Casualty Insurance: Troubled Industry

Archive Report

Causes of Insurers' Problems

Losses Attributed to Jury Awards, Inflation

Ajury in Brooklyn, N.Y., awarded singer Connie Francis $2.5-million as compensation for being raped in a Howard Johnson's motel room. In Alaska, a jury awarded $2-million to a man who had been shot in the ankle by a defectively designed revolver. In California, a jury awarded $4-million in punitive damages for a company's failure to pay a disputed auto liability insurance claim. A 19-year-old boy in California won $3-million after being paralyzed following a dive off a railroad trestle—a jury found the railroad company liable for not posting a “no driving” sign.

Those cases made headlines in 1976. They reflect a phenomenon that insurance companies call “social inflation,” the tendency of judges and juries to make larger ...

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