Reforms of the civil litigation system appear to be having an incremental impact keeping claims growth low, according to a reinsurance brokerage analysis.
That finding and others are contained in "The U.S. Liability Report of 2006: A Review of Significant Events in Tort Law," produced by the Marsh & McLennan Companies subsidiary Guy Carpenter & Company, Inc.
One of the most important legal developments for insurers this year is still pending, according to the report--a U.S. Supreme Court ruling on Phillip Morris' appeal of a $79.5 million punitive damage judgment by an Oregon jury in a suit brought by a dead smoker's relatives.
The panel also awarded the family of lung cancer victim Jesse Williams $521,000 in economic damages. Philip Morris is arguing that the punitive damages are excessive. They were reduced by the trial judge to $32 million--an action that is being appealed. Philip Morris argues the jury award exceeded the high court's 2004 formula for punitive damage limits.
Case arguments were heard Tuesday by the Supreme Court.
"The Philip Morris case is a highly anticipated Supreme Court ruling that could influence the liability insurance and reinsurance markets well into the future and have far-reaching repercussions," said Andrew Marcell, managing director and head of Guy Carpenter's Professional Liability and Casualty Specialty Practices.
Examining tort reforms' effect on insurance claims, the report saw an incremental impact. With inflation-adjusted growth in paid claims for general liability and product liability at less than 1 percent per year, "the system is not shrinking, but its growth rate is low," the report said.
The study looked at the federal Class Action Fairness Act of 2005 and concluded that "while there are no comprehensive statistics on class actions, there are plenty of anecdotal facts that suggest a decline in these suits."
However, Guy Carpenter noted other factors impacted class-action activity in 2006, including a ruling on silica cases and a decision by drug manufacturer Merck to litigate Vioxx claims on a one-to-one basis.
Whether the Class Action Fairness Act "will actually live up to its billing is difficult to predict," said the study.
The report noted that silica cases are under scrutiny, with congressional hearings and federal and state criminal investigations underway.
Besides the Philip Morris case and developments in silica and asbestos law, the report touches on a number of other key U.S. tort law developments and trends, including:
o The success of the restaurant industry in persuading states to legislate limits on food industry liability for claims involving weight gain or obesity.
o Progress in state medical criteria laws, which establish medical standards for pursuing asbestos and silica claims.
o A new set of tort reform efforts touching on the abuse of state consumer protection laws.
A copy of the full report is available for download at www.guycarp.com .
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