Munich Re's survey sheds light on abuses in the US legal system

Munich Re’s survey sheds light on abuses in the US legal system | Insurance Business Asia

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Munich Re’s survey sheds light on abuses in the US legal system

How aware is the average American of the tactics being used?

Reinsurance

By
Kenneth Araullo

Are Americans aware of lawyer tactics which can negatively impact their household costs?

In a new survey, the American Property Casualty Insurance Association (APCIA), in collaboration with Munich Reinsurance America (Munich Re US), highlighted public perception gaps regarding the US legal system.

Featuring responses from over 2,000 adults, it sheds light on the public’s awareness of how plaintiff lawyers’ strategies, such as aggressive advertising and third-party litigation financing, indirectly contribute to increased household expenses through “tort tax”.

The results reveal that 65% of Americans are unaware that each household bears an estimated annual “tort tax” cost of $3,621, influencing the prices of daily commodities like groceries and gasoline.

Additionally, 59% of respondents are not informed about the involvement of third parties, such as hedge funds or foreign entities, in litigation financing, seeking profits from the legal disputes of others without any direct connection to the case.

Nearly half (47%) of those surveyed are also oblivious to the fact that a significant portion of a lawsuit’s financial award often goes to the plaintiff’s lawyer, rather than the claimant.

Majority support full transparency and disclosure

An overwhelming majority (88%) of participants expressed support for mandatory full transparency and disclosure concerning all parties financially invested in civil lawsuits. Similarly, 86% of Americans agreed that legislative actions at both state and federal levels were necessary to curb legal system abuses, including undisclosed third-party funding and misleading plaintiff lawyer advertisements, to restore equilibrium within the civil justice framework.

A 2021 study by the Perryman Group underscored the economic consequences of legal system misuse, citing an annual loss of 4.24 million jobs, $429.35 billion in output, and over $110 billion in government revenues across federal, state, and local levels.

Maura Freiwald, head of casualty at Munich Re US, emphasized the survey’s role in heightening public awareness about the detrimental effects of legal system exploitation.

“This survey is an important step in raising awareness and educating the public about the tactics being used and the negative impacts of legal system abuse. This is not going away anytime soon,” Freiwald said. “If left unchecked, it will lead to higher insurance costs, financial strain on insurers, depletion of municipal resources, and disincentives for businesses to take risks.”

Echoing Freiwald’s sentiment, Stef Zielezienski, executive vice president and chief legal officer at APCIA, highlighted the need for legislative intervention to tackle what was described as the rampant exploitation of the legal system.

“The survey results are clear – the majority of Americans agree state and federal lawmakers need to address these abuses of the legal system. Common-sense reforms, including full transparency and disclosure of all parties with an interest in the outcome of civil litigation, are needed to restore balance to the civil justice system,” Zielezienski said.

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