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Why Do Insurers Spend Money Fighting Claims Rather Than Paying Them?

A recent study by Prof. Jeffrey O’Connell of the University of Virginia School of Law and Patricia Born of California State University-Northridge analyzed settlements of personal injury and defective product cases against companies between 1988 and 2004 in Texas and Florida. Their study was published recently in the Columbia Business Law Review.

The report tested an “early offers” system, which encourages businesses to promptly pay injured parties their essential losses: out-of-pocket medical expenses and wage loss.

Such a plan would reduce claim costs for general liability claims – by an average of $114,000 per claim and by $670,000 per claim for severe injuries.

The savings come mainly from eliminating non-economic damages, such as pain and suffering, and from reducing legal fees.

The early offers regime is projected to save an average of $32,000 in legal expenses in all cases, and about $211,000 in severe injury cases [read more]

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Geoff Sharp

Geoff Sharp is a Commercial Mediator from Wellington, New Zealand. Geoff works in the Asia Pacific region, including New Zealand, Malaysia, Thailand and Pacific Islands. He is a mediator resolving business problems. He is a fellow of the International Academy of Mediators and mediates complex and hotly debated litigation covering… MORE >

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