Healthcare and life sciences organizations recognize that social inflation is here to stay
Healthcare and life sciences executives are feeling more resilient in the face of today's economic challenges, our survey data has revealed, and this sense of resilience is reflected in the industry’s response to social inflation (the rising costs of insurance claims resulting from things like increasing litigation, more plaintiff-friendly legal decisions, and larger compensatory jury awards). Where once hospital systems were focused on combatting the trend, they have now largely accepted it as a reality and have shifted to planning for its impact.
Clients are weighing up and balancing the decision of whether to take cases to trial. You lose a lot of control when you go in front of jurors. However, not everything should be settled. For cases that clients feel strongly about, it sets a good precedent to protect healthcare that’s done right.
Social inflation initially accelerated during the pandemic as healthcare organizations expanded through mergers and acquisitions, fostering anti-corporate feelings. This growth diminished consumers’ sense of connection to local medical offices, a sentiment that was reflected in jury verdicts against these corporations. Consequently, we saw a shift towards larger financial settlements, with billion-dollar awards becoming increasingly common.
In acknowledgment of this intensified anti-corporate sentiment, healthcare organizations have moved from questioning social inflation's persistence to developing strategies to mitigate its impact. This signifies a shift towards accepting social inflation as a permanent change within the healthcare sector.
Healthcare organizations’ growing acceptance of social inflation has led them to become increasingly cautious about legal risks, fearing nuclear verdicts. In response, we guide policyholders to focus on discerning reasonable from unreasonable legal risks. We generally advise organizations to go to trial today only under two specific conditions: 1) when there is a high probability of winning the case, or 2) if the plantiff’s attorney is being excessively unreasonable.
Managing the way cases are tried has also shifted. Traditionally, defense attorneys avoided suggesting settlement figures to prevent influencing jurors toward simple resolutions. However, with inflated demands leaving jurors to choose between nothing or an astronomical amount, the defense strategy has shifted towards naming a more reasonable figure, in the hope of arriving at a final amount that reflects the claim's actual value.
Balancing dispute resolution is crucial, especially for healthcare organizations with strong defenses against wrongful accusations. Opting for trial in such cases is key to protecting an organization’s reputation and deterring unwarranted litigation, which could otherwise increase and fuel the issue of nuclear verdicts.
When disputes do go to trial, the defense can take a page from their opponents’ strategy book. Plaintiffs' attorneys often collaborate, sharing strategies to strengthen their cases. Similarly, it's essential for the defense to unite, exchanging successful tactics to ensure a fair and balanced legal battle.
How we can help
Resilience in the face of social inflation requires collaboration
Insurance companies and policyholders are increasingly joining forces to combat the effects of social inflation. This collaboration is crucial, as it allows for the pooling of resources. Individual hospitals have valuable local knowledge that insurers might lack, while insurers bring a broader perspective, drawing from state, regional, and national experiences. Moreover, insurers have dealt with numerous similar cases and are familiar with many plaintiffs' attorneys. They can provide insights on case strategies, jury perceptions, and the optimal timing for involving external experts.
The information set forth in this communication is intended as general risk management information. Beazley does not render legal services or advice. It should not be construed or relied upon as legal advice and is not intended as a substitute for consultation with counsel. Although reasonable care has been taken in preparing the information set forth in this communication, Beazley accepts no responsibility for any errors it may contain or for any losses allegedly attributable to this information.
Clients are weighing up and balancing the decision of whether to take cases to trial. You lose a lot of control when you go in front of jurors. However, not everything should be settled. For cases that clients feel strongly about, it sets a good precedent to protect healthcare that’s done right.
