This driver of legal system abuse is an arrangement where a funder that is not a party to a lawsuit provides funding to a plaintiff or law firm in exchange for an interest in the potential award in a lawsuit. Plaintiffs do not have to repay the funding if their lawsuit is not successful.
Strategies to mitigate legal system abuse
Munich Re is taking a proactive approach to understand and address the issue of legal system abuse.
The following are strategies clients can implement to help mitigate this risk:
- Require discovery of TPLF arrangements
- Enhance defense case management to offer a more effective counter to the plaintiffs’ bar
- Ensure risk management practices are optimized
- Review insurance contracts to certify appropriate coverage
- Proactively manage claims, especially in long-tail business
- Prepare for renewals to demonstrate exposures, risk management, and propensity to losses
- Prepare defendants adequately
- Evaluate higher deductibles, higher retentions, or reduced insurance policy limits
- Use data, analytics, and technology to improve exposure monitoring and analysis to identify trends early
- Analyze developments from a cross-functional perspective, pulling expertise from claims, legal, underwriting, and data analytics departments to understand and respond quickly
Munich Reinsurance America Inc. is uniquely positioned to take a broad approach using a cross-functional team with expertise in claims, legal, underwriting, actuarial, and data analytics to work with clients and brokers to better understand their business and address the changing risk landscape.