In a market-based system, the ideal would be that you get what you pay for. German engines vs North Korean engines, one-ply vs two-ply toilet paper and so on. Unfortunately, with Covid-19 related litigation between policyholders and insurance companies, we are all paying many times as much as we should to settle the question of who gets paid what, if anything.
Unlike many problems, this set of issues created by the litigation industry could be reduced dramatically with standard, search-and-replace formulaic agreements between aggrieved policyholders and defence-to-the-last-executive-standing insurance companies.
There has been a spate of announcements that bar owners, hoteliers and other public-facing entities are joining together to file lawsuits against their insurers.
These are not really separate logical and legal arguments being crafted by skilled professionals with the dedication of master shoemakers. All the cases come down to the ambiguities in interpreting badly written business interruption insurance policies.
We, as in society and the real enterprises involved, will ideally get one precedent-setting case for the Covid-19 business insurance disputes, fully vetted on appeal, for each governing law area.
France, and jurisdictions following French law, may have a precedent established for Covid-19 business interruption insurance disputes relatively soon. One possible candidate for a precedent-setting case is the one recently brought against Axa in Paris.
London, New York, Stockholm and Tokyo are likely to have their own precedential Covid-19 cases.
So why not just wait for those key precedents to be set? The obstacle is fear of not being treated as well or as badly as everyone else. And guess who feeds that fear with the intensity of a White House aide? The legal profession and the litigation finance funds who offer to cover the upfront cost.
I am not pointing just to the plaintiff’s bar and its litigation funders. I believe the insurance company counsels and the line-of-business managers are symbiotic with the lawyers promoting their trade with policyholders.
This is not a personal vendetta. I wish only the best for the lawyers and the litigation funding people. I propose guaranteed, union-contract jobs with life tenure for them. For example, with an ageing population we will need more capable, sensitive people to empty bedpans. Under my proposal the lawyers can get time-and-a-half after only six hours of work in a day, a better deal than employers offer for bedpan cleaning.
In the same spirit, litigation finance professionals could be redeployed to inspect the safety provisions on fishing boats and in logging camps. This would be much more rewarding work than financing lawsuits with bond issues.
Then there is the necessary task of decontaminating meat packing plants. My proposal would see the investor relations people for the litigation trade apply their strong work ethic to this demanding job.
The rule of thumb used by the insurance industry is that legal bills and related transaction costs account for a third of contested losses. The subsidised work scheme I am proposing here would be a fraction of those charges, and would provide much more in the way of social benefits.
Even if litigation costs are just a quarter of insured losses, this scheme will be a better deal than litigating Covid-19 business interruption cases to death.
The magic documentation here is called a “tolling agreement”, made directly between the insurance companies and the business interruption claimants, that says both sides agree to stop the clock on claims litigation until there is a fully adjudicated case that can serve as an accepted precedent. There is well-tested “tolling agreement” language out in the public domain. The professional fees for finding it and doing a search-and-replace for particular cases should be low or nonexistent.
Then most of the surplus lawyers and litigation funders can be ushered into my proposed career placement programme.
Conversely, if a plaintiff’s or an insurance company’s lawyers fail to mention the possibility of tolling agreements, they automatically lose, and the expense is theirs. That provides an additional incentive to reduce the litigation burden on society.
Earl Nemser, a New York lawyer who has considered the equities of Covid-19 claims (though not the jobs scheme), says: “This should be about structuring the best economic result for everyone, without the suffering, discovery costs, and lost time resulting from litigation.”
Now I am just sitting back and waiting for my head-table invitation from the organisers of the litigation funders’ annual party.
