GENERAL AND PRODUCTS LIABILITY LAW IN THE USA 1 Michael Rieger-Goroncy Beazley Group London Tel: Mobile:

In 16 states the number of filings went up from in 1975 to in 2000 But: The population grow father than this, in fact, the number of filings per residents decreased by 8% The claimant bears no risk of paying legal expenses Class actions Jury trials Claimants normally have no social security protection Punitive and exemplary damages Tort Law in the USA (responsabilidad por riesgo creado) 2

The frequency of medical malpractice liability claims in the USA has stabilized and is growing at a 1% annual rate. The severity of medical malpractice liability claims in the USA grows at a 4% annual rate. For 2012 the annual loss rate per occupied hospital bed is projected to be 3,540 USD and 6,750 USD per employed physician. Loss rates are projected to increase at a 5% annual rate. On about 50% of all suits (incl trials) hospitals do not pay any indemnity Non-suited claims close significantly faster. 80% are reported within 12months and closed within two years of being reported. Projected 2012 Loss Rate in Florida: 7,580 USD, in Indiana 1,040 USD per occupied bed! (American Society of Healthcare Risk Management (ASHRM), Oct 2011) Med Mal in the USA 3

Percentage of Households reacting to economic downturn Reducing entertainment expenses 65% Cancel vacation 55% Cancel or postpone preventive healthcare 28% Seeking lower auto insurance rate 28% Increase insurance deductible 15% Cancel renters insurance 14% Cancel auto insurance 9% Cancel home owners insurance 5% Insurance Research Council, April 2009

Percentage of uninsured motorists in 2009 yellow: 16 – 28%, orange 14 – 15%, green 10 – 13% and blue 0 – 9%

The “ “Open Court” System Virtually any person or company can file a lawsuit in the U.S. and the E.U. Their courts’ doors are generally wide open The validity or merit of a claim is not a prerequisite to the filing of a lawsuit

American Courts Use Procedural Justice Philosophy – cases should be decided by what the facts reveal, not by what the parties can conceal In most situations, a party which is sued must participate in fact finding (“discovery”), even if the claim is meritless and even if the party being sued is of the view that the court has no jurisdiction over it.

American Courts Use Procedural Justice Discovery includes: (i)Document Production  More is seen as better, and discovery is allowed even if the requested material is not directly relevant (ii)Interrogatories – Questions between litigants (iii)Depositions – Personal interviews provide sworn testimony

Litigation Problems A party’s refusal or simple failure to disclose information results in negative court reaction.  Entry of a default judgment in favor of the plaintiff  Monetary sanctions against the defendant  Appointment of a discovery master  Loss of credibility when presenting meritorious positions  Credibility loss can have far reaching implications

Increasing Recalls Lead to Greater Regulation and Lawsuits Several high profile recalls have increased suspicion about imported products  ⅔ of product recalls in the United States relate to imported products;  On average, there has been a 25% annual increase in recalls  Plan of the U.S. Consumer Product Safety Commission (CPSC) is to increase surveillance and enforcement, along with post-recall verification  General presumption – If you made it, you are responsible

U.S. Government Agencies Charged With Addressing Safer Imports U.S. Government agencies regulating imported products CPSC (Agreements with foreign nations and Import Surveillance Division) Food and Drug Administration (FDA) National Highway Transportation Safety Administration (NHTSA) Occupational Safety and Health Administration (OSHA) Interagency Working Group on Import Safety

Litigation Can Be Used as a Weapon and as a Business Strategy Costs of litigation are oftentimes used as leverage to force a defendant to settle, notwithstanding that the defendant does not believe it did anything wrong Settlements are frequently based on nuisance value  it can be cheaper to pay money to a plaintiff to settle rather than to pay lawyers to defend you Outside the U.S., many countries have “loser pay” rules to discourage frivolous or questionable lawsuits

Lack of Trust in Lawyers and Judges "[t]he class action system was never intended to be a casino for lawyers to obtain jackpot attorney's fees. The class action system was created with the best of intentions- to protect consumers by allowing individuals with small, similar claims to be joined in one lawsuit. But unfortunately, it has been turned on its head, taking money from those it was meant to protect- consumers and shareholders- and making lawyers filthy rich.” (Barack Obama in 2010).

Lack of Trust in Lawyers and Judges In the U.S., many judges are elected and as such, are sensitive to political and social pressures

Class Actions/Mass Actions Many cases arising out of product recalls are brought as class actions or mass actions

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