Last year, it was a mere 170. "So why would anyone want to write this?" he said.

"It is absolutely the case that the tort environment of the past decade has made products liability a difficult place to be. A lot of insurers lost a lot of money," he said. However, he added, "going forward, there are reasons for optimism."

Positive changes in the tort environment, he said, include the passage of the Class Action Fairness Act in February, designed to halt abuses like "venue shopping"--making it easier to remove class actions to the federal system.

In addition, "more states seem willing to entertain caps on punitive damages awards," he said. In the most high-profile products liability case this year, involving Merck's arthritis drug--Vioxx--even though a Texas jury awarded over $200 million, it was later reduced to $26 million, he noted.

"We're on a positive trajectory," he said. "Rationality, piece by piece, is being restored to our tort system--particularly in the state courts, where problems normally occur."

"Very recently, Congress put forth stringent limitations on gun liability, and the so-called 'cheeseburger bill' went through," added Mr. Hartwig, highlighting two other positive developments. On Oct. 19, the House passed the "Protection of Lawful Commerce in Arms Act," which protects gun makers and sellers from suits based on criminal use of their products, as well as "The Personal Responsibility in Food Consumption Act," ending obesity suits.

(As this article went to press, the gun bill was awaiting the president's signature, while the food bill was on its way to the Senate. A few days after NU interviewed Mr. Hartwig, the House passed another reform measure--the Lawsuit Abuse Reduction Act, imposing sanctions against lawyers who file frivolous lawsuits.)

Mark Behrens, a partner for Shook, Hardy and Bacon in Washington, sees rationality impacting the number-one past nemesis for products liability insurers--asbestos, and its close cousin, silica.

Asbestos and silica medical criteria legislation passed in Texas, Florida and Georgia this year and Ohio in 2004, filtering out claims by people who aren't sick, he said. Some reports show that 90 percent of cases in recent years were brought by the unimpaired, noted Mr. Behrens, who is also counsel to the Coalition for Litigation Justice, a group of defendants and insurers.

He said the latest positive development is a silica decision by Texas Federal Judge Janis Graham Jack, in June. Judge Jack tossed all but one of 10,000 silica cases from her court, finding that they were based on fraudulent diagnoses by lawyers, doctors and screening companies.

Spillover from the decision is already evident, Mr. Behrens said, noting that not only will her decision be a road map to state courts hearing silica cases, but on the asbestos front, claims managers for the Manville Personal Injury Settlement Trust said in September they will no longer accept claims supported by any doctors or screeners discussed in Judge Jack's opinion.

Still, "the history of asbestos litigation shows that the plaintiffs' bar always adapts," he warned. "The next asbestos is always asbestos," he added, quoting an unnamed insurance claims executive and predicting that cases will now evolve in a "back-to-the future" fashion.

Litigation increasingly will look like it did in 1985, when there were fewer claims but brought for people with serious illnesses--mesothelioma or asbestos-related lung cancer, he said.

Moving Targets

Mr. Behrens said the plaintiffs' bar will also adapt by forum shopping, noting that there is now more asbestos litigation in California, "probably as a direct result of reforms enacted in Mississippi and Texas," and that an unusual forum--Delaware--is being targeted by a leading Madison County, Ill.-based law firm. "This is interesting since Delaware has been viewed as a favorable legal climate for defendants."

The law firm, SimonsCooper, announced the launch of a new blog last month, with one entry that explains the Delaware filings. Incorporation of firms in Delaware means "they cannot wrangle over jurisdiction," the entry said. "Wrangling takes time. The victims of asbestosis and mesothelioma don't have time," it continued.

The Web address of the blog--www.benzeneasbestos.com--reveals another strategy that Mr. Behrens identified, that being diversification into other mass torts, such as benzene. Benzene used in solvents that are applied to de-grease tools and machine parts, according to the lawyers, is linked to blood disorders and blood cancers, such as anemia and leukemia.

While Mr. Behrens said benzene litigation is only in the "incubator stage," the phenomenon of reforms in one area fueling claims in another is one that Denise Holzka, a partner for Heidell, Pittoni, Murphy & Bach, sees happening in another product area--medical devices.

The New York-based defense lawyer said caps on pain-and-suffering damages in medical malpractice cases are giving rise to device litigation. In a state where a $250,000 cap is in place, if a plaintiffs' lawyer believes a case is worth $750,000, and a device was used during a surgery that resulted in injury, then you'll see litigation brought against the device maker, even if user error is the source of injury, she said.

She reported that her firm has such a case in California, in a situation where the cuff of a heart monitor stopped working and an anesthesiologist began monitoring a woman's pressure manually on the other arm, leaving the monitor cuff on during the entire two-hour surgery.

The alleged damage is significant nerve damage to her arm, Ms. Holzka reported, asserting that while the anesthesiologist should have known that the cuff was still keeping pressure on the woman's arm, the litigation alleges that the monitor should have had a warning mechanism to alert the doctor that this was happening.

"I can't say with certainty that the cuff manufacturer wouldn't be sued" if not for the medical malpractice cap. "But this isn't a difficult med mal case," she said.

Michael Egan, segment director, Medical Technology for St. Paul Travelers, which set up a unit devoted to medical technology eight years ago, has yet to see an undeniable link between med mal reforms and device claims. "It's something we are looking at closely, but we haven't necessarily seen significant or unexpected trends in our loss experience," he said.

"We have seen cases where hospitals and providers have had very low limits, and it would appear that if they had had more adequate limits, it would have been unlikely the device manufacturer would have been brought into litigation," he added. "We haven't seen a lot of it. We're not alarmed about it. We'll continue to monitor it."

Mr. Egan said one definite trend is an increase in device claims involving allegations other than a design or manufacturing defect. These more novel claims allege either that a manufacturer failed to train the physician on the proper use of a device, or that the device was used on an off-label basis and the manufacturer either promoted it or didn't give enough warning of potential injury that could be caused by a known off-label use.

He explained that while a manufacturer needs approval for a specific use for a device that's regulated by the Food and Drug Administration, health care providers can use the devices however they want.

"We have seen an increase" in allegations related to off-label situations, "but I don't know that we can causally link it to med mal reform," he said.

St. Paul Travelers insures a broad range of device makers (and biotechnology firms involved in diagnostic testing), ranging from startups to large, established firms. While the insurer does not write pharmaceuticals, negative publicity for drug makers is still a concern, according to Mr. Egan.

"There have been articles questioning the FDA's ability to regulate," painting a potentially negative picture not just for drugs but for devices as well, he said.

Still, he said, agents report no shortage of capacity among the few insurers writing medical devices. Even in areas that fall outside of St. Paul Travelers' appetite, like permanently implantable devices, "there's probably a market out there," perhaps in the surplus lines arena.

Appetites Expand

Mike Johnston, a wholesale broker for CRC in Birmingham, Ala., reports softer market conditions for products liability generally. Operating in the surplus lines area, he sees "the tougher products"--pharmaceuticals, herbaceuticals, clinical trials of pharmaceuticals prior to FDA approval, industrial machinery, imported products, football and motorcycle helmets, and auto products, among others.

This year, "as the overall commercial market softened, we started to see a modest outflow of easier types of products risks" to standard markets, he noted.

Among them, he said, "the easier types are foreign-made products," such as hand tools or air conditioners that "aren't overly complicated in and of themselves. The fact that they're made in a foreign country complicates the situation" for underwriters. Also, they're mechanical and electrical, making them less desirable to standard insurers in a hardening market, he added.

He said favorable financial results in recent years are fueling competition--and rates are falling. "Price decreases are around 25 percent on the business we're losing," he said, noting that risks staying in the E&S market see declines of about 10 percent.

Scott Bayer, a senior vice president for Liberty International Underwriters in New York, which writes products on an E&S basis, had a similar assessment when he spoke to NU during the annual meeting of the National Association of Professional Surplus Lines Offices in September. "Unfortunately, the business never really hardened. There are a lot of carriers willing to write it very competitively," he said.

The line has performed well overall in relation to others in the last five or 10 years, so a lot of companies have tried to expand their products liability portfolios, he said.

Noting that LIU's portfolio includes consumer products, medical products, sporting goods and machinery, he said it is diverse by design. However, LIU stays away from pharmaceuticals and nutriceuticals, residential building products, firearms and animal feed, he said, explaining the potential for multiple-plaintiff exposure from the latter. "The cow eats feed, gets sick, then people get sick. It follows down the line."

Mary Foucard, a agent with Cambridge Underwriters in Livonia, Mich., whose retail agency places risks with standard insurers, characterizes the products market as a "healthy, competitive" one. "The Midwest is an attractive place to do business," because of events in the South and more weather-sensitive regions, she said.

Ms. Foucard's product placements, because of her firm's location, mainly involve automotive products (such as electronic switches for windshield wiper wands, or machine parts used to make vehicles). She gave high marks to insurers for their level of underwriting sophistication in these areas and beyond. "Underwriters are receptive to considering products they might not have considered three years ago," she said, citing elevator parts as one example.

She also said insurers are competitive on terms as well as pricing. "I've seen policies go from a certain deductible to a reduction in that deductible, to even considering writing first dollar," she said.

Switching Gears

In the automotive products world, two lawyers from Cozen O'Connor see a product defect issue impacting first-party property insurers--a dozen of which they are representing in subrogation actions against auto giant, Ford Motor Company.

These product liability claims, which have the property insurers as plaintiffs, relate to damage caused by a switch that is designed to turn off the cruise control in 16 million cars, explained John Reis, a member of Cozen O'Connor's Charlotte, N.C., office.

The defect, which causes fires when cars are parked in "key-off position," has destroyed homes and car dealerships, he said. In two recall actions to date, Ford recalled 3.8 million of the 16 million vehicles potentially affected, he said, adding that the law firm is only targeting Ford, (which is largely self-insured and hasn't had to tap any insurance) in subrogation actions, and not the part maker, Texas Instruments.

Elliot Feldman, who chairs the law firm's subrogation recovery department in Philadelphia, said that tens of millions of dollars could be at stake for property insurers, noting that the firm is investigating the possibility of consolidating claims through multi-district litigation.

Art: Monitoring blood pressure of fat guy downing Big Mac or cheeseburger (perhaps holding gun in other hand, or stuck in his pants)

As insurers continue to monitor the liability potential of various products, some hot topics, like fattening foods and asbestos, appearing to be cooling down, while other areas, like medical devices, could heat up.

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With losses from prior-year exposures like asbestos still impacting recent calendar-year results, insurers recorded an average combined ratio of 198 over the past six years--incurring nearly two dollars in losses and expenses for each dollar they took in.

Egan, mug coming Tuesday

"We have seen cases where hospitals and providers have had very low limits, and it would appear that if they had had more adequate limits, it would have been unlikely the device manufacturer would have been brought into litigation."

Michael Egan,

Segment Director, Medical Technology

St. Paul Travelers

"We're on a positive trajectory. Rationality, piece by piece, is being restored to our tort system--particularly in the state courts, where problems normally occur."

Robert Hartwig, Chief Economist

Insurance Information Institute

"I've seen policies go from a certain deductible to a reduction in that deductible, to even considering writing first dollar."

Mary Foucard, Agent

Cambridge Underwriters