And You Thought the Plaintiffs Bar Couldn't Get More Busy

Insurance executives ask their heads of claims the same thing: "How many Securities Class Action Cases (SCAS) were filed?" There's no industry standard definition and Advisen, our friend Kevin LaCroix at the D&O Diary (blog here), and other service providers like NERA or Cornerstone have varying counts.

NERA and Cornerstone make their money by serving as expert witnesses during trial and pre-trial stages. NERA and Cornerstone collect data as a byproduct of this business.

Advisen makes its money collecting data and licencing access to this data on a one-time or continuous basis. Data and predictive models are our core business and we are dedicated to the commercial insurance industry so our output is tailored to their specific needs.

So the answer to the executive's question is "Depends on what you define as a SCAS" but, more importantly, SCAS is only one part of the exposure to liability insurers. In fact, in Q1 2009, SCAS dropped to less than 40% of all securities filings. Advisen tracks shareholder and other derivative suits and cases involving breach of fiduciary duty and securities fraud.

Advisen tracks filings in US federal and state courts and collective actions and other cases filed in overseas courts against US and non-US companies.

In summary, there is no standard definition of "securities class action suit." But for management liability professionals, the more important question is"How many and what types of lawsuits are likely to result in claims under D&O, E&O or fiduciary liability policies?" Advisen tracks and reports on all manner of suits, filed in state, federal and foreign courts, that are likely to result in losses to companies and their management liability insurers. The Advisen database is the most complete, accurate and timely of its kind.

Today Advisen released the findings of its quarterly securities litigation review and the report is available free of charge here. The headline is that filing activity was up significantly from 2008 rates, but the pace can't be sustained and will likely level off over the year.

The executive's follow up questions are "how many of these companies do we write policies for" and "what do we need to reserve". Reserving capital erodes profit so frequency is not popular, but frequency of filings is only part of the picture.

The elephant in the D&O room is whether these cases will yield insured loss. Advisen has already written (see here) about how defense costs are going to eat significantly into the policy limits but that for many reasons, this increased frequency is unlikely to result in an increase in claims paid.

D&O and E&O professionals would benefit from reading the report (here) and seeing if their clients are on the list (here).

Not For Use on Moving Vehicles

I love the Friday funny news story.

Quoting a UPI article:

A warning submitted by a man in Hampton, Ga., regarding the use of a portable toilet has topped this year's Wacky Warning Label Contest, an event sponsor says.

The Foundation for Fair Civil Justice said in a release that Hampton resident Steve Shiflett won the 2009 Wacky Warning competition by sending in a warning label attached to "The Off-Road Commode."

"Not for use on moving vehicles," the label on the portable toilet, which can be attached to a vehicle's trailer hitch, reads.

Other winning entries this year include a cereal bowl warning that urges adult supervision for use and a livestock castration ring product that insists the product only be used on animals.

Bob Dorigo Jones, who created the annual contest, said such seemingly unnecessary labels are an indication of an ongoing economic trend.

"Once a year, millions of people around the world get a collective laugh from our winners," Jones said. "The truth is, this is no laughing matter. Outrageous warning labels confirm that the American civil justice system is out of whack! In today's economy, Wacky Warning Labels demonstrate the tax we all pay for lawsuit abuse."

Why Say Yourself What a Client Can Say Better?

One of our retail broker subscribers posted a note internally to colleagues about why they should use Advisen - because it helps them make money. I have excerpted in the below for weekend reading - on the flight to RIMS?

Ready to Close that Deal?
Advisen may be the solution!

Whatever happened to the good old days of loyalty coupled with an insurance broker who provides better value than their competitors? In these tough times as all sectors of the economy struggle to tread water, many of us are probably wondering why accounts that we have had ten or twenty years are heading for the door. There is one answer: The bottom line. Do not give up quite yet! There is a software tool that can:
1) Increase the ratio of your sales
2) Provide your client or prospect with valuable information about their industry and insurance policy
3) Clearly put the term “value” back into the minds of the consumers

Advisen is fueling global business insurance with the industry’s first ever online knowledge marketplace.

Advisen’s wealth of information resources, combined with a sophisticated search engine, data mining, and analytical tools provide strategic information services to the insurance industry. By aggregating information relevant to the business insurance industry, Advisen has created a workspace where insurance underwriters, brokers and business managers assess, quantify and evaluate risk within and across domains, benchmark performance against best practices, and track regulatory developments.

Recently, a colleague asked me if I could check what the self-retention average for a company who specializes in real estate management with revenue over $100 million dollars would be. After filling out the brief search engine questionnaire on the software, I was able to create a graph which illuminated the average retention of similar companies across the country. Based on this information, we were able to determine that the retention was right where it needed to be.

We didn’t stop there. I used Advisen to do a policy form comparison between the incumbent broker’s policy form and the carrier’s form that we were planning to use. We were able to show the prospect where the norm in terms of retention fell for their industry, the difference in wording between policies, and also how that could affect the payout of a claim in the event of a loss. To say the least, the prospect was very impressed.

What's 30,000 Reference Resources Between Friends?

I had a caller from Willis in Oklahoma today call about a client who wanted to be insured against liability for problems at their Italian restaurant chain in the mid-west. The broker wanted a loss run to compare to the clients' own claims experience.

I checked out our MSCAd Large Loss Database (see info here) and since we cover the largest cases first, we covered the infamous "Why didn't you tell me your coffee was hot?" suit against McDonald's (and another one where a Mom sued for a kid falling out of its high chair at McDonald's - my 2yr old son does that at least twice a meal, he must have been born with a steel plate in his skull). But this wasn't going to do - the client had 100 claims last year and we didn't have enough of this granular loss data.

So I turned to our catch-all database called rmLibrary which contains links to 30,000 pages on the web and other resources and found the four links below. I love that in addition to preventing them (the best scenario) there are resources devoted to investigating and proving the damages!



Anyway, this is why Advisen partners with Libraries & Directories and carries their rmLibrary product for all of our subscribers. (See details about expanded partnership here). They don't have loss runs for this either but they have killer content at your fingertips.

The fellow in Oklahoma should subscribe soon and I couldn't resist asking him what caused most of the clients' 100 claims: overwhelmingly it was "chicken bones in the spaghetti". GROSS.