APCIA CLO: Legal system abuse inflates insurance costs, costing U.S. economy $529B

Stef Zielezienski, chief legal officer of the American Property Casualty Insurance Association (APCIA), said that a survey conducted by APCIA and Munich Re US revealed plaintiff lawyer tactics inflate insurance costs, costing the U.S. economy an estimated $529 billion. These comments were made in a press release on February 4.

"The misuse of the legal system fueled by plaintiff lawyer tactics," said Zielezienski, Executive Vice President and Chief Legal Officer. "Reforms are needed to reduce consumer costs and improve insurance availability and affordability. The majority of Americans agree that these tactics are driving up insurance costs."

The 2024 survey indicated that 69% of Americans believe third-party litigation funding (TPLF) and jury anchoring contribute to rising insurance costs. Furthermore, 66% of respondents said these tactics increase prices on everyday consumer goods, while 86% supported legal system reforms to address these issues. The survey also found that a significant portion of respondents lacked awareness about these legal practices, with 75% unfamiliar with jury anchoring and 70% not recognizing TPLF.

According to the Institute for Legal Reform, misleading legal advertising, jury anchoring, and the "reptile theory" are tactics used to influence jurors and inflate legal awards. Misleading advertisements exaggerate lawsuit payouts, creating false expectations and encouraging more litigation. Jury anchoring involves introducing an extreme dollar amount as a reference point, pressuring jurors to award higher damages. The "reptile theory" plays on jurors' fears, prompting them to deliver large verdicts to "send a message."

Baker Botts reports that TPLF allows outside investors to finance lawsuits in exchange for a share of the winnings, raising concerns over transparency and control of cases. In California, the case Taction Tech v. Apple ruled that some TPLF documents were relevant while others were protected under privilege. Meanwhile, Senate Bill 581 aimed at regulating TPLF failed in February 2024.

California has some of the highest car insurance rates in the U.S., with full coverage averaging $3,066 per year ($255/month) and minimum coverage at $760 per year ($63/month). These rates exceed national averages of $2,670 for full coverage and $773 for minimum coverage. Factors such as location, driving record, and vehicle type can influence individual rates according to Bankrate.

Zielezienski's LinkedIn profile indicates he has over 25 years of experience in insurance law. He earned a J.D. from Columbia Law School and a B.A. in Political Science from Columbia University, graduating summa cum laude.