AIA calls for support for US legal reforms

A senior member of the American Insurance Association (AIA) has called on risk managers to help reduce litigation and reform the US legal system.

Speaking at the Risk and Insurance Management Society's real estate management symposium in October, David Snyder, vice-president of the AIA, said that risk managers have a unique perspective to bring to the debate over the US lawsuit system.

He added that there had been a number of positive developments, such as the passage of federal class action reform legislation, state-based tort reform, and recent US Supreme Court decisions that helped to rein in punitive damages. When combined, he said, these could help to balance the scales of justice.

Mr Snyder said: "These reforms are well overdue. Since World War Two, the tort system has grown exponentially, fuelled by novel theories ably advocated and adopted in court rules and laws, progressive law schools which turned out record numbers of lawyers, and receptive juries often seeded by media stories."

According to Mr Snyder the $200bn lawsuit industry has evolved into one of the largest, fundamentally unregulated industries in the US, providing $40bn in profits to the practitioners. Over the next ten years the costs are expected to total between $3.6trn and $4.8trn, depending on future growth rates. Between 1950 and 2001 the gross domestic product of the US grew by 4000%. However, he said that tort costs had risen three times faster than this, growing by 12,000%.

Mr Snyder outlined five areas where risk managers can take an active part in minimising litigation and maximising the opportunities for legal reform. These included: monitoring changes in employee, customer and public expectations; preventing possible claims by good risk management policies; treating insurers and brokers as partners; making sure that interests are protected; and finally supporting efforts to address abuses in the litigation system by advocating state and federal law reforms.