Insurance Blog

The number of federal securities class action filings continued to decline in the first half of 2010 due in part to a decrease in credit crisis-related litigation, according to two just-released reports.
A report prepared by the Stanford Law School Securities Class Action Clearinghouse and Cornerstone Research found a total of 71 federal securities class actions were filed in the first half of 2010, a 15.5 percent decline from the 84 filings in each half of 2009.
Credit crisis-related litigation accounted for only eight filings in the first half of 2010, compared with 37 filings in the first half of 2009 and 16 filings in the second half of 2009.
Stanford law school professor Joseph Grundfest said:
The securities fraud litigation wave stimulated by the credit crisis now appears to be history. We have an inventory of cases waiting to be dismissed, settled, or tried, but to borrow a phrase from the current Gulf […]

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An op-ed by author Eric Schlosser in Saturday’s New York Times focused on the issue of food-borne illness and called on the U.S. Senate to pass food safety legislation.
Estimates from the Centers for Disease Control and Prevention (CDC) quoted by Schlosser indicate the scale of the problem:
Every day, about 200,000 Americans are sickened by contaminated food. Every year, about 325,000 are hospitalized by a food-borne illness. And the number who are killed annually by something they ate is roughly the same as the number of Americans who’ve been killed in Iraq and Afghanistan since 2003.”

Schlosser went on to observe that while the elderly and people with compromised immune systems face an elevated risk from food borne pathogens like listeria, campylobacter and salmonella, by far the most vulnerable group are children under the age of four.
The economic cost of the problem is also huge. A recent study sponsored by Pew Charitable […]

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A Los Angeles Times blog post reports that marijuana lollipops were for sale on the Lakers parade route yesterday.
Apparently a food truck, Weed World Candies.com, was handing out the lollipops for free to customers that had a prescription card allowing them to purchase marijuana.
In addition to the orange and blue marijuana lollipops, the truck carried a variety of marijuana brands, according to the LA Times.
California became the first state to approve medical marijuana in 1996 and this November voters will decide whether to legalize marijuana even without a medical prescription. The liberalization of state marijuana laws is an issue that insurers are monitoring.
A BestWeek article by Meg Green via insurancenewsnet.com reports that to-date 14 states have legalized marijuana for medical use, while another 10 states have medical marijuana initiatives on the ballot this year and insurers are playing a key role in this emerging market. BestWeek says:
Billions of dollars are […]

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A Los Angeles Times blog post reports that marijuana lollipops were for sale on the Lakers parade route yesterday.
Apparently a food truck, Weed World Candies.com, was handing out the lollipops for free to customers that had a prescription card allowing them to purchase marijuana.
In addition to the orange and blue marijuana lollipops, the truck carried a variety of marijuana brands, according to the LA Times.
California became the first state to approve medical marijuana in 1996 and this November voters will decide whether to legalize marijuana even without a medical prescription. The liberalization of state marijuana laws is an issue that insurers are monitoring.
A BestWeek article by Meg Green via insurancenewsnet.com reports that to-date 14 states have legalized marijuana for medical use, while another 10 states have medical marijuana initiatives on the ballot this year and insurers are playing a key role in this emerging market. BestWeek says:
Billions of dollars are […]

Read the rest of this great post here

The eruption of the Eyjafjallajökull volcano in Iceland has left the aviation industry reeling, but from the perspective of the insurance markets, the position is relatively clear, according to Aon’s May 2010 Airline Insurance Market News.
Aon notes that successful claims against standard airline liability insurance policies due to delays as a result of the volcanic eruption in Iceland are unlikely. The main reason for this is that this is a natural event and there has not been any actual damage to aircraft or property at this stage.
The picture is similar from the business interruption point of view. Stephen Cross, CEO, Aon Global Risk Consulting, says:
Typically, business interruption (BI) policies will most likely not be responding to the disruption to airspace caused by the volcanic ash. BI policies usually only kick in when there is physical damage. If ash falls to earth and lands on a business’ premises and causes damage, […]

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Concerns are rising about the potential environmental impact after the sinking of the Deepwater Horizon oil rig in the Gulf of Mexico about 50 miles off the coast of Louisiana. Eleven workers are feared dead and 17 others were injured following an explosion and fire that ripped through the rig late Tuesday. The rig, which is owned by offshore drilling contractor Transocean Ltd, was under contract to oil giant BP, according to media reports. Check out a Guy Carpenter risk report for more on this story. An article in the New York Times notes that the potential for environmental disaster from the spill would be greatest if the oil were to reach the Louisiana coast. BP was reported to be dispatching a flotilla of more than 30 vessels capable of skimming more than 170,000 barrels of oil a day to protect sea lanes and wildlife in the area of the sunken platform. […]

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Both the number and value of securities class action settlements increased in 2009 and as earlier predicted the upward trend is likely to continue in the year ahead as ongoing cases related to the financial crisis get resolved. An annual report by Cornerstone Research found that the value of cases settled in 2009 rose to $3.8 billion, an increase of more than 35 percent on 2008, while 103 settlements were approved in 2009, compared with 97 in 2008. Professor Joseph Grundfest, director of the Stanford Law School Securities Class Action Clearinghouse observed: “If a lawsuit is prosecuted by a large public pension fund, involves a parallel SEC proceeding, and alleges accounting violations, then defendants can expect to pay higher amounts.” He went on to note that because securities fraud litigation typically settles three to five years after the first complaint is filed, this year’s settlement activity reflects lawsuits brought roughly […]

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Warren Buffett’s annual letter to Berkshire Hathaway shareholders, released this past Saturday February 27, had some stern words for senior executives of financial institutions mired in the financial crisis and their reliance on insurance coverage. After stating that “a CEO must not delegate risk control” the Oracle of Omaha observed:
In my view a board of directors of a huge financial institution is derelict if it does not insist that its CEO bear full responsibility for risk control. If he’s incapable of handling that job, he should look for other employment. And if he fails at it – with the government thereupon required to step in with funds or guarantees – the financial consequences for him and his board should be severe.”

Buffet goes on to note that it has not been shareholders who have botched the operations of some of the country’s largest financial institutions, yet they have borne the burden, […]

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Connecticut Governor Jodi Rell has announced she is forming a panel of state agencies to identify the cause of the Kleen Energy power plant explosion in Middletown on Sunday, including any potential contributing factors such as construction problems, worker safety issues and licensing or permitting matters. A second panel of experts will review the findings and determine whether any changes should be made to Connecticut laws, building regulations and fire codes. The U.S. Chemical Safety Board has also deployed a team to the site of the explosion to investigate. Five workers were killed and at least a dozen injured in the explosion February 7 at the under-construction plant during testing. A February 10 article in the Hartford Courant by Matthew Sturdevant reports that the plant was insured for as much as $877 million under an “all risk” property policy underwritten by a group of international insurers, but the exact amount […]

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As auto manufacturer Toyota begins a publicity offensive in response to two separate but related recalls of around nine million autos worldwide, a couple of reports make the important point that the long-term damage to the company’s reputation could be much more costly than the immediate financial fallout. The recalls and sales stoppages announced by Toyota come after floor mat or accelerator pedal problems in a number of its vehicles and several crashes. An article in the Wall Street Journal observes that if Toyota’s problems escalate, it could cause irreparable damage to its brand identity, requiring the company to spend billions of dollars in advertising, sales incentives, legal bills and, possibly, interest payments. Meanwhile, an article in Business Insurance cites various analysts saying that the damage to Toyota’s reputation for quality and safety could be extremely costly. What action a business should take to limit this damage and the topic […]

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