Calling all the 2020 Karens, Zoombombers, superspreaders, Trumpers, social unrest protestors, cancel culture conspirators, herd immunity participants and essential workers to move out of the way. We are flattening the curve and shifting to the next catchphrase, social inflation. This means insurance claim costs are rising over the rate of economic inflation due to societal attitudes.

This phenomenon is drastically affecting the umbrella liability capacity, resulting in reduced policy limits and premium increases. The term, social inflation, describes the following trends within the general public:

1. Increased litigation;

2. Holding defendants to a broader duty of care;

3. Supporting legal decisions in favor of the plaintiff whether or not within the law (jurors are biased to social justice and want to hold businesses responsible);

4. Much larger awards to plaintiffs (nuclear awards).

Let’s explore some of the outcomes that provide evidence of social inflation.

INCREASED LITIGATION: During the pandemic, there are not as many vehicles on the roads and fewer business operations, which should result in fewer lawsuits in these areas. However, the 1,500 COVID-19 cases filed from March 2020 to December 2020 are nearly eight times the number of cases that follow the typical natural disaster.

DEFENDANTS HELD TO BROADER DUTY OF CARE: Negligent security cases are on the rise. In the past, when a crime was committed the property owners did not have a duty to protect a person from another person according to common law. However, times are changing, and so are the standards of care. In the fall of 2020, the new duty to protect was evident in the case of a professionally managed and gated townhome community in Florida where a 30-year-old father of three was fatally shot on the common parking lot, allegedly by a stray bullet. Three young boys dressed in black had been roaming the property, and when asked what they were doing, one of them pulled a gun and fired three shots. Following an investigation revealing prior crimes on the property and in the neighborhood, the townhome community’s and the management company’s insurers each paid policy limits. The community’s security was ineffective: no security guard, the gate video camera and a parking lot light were inoperable, and the perimeter chain-link fences were notorious as sources of entry for suspected trespassers to climb over easily.

Community associations are not the only casualties of negligent security. A lack of video surveillance outside a convenience store resulted in a $52 million payout when a shooting occurred on-premises. Thirty-eight million was paid for an attempted carjacking resulting in gunshot wounds to the victim. An apartment complex and shooter on-premises were both held 50% responsible; $20 million was paid. Other honorable mentions are $5 million for an injury on a nightclub’s premises and a $2 million settlement for a crime in an apartment building hallway.

BIASED JURORS AND NUCLEAR AWARDS: A $90 million Texas jury award in 2018 proves this point. A mother of three was driving in the freezing rain and black ice when she lost control of her pickup and crossed over the grass median into the oncoming traffic, where her pickup was struck by a Werner 

Enterprise truck. The accident resulted in a seven-year-old boy’s death, and a twelve-year-old girl was rendered a quadriplegic, while the mother and another son suffered extensive brain injuries. The jury found Werner 70% responsible, Werner’s driver 14%, and the mother bore 16% responsibility. Why was the jury anti-Werner? Every state’s Commercial Driver’s License (CDL) manual instructs 18-wheelers to slow to a crawl and get off the road during icy conditions; Werner’s student driver was traveling 50 mph. Werner did not provide the driver with basic safety equipment such as an outside temperature gauge or CB radio, which could have made the driver aware of the icy road conditions. Also, it seems the jury did not approve of Werner’s executives’ testimonies that the company did absolutely nothing wrong and would not make changes in the future. Voila, the verdict!

Where this ends is yet to be seen. In the meantime, we can expect more of the same. We now face the 2020 backlog of courtroom cases with yet-to-be-seen jury awards. Our litigious population of the Karens, Zoombombers, superspreaders, Trumpers, social unrest protestors and cancel culture conspirators will file new lawsuits, and societal bias against business will continue, thus continuing to fuel social inflation.

Source:  Karen O’Connor Corrigan, CIC, CIRMS, president/owner, O’Connor Insurance Agency from the Missouri Association of Insurance Agents’ Missouri Agent*, May/June 2021 *