Addressing Legal System Abuse Tops APCIA 2024 Priority List

AI and catastrophe insurance challenges also on radar for the coming year

January 11, 2024 Photo

Curbing rampant legal system abuse tops the 2024 advocacy priorities for the American Property Casualty Insurance Association (APCIA). The association recently announced its 2024 advocacy priorities and plans for reform, which they agreed to discuss with CLM.

TPLF and Other Plaintiffs’ Bar Abuse Tactics

“It started with the growth in unchecked plaintiffs’ bar advertising several decades ago, creating a platform for the plaintiffs’ bar to foster the narrative that corporations, including insurers, were bad actors and that attorneys were there as ‘white knights’ to help them navigate the court system,” explains Stef Zielezienski, executive vice president and chief legal officer, APCIA. “Over time, it has evolved into an expansion of litigation exposure by legislation and includes practices like insurance bad faith standards, time limited demands, assignment of benefits, third party litigation financing (TPLF), and use of medical liens and letters of protection.”

The growth in TPLF, Zielezienski emphasizes, is the most concerning, “as it highlights the transformation of the judicial system—which is a branch of government—into an opportunity to otherwise non-interested investors (including foreign sovereign wealth funds) to profit from U.S. judicial outcomes.”

Without disclosure requirements or other safeguards against TPLF abuse, “the civil justice system is distorted from one designed to fairly resolve disputes into one that focuses on return on investment for unknown third-party lenders whose only interest is profiting—and their investors—at the expense of those most in need of protection.”

The most significant impact of these legal system abuses, according to Zielezienski, is that it “subverts the ‘truth-finding” and justice hallmarks of our judicial system in favor of promoting the courts as an investment market that benefits speculators. In turn, abusive practices add costs for every American family, individual, and business that find their way into insurance affordability, as well as the general costs of goods and services. As a result, consumers may pay what the U.S Chamber Institute for Legal Reform (ILR) has called a ‘tort tax’ for everyday items like groceries and gas. According to the U.S. Chamber ILR, the average American household pays more than $3,600 due to unnecessary and abusive litigation across the country that raises the costs of products and services.”

Curbing the Legal System Abuse

The association’s number one priority is working to curb this rampant legal abuse by the plaintiff’s bar, which it says is a widespread problem. When asked whether there have been any significant recent developments in the landscape that have elevated this as a top priority for the association, Zielezienski says, “Last year, Florida passed broad legal system abuse reforms, in reaction to evidence that the state had become a magnet for litigation. Other states, like Montana, have enacted first-step reforms to address discrete practices such as the growth in third-party litigation funding, which turns our judicial system into an investment market where outsiders bet on litigation outcomes. These growing reforms are a positive step toward balancing the scales of justice and reducing frivolous lawsuits. APCIA will continue to advocate for more states to pursue similar reforms. 

Specifically, APCIA views its own role as “helping engage the entire business community in a coalition effort to reduce and eliminate those abusive plaintiffs’ bar practices that are adding unnecessary costs, delays and clogging of the U.S. judicial system,” explains Zielezienski. “This is not an isolated insurance concern, but, like most things, impact on insurance availability and affordability serves as a ‘canary in the coal mine’ that should resonate with businesses and drive reforms in the name of restoring balance in the judicial system, reorienting the system to its goal of seeking truth and justice, and reducing the adverse economic impact of a bloated and clogged court system.  Common-sense reforms, including transparency and disclosure in third party litigation financing, are needed to help these worthwhile goals.”

AI and Other Plans for 2024

Apart from working to curb rampant legal system abuse, APCIA’s eight other priorities for 2024 include: 

  • Supporting risk-based pricing and related rating and underwriting tools.
  • Addressing innovation, regulatory modernization, insurance industry talent and economic empowerment.
  • Catastrophe insurance challenges (including adoption of relevant recommendations from the federal Wildland Fire Mitigation & Management Commission Report.
  • Ensuring the sustainability and soundness of the state-based workers compensation system.
  • Protecting insurance contract certainty against legislative, regulatory, or judicial overreach.
  • Addressing automobile insurance cost drivers.
  • Preserving a sound taxation structure for property-casualty insurance.
  • Advancing international trade, market access, and regulatory modernization.

Regarding APCIA’s plans to address innovation and regulatory modernization, Zielezienski says, “One of the most significant developing issues in the innovation space is the regulation of artificial intelligence (AI). Insurers are using AI for various business functions, including underwriting, marketing, and loss prevention. AI is an important tool because it has vast potential to improve decision making, efficiency, and enhance the customer experience. It is critical that regulators foster and support innovation that enables insurers to use AI to better tailor insurance products to the particular needs of all consumers, meet customer service expectations, assess risk, and assist policyholders and the larger society to identify, reduce, and manage risk of loss.”

Zielezienski adds, “Modernizing laws to allow ease of electronic interaction and transactions with consumers and the state insurance departments has long-been a goal of the insurance industry. The significant shift to remote work brought on by COVID-19 has only emphasized the need for these modifications. APCIA encourages policymakers to take advantage of all opportunities to eliminate requirements for wet signatures, allow for ease of electronic delivery, support the use of drones, and consider leveraging technology to conduct various state auditing and exam requirements.”

As far as industry talent, Zielezienski explains, “APCIA will continue to support efforts to expand the industry’s diverse talent pipeline and advance access to insurance education. We are also committed to preparing the next generation of leaders to better understand their role in protecting the viability of private competition for the benefit of consumers, businesses, and communities. APCIA and our members helped launch the Insurance Careers Movement in 2015 to heighten our focus on workforce development and diversity as key industry priorities.”

APCIA is also working with state legislators and regulators to “address perceived unfair discrimination in the rating, underwriting, claims, and marketing areas of property casualty insurance,” says Zielezienski. “This issue has gained nationwide interest following the passage of the Colorado law in 2022 looking at industry governance and testing work. APCIA, along with other entities have, we believe, successfully shown that such unfair discrimination does not exist on an aggregate basis in rating and are looking at other business practices. We do not have or collect racial data, for example, and will continue to defend risk-based practices by insurers.”

Finally, on catastrophe insurance, Zielezienski says, “APCIA will also be working to mitigate pressure on catastrophe insurance, resisting regulatory rate suppression, coverage mandates, and retroactive coverage proposals. APCIA will also promote resilience, sustainability, and risk mitigation for weather and wildfire (such as the federal Wildland Fire Commission recommendations, in which APCIA CEO David Sampson was a key participant), to make catastrophe insurance more available and affordable.”

For more information about these industry issues, plan to attend CLM's upcoming webinar on Jan. 23, titled, "Journey to the Center of the Hellholes: 2024," in which Ronna Ruppelt, CLM CEO, will sit down with Lauren Jarrell, director and counsel, Civil Justice Policy with the American Tort Reform Foundation, to discuss the results and implications of its 2023-2024 Judicial Hellholes® report. Reserve your seat now to learn more about the jurisdictions that have earned reputations as judicial hellholes and why they deserve the title. 

About The Authors
Angela Sabarese

Angela Sabarese, Associate Editor of CLM.

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