Huge losses in litigation have devastated the insurance market against court decisions, leaving potential customers with fewer coverage options and causing premiums to double.
The most recent example of carnage in the industry was on October 10, when a judge reduced the litigation fees to the law firm of Quinn Emanuel from $185 million to $92.4 million. Quinn had an insurance policy covering about 90% of the original charges, which could have cost the underwriters about $75 million.
As a result of these losses, premiums are now about 17% or 20% of claims, up from about 10% a year ago, said Charles Agee, CEO of Westfleet Advisors, a litigation finance advisory firm. It is said that they are doing so.
“It’s even harder to insure the risk,” Agee said in an interview. Huge losses have “forced insurers to reassess their risk appetite.”
Quinn Emanuel did not respond to requests for comment.
The loss took some of the luster away from the judgment protection insurance market, which soared in popularity at the beginning of the decade. This insurance is popular with plaintiffs who want to protect a trial court’s judgment before it is reduced or set aside on appeal.
Judgment protection insurers such as HDI Global Specialty, Lockton, and Certum Group are playing an increasing role in the broader $13.5 billion litigation funding industry. Brokers such as Aon, CAC Specialty, and Willis Towers Watson Plc sell their products.
Much is shrouded in mystery about this area of the insurance business. Plaintiffs who win major awards typically do not have to disclose whether they have purchased judgment protection insurance. Similarly, insurance companies do not disclose coverage in individual cases, except in rare cases.
The existence of insurance in the Quinn Emanuel case is only known because the insurance policy was made public during the litigation. Several insurance companies back Quinn’s insurance, but their names are hidden in court documents.
In the underlying lawsuit, Quinn had won billions of dollars for health insurance companies, alleging that the U.S. wrongly denied payments promised under Obamacare.
BMO loss
In addition to the Quinn case, insurance companies are also anticipating losses from other recent decisions. Last month, the U.S. Court of Appeals for the Eighth Circuit reversed a $564 million judgment against BMO Bank for its involvement in a Ponzi scheme run by Tom Petters. The industry expects to pay out at least $80 million in insured losses from the lawsuit, Insurance Insider reported.
In one of the year’s biggest losses, insurers in April covered between $500 million and $750 million of a $1.6 billion judgment against IBM. Following the ruling, Liberty Mutual Insurance Company, which covered between $100 million and $150 million of its policies, withdrew at least two potential litigation insurance policies, Bloomberg Law reported. Ta.
One industry source who asked not to be identified regarding judgment protection insurance said the losses are driving up premiums and making insurers wary of covering large personal claims.
Regarding insurance, the person said, “I’m not saying it’s over, but it’s undergoing major changes.” “Prices are higher, limits are lower, there’s not as much capacity, and underwriting guidelines are more stringent.”
The person added that the losses in recent months would have been difficult to manage at any point, even two years later.
Byron Sumner, CEO of litigation insurance provider Ignite Specialty Risk, said the series of losses is the first shakeout for the early-stage judgment protection insurance market, but the widespread contraction is new to insurers. No, he said.
“Insurance companies are responding and obtaining coverage will not be as easy as it has been over the past 12 months,” Sumner said. “However, I don’t think it will always be as difficult as it has been, as insurers will regain appetite for this class once the market shows attractive levels of profitability.”
