Liability Insurance Squeeze

December 6, 1985

Report Outline
Signs of Crisis
Who's to Blame?
Reform Proposals
Special Focus

Signs of Crisis

Professional Malpractice Suits on the Rise

Trying to break into the school from the roof, the 18-year-old youth fell through a skylight. Paralyzed by the fall, the would-be burglar sued the school. Rather than risk the possibility that a jury might impose an even higher payment, the Redding, Calif., school's insurance company paid the youth $260,000 plus $1,500 a month for life in an out-of-court settlement.

That award is but one example of a growing number of liability suits being brought successfully against professionals, municipalities and businesses all over the country. And while the case may appear to many to be an egregious abuse of justice, both the attribution of fault and the size of the award are no longer exceptional. As a result, the property/casualty insurance industry has sustained record losses. And doctors, other professionals and businesses are changing the way they do business or abandoning practices and products that pose too great a risk of landing them in court on charges of negligence.

For those who want the protection of liability insurance, however, it is getting harder to obtain. To compensate for their losses, insurance companies are raising the premiums they charge businesses and individuals to protect them from financial ruin. In some cases the increases have been so large that clients have opted to “go bare” and assume all risks alone. Others cannot obtain malpractice or product liability insurance at any price. Insurers are no longer willing to shoulder the risks of certain professionals and businesses even though many of their clients have never been sued.

ISSUE TRACKER for Related Reports
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