To assist companies seeking to settle consumer class-action lawsuits gain greater certainty over their potential payouts, insurance broker Marsh has launched a specialty insurance product that transfers a company’s known settlement exposure to the insurance market.
Created by Class Action Managing General Agency and sold exclusively through Marsh, Class-Action Settlement Insurance (CASI) offers up to $100 million in coverage for the monetary portion of an insured’s consumer class-action settlement. After establishing a settlement fund, a company pays a fixed premium and transfers the uncertainty and volatility of the ultimate payout to a global insurer.
According to NERA Economic Consulting, part of the Oliver Wyman Group, a wholly owned subsidiary of Marsh & McLennan Companies, the number of consumer class-action settlements more than doubled from 2010 to 2013, with total settlement values ranging from between $1.7 billion in 2010 to $9.7 billion in 2012. Approximately three-fourths of these class-action settlements included monetary payouts to class members.
NERA found that the average settlement value over the four-year period, which was influenced by several large settlements, was $56.5 million, while the median value over the same period was $9 million.
With the addition of social media, claims aggregators, and online settlement promotion sites, companies seeking to settle consumer class-action litigation cannot accurately predict their potential settlement exposure and/or expected payout, the company said in a statement. With CASI, companies can insure their multimillion dollar settlement liability, limiting their exposure by fixing their loss to the amount paid in premium.
Furthermore, Marsh said, because the entire monetary settlement amount is insured, companies can design a large enough settlement to obtain court approval without taking on the additional risk and exposure from claimants, which should result in a more expeditious path to settlement for all parties involved.
CASI is underwritten by an A-rated carrier.
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