Injury Claims Analysis in Recession Includes Financial Health of Insurers

As a Georgia trial attorney handling serious injury and wrongful death cases, I have grown up with the understanding that tort law and insurance law are two peas in the same pod.  Fifteen years ago, in fact, I was chair of the Tort & Insurance Practice Section of the Georgia Bar.

Since automobile insurance became widespread in the 1920s, there has been a symbiotic relationship between tort law and liability insurance.

As a practical matter, the evaluation of personal injury claims is focused on three elements 

• tort liability of the defendant(s) (often a complex analysis of duties and breach of duty in itself),
• damages (which must be proximately caused by the defendants’ acts or omissions, and
•  the amount of liability insurance coverage.

In the current economy, we have to add another category of analsyis:

• financial health of the defendant’s insurance company.

This week there was news that A.M. Best Co.  downgraded the financial strength ratings of key subsidiaries of The Hartford Financial Services Group, Inc. from A+ (Superior) to A (Excellent).  The downgrade was due to its general account investment portfolio and retail variable annuity businesses. But one must wonder when and how problems in the corporate family will impact payment of claims in the property and casualty lines.

Recently we have also seen AIG’s meltdown, and concerns about Lincoln National, Prudential and other insurers.

Forbes reported a couple of weeks ago, in an article by Ieva Augstums, about the stress the recession places on the business model of the insurance industry.  Typically, insurers have made money by investing premium dollars before they have to pay out claims. But cratering stock prices and interest rates put stress on that business model, leading to concerns that insurers will have to dip into reserves to pay claims. The ripples are seen throughout the insurance industry.

In our catastrophic personal injury practice in Atlanta, we now regularly monitor reports on the financial health of defendants’ insurers.  Concerns about the economy may lead to efforts to get some cases on trial calendars faster, lest declining health of insurers might later cause more problems.

And this month I’m writing a paper for a seminar presentation in San Diego in July about what to do when trucking companies and their insurers go belly up.

We do live in interesting times.

Ken Shigley is a trial attorney in Atlanta, Georgia who was recently listed for the fifth consecutive year as a “Super Lawyer” (Atlanta Magazine).  He is also included among the “Legal Elite” (Georgia Trend Magazine) and in the Bar Register of Preeminent Lawyers (Martindale).  Mr. Shigley is a Certified Civil Trial Advocate of the National Board of Trial Advocacy. With longexperience representing parties in trucking and bus accidents, products liability, catastrophic personal injury, wrongful death, brain injury, spinal cord injury and burn injury cases, he now serves as Secretary  of the 40,000 member State Bar of Georgia.