Since 2002, the average number of separate lawsuits associated with a single securities-related event — such as the collapse of Enron — has jumped 33 percent, and suits against underwriters, banks, brokers and law firms have skyrocketed, according to a new database unveiled today by Advisen, Ltd., the leading provider of information, analytics and benchmarking for the commercial insurance industry.
Advisen’s Master Significant Case and Action Database (MSCAD) contains a comprehensive compilation of information on more than 3,500 Management Liability lawsuits dating to 1987, and is the commercial insurance industry’s first database to track “clash” loss events. A clash event occurs when a single issue triggers claims under multiple insurance policies.
Management liability lines — a category that includes various coverages for companies and their directors and officers, ERISA fiduciaries and professionals — have seen clash events become increasingly commonplace. Loss of shareholder value resulting from fraud or mismanagement can result in multiple claims under D&O, fiduciary liability, and various professional liability policies.
“Clash situations have become a serious concern to underwriters who provide liability coverage to service firms such as banks and lawyers, which may be swept up in the wake of headline grabbing scandals like Enron and WorldCom,” said David K. Bradford, editor in chief at Advisen and the author of the Advisen QuickNote that announced the new database. “For example, there were 24 separate lawsuits that resulted from the Enron scandal, spreading out like tentacles, touching auditors, bankers and a host of other professional service firms. The data in MSCAD gives underwriters previously unavailable information to help quantify their exposure to these events.”
Clash events are relatively common in some parts of the insurance business — for example two automobiles insured by the same company involved in the same accident. More complex clash events can involve several policies owned by one insured, or a number of different types of policies owned by two or more unrelated insureds, all underwritten by the same insurance company. Insurance companies buy specialized reinsurance coverage for clash events, however, it’s difficult for an insurer to determine how much clash protection to buy, and some reinsurers shy away from clash coverage since large events are difficult to predict and price.
Advisen Ltd. provides insight into key commercial insurance and risk management decisions made by carriers, brokers, risk managers and other insurance professionals. Advisen’s ASP platform incorporates real-time analytics and research on over 1.5 million companies, 70 industries and over 200,000 actual program transactions. The Advisen platform includes benchmarking, submission templates, application work-ups, insurance program management, policy & law comparisons, loss & exposure analysis, news, corporate governance, financial metrics and large loss data. Over 25,000 commercial insurance professionals access data from Advisen everyday. Visit www.advisen.com or call 212-897-4800.