Rolling Up Losses
It’s not as if the product liability line was problem free before bad burritos and hoverboards came onto the scene.
By Eric Gilkey
Whether it involved rolling up burritos or rolling down the street on a “hoverboard,” incidents of product liability claims have been, well, rolling up on insurers lately.
According to Cozen O’Connor’s Peter Lynch, who wrote this month’s cover story, there have been “at least 41 incidents in 19 states where consumers reported hoverboard fires that destroyed rooms and even entire homes.” Chipotle, too, faces similar numbers with its E. coli outbreak, which has affected 53 people in nine states, and a lawsuit already has been filed by investors who claim that the company failed to disclose its food safety concerns quickly enough.
While these recent examples seem to show legitimate cause for concern, it’s not as if the product liability line was problem free before bad burritos and hoverboards came onto the scene. According to the Insurance Information Institute (I.I.I.), “Insurers’ defense costs as a percentage of incurred losses have, traditionally, been relatively high in lines such as product liability,” which I.I.I. says reflects the high cost of defending certain types of lawsuits. For example, I.I.I. cites SNL Financial data when it states, “In addition to $1.2 billion in product liability incurred losses in 2014, insurers spent $953 million on settlement expenses, equivalent to 77.4 percent of the losses.” In other years, such as 2012, I.I.I. reports that defense settlement costs for product liability cases cost a mind-boggling 114 percent of incurred losses.
For now, it seems, this rolling stone shows no sign of slowing, let alone growing moss.