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Class Realities

How to prepare for the rising risk of class actions involving insurers.

March 08, 2016 Photo

I had the pleasure of attending CLM member firm Smith, Rolfes, & Skavdahl Co. LPA’s annual update on insurance law in February, which featured a presentation by Claims Management’s contributing editor Matthew Smith, the firm’s founder and president. The topic? Claims practices litigation and the rising risk of class actions involving insurers.

What shocked me was the rapid rate at which insurers are being targeted. According to a 2015 survey by Carlton Fields Jorden Burt (CFJB) that Smith cited in his presentation, insurance emerged as a significant area in 2014, making up six percent of all class-action matters. While that might seem like a low rate when compared to other areas like consumer fraud (which accounts for nearly 30 percent of class actions handled), it’s alarming because insurance didn’t show up at all in CFJB’s 2013 report. That’s quite a jump, going from a relatively untouched industry to six percent of all class actions in one year.

It should sound alarms to insurers that plaintiffs’ firms smell opportunity and, if you haven’t been targeted yet, it’s probably just a matter of time. There are ways to fight back, though. As Smith noted in his presentation, “We might not be able to stop the train, but we can control the tracks.” He said that includes better communication with claimants in terms of explaining the value of things like RCV and promoting positive practices, while steering clear of tactics like premium optimization, which can harm the insurer/policyholder relationship and damage the industry’s public perception.

“Don’t run in fear,” said Smith, “but you have to be prepared to deal with it correctly, because it’s not like other litigation.” Words to heed.

About The Authors
Eric Gilkey

Eric Gilkey is vice president of content at the CLM, and serves as executive editor of CLM magazine, the flagship publication of the CLM.  eric.gilkey@theclm.org

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