claims Officer of Chartis U.S. (formerly AIG Commercial Insurance), a position he assumed in April of In this capacity, he oversaw the operation of Chartis U.S. s Primary Claims, P&C Severity Claims, Financial Lines Claims, Claims Resources and Solutions, Commercial Property Claims, Lexington Claims, Aviation Claims, Canadian Claims, Structured Settlements and Claims Operations and Systems. From 2002 to 2008, Rick was the President of P&C Severity Claims for AIG Domestic Claims Inc. Rick began his career at the organization as Senior Vice President, leading the Excess Casualty Claims department of AIG Technical Services Inc. (AIGTS) the predecessor to AIG Domestic Claims a position he held for over four years. Prior to joining AIGTS, Rick was the Second Vice President for Strategic Claims at Travelers Property Casualty. He began his career in the insurance industry in 1988 with Travelers, holding a variety of claims positions there. Before that, Rick was an attorney in private practice in Ohio. Rick graduated from the Cleveland State University John Marshall School of Law in 1979 and was admitted to the Ohio Bar in November of the same year. Rick was the Chairman of the Claim Committee for the American Excess Insurance Association and is a current member of the Claim Committee for American Nuclear Insurers. 13

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16 Chartis 175 Water Street New York, NY Chartis is a world leading property-casualty and general insurance organization serving more than 70 million clients around the world. With one of the industry s most extensive ranges of products and services, deep claims expertise and excellent financial strength, Chartis enables its commercial and personal insurance clients alike to manage virtually any risk with confidence. Chartis is the marketing name for the worldwide property-casualty and general insurance operations of Chartis Inc. For additional information, please visit our website at All products are written by insurance company subsidiaries or affiliates of Chartis Inc. Coverage may not be available in all jurisdictions and is subject to actual policy language. Non-insurance products and services may be provided by independent third parties. Certain coverage may be provided by a surplus lines insurer. Surplus lines insurers do not generally participate in state guaranty funds and insureds are therefore not protected by such funds. 15 The information contained in this white paper is for general information purposes only and should not be viewed as a substitute for legal, accounting or regulatory advice in any particular topic. The opinion expressed by each of the authors is his or her own and does not necessarily represent the views of Chartis or its affiliates. Use of such information is voluntary, and reliance on it should only be undertaken after an independent review by your own counsel of its accuracy, completeness, efficacy, timeliness and application to particular facts and circumstances. Chartis (including its employees and agents) assumes no responsibility for consequences resulting from the use of this information, or in any respect for the content of such information, including (but not limited to) errors or omissions, the accuracy or reasonableness of factual conclusions, the defamatory nature of statements, ownership of copyright or other intellectual property rights, and the violation of property, privacy or personal rights of others. Chartis is not responsible for, and expressly disclaims all liability for, damages of any kind arising out of use, reference to, or reliance on such information. No guarantees or warranties, including (but not limited to) any express or implied warranties of merchantability or fitness for a particular use or purpose, are made by Chartis with respect to such information.