Have you ever been driving down the highway and noticed a mega billboard featuring a law firm’s promises for a “big settlement win?” If so, you’re already familiar with some of the tactics associated with legal system abuse.
Legal system abuse is when the nation’s judicial system is taken advantage of by plaintiffs and their legal teams. Things like frivolous lawsuits, excessive jury awards, and outside litigation financiers inflate settlement amounts, disrupting the courts and impacting businesses and even insurance providers.
Because of the ongoing possibility of legal system abuse, business owners and insurance providers have to be ready to work through changes in premiums, claims processing, and more. At Nesbit Agencies, we know that by helping our clients understand and prepare for legal system abuse, we aren’t just protecting their businesses; we’re improving a number of issues that are wreaking havoc on the entire insurance ecosystem.
Legal System Abuse And Its Business Impact
Legal system abuse didn’t start out with malicious intent. The tactics above were initially developed to help those with limited financial means fight for justice but were taken advantage of by bad actors. Now, legal system abuse is its own industry entirely.
When the courts aren’t working as they should, businesses and consumers end up facing higher claim costs, drawn-out legal battles, and exorbitant insurance premiums. As a business owner, if your business insurance provider disburses a large dollar amount as part of a settlement, your premiums will go up—sometimes significantly.
When businesses aren’t prepared to cover the rising costs of insurance, what is the go-to lever they have at their disposal? Hiking up the price of the goods or services they offer. Most consumers haven’t heard the term “legal system abuse,” but in the background, it’s impacting their wallets.
Only The Big Guys? Think Again.
The headline-making settlements that are seen in the news usually come from major corporations. Although smaller settlements might not grab attention in the same way, small business owners shouldn’t overlook the risk of legal system abuse.
For businesses, higher settlements paid by insurance providers mean higher premiums across the board. In some states, businesses are experiencing the following negative effects:
· Higher costs for liability and commercial auto insurance
· Additional time and money spent managing claims and legal issues
· Reduced coverage options in high-litigation industries
Even if your business has never been challenged in court or utilized insurance coverage to pay a settlement, you’re facing a crisis of higher insurance costs and possible coverage reductions. In order to get ahead of legal system abuse, insurance providers, businesses, and consumers must come together to make a change.
Today’s Reform Efforts
Led by Independent Insurance Agents & Brokers of America, many industry groups are working together to reform the legal system, protect insurance carriers, and support small businesses. Here’s what their proposed solutions are focused on:
· Increasing transparency related to third-party litigation funding. Once third-party funders get involved, settlements skyrocket, but the plaintiff gets less money in the end.
· Educating industry leaders and the general public on how legal system abuse drives up costs for everyone.
· Advocating for reasonable limits on damages and more just legal outcomes.
Taking Action: The Role Of Business Owners
If this problem seems removed from your day-to-day, you’re in good company. However, legal system abuse is impacting your business and your personal financial health. Here’s what you can do to pave the path for a better future:
1. Look at your liability coverage. Work with your insurance provider to understand if your coverage limits are enough for today’s legal landscape.
2. Protect yourself. Be sure to maintain detailed documentation, implement safety programs, and lean on contractual agreements when necessary.
3. Partner with the right provider. Your insurance agent can assist you in identifying potential risks, provide guidance on how to address said risks, and help you navigate the claims process. Insurance is complex, and you shouldn’t be navigating the industry without a trusted advisor.
Ultimately, we all want the same thing: to avoid legal disputes and settlement payouts. But in reality, legal risks are a part of doing business. By taking the time to understand legal system abuse, you’re already a few steps ahead of other business leaders. Reach out to the Nesbit team today to figure out how to stay ahead of legal system abuse.
