Will COVID-19 Mitigate Social Inflation?

Social inflation is a bit of a buzzword, used to describe a rising cost in insurance claims. Some say this is sour grapes from insurers who don’t want to pay out on pandemic-related policies. Others insist that social inflation is a real problem that, if left unchecked, can cause damage to the very concept of insurance.

Insurance Business Magazine reveals that the delays caused by Coronavirus lockdown measures have led to an increase in early settlements. Attorney Ellen Greiper states that since May, she’s received a spike in calls from opposing counsel agreeing to offers they’d previously dismissed. She suggests that when plaintiffs realize that they may not see a trial date for a year or more, the idea of settling seems more attractive.  

Plaintiffs may also realize that our world has changed in a way that may not allow for huge awards. When jurors have been laid off or their company shuts down, they may not be disposed toward giving multi-million-dollar awards even when the plaintiff is in the right.

Some courts are beginning to open for specific matters. Overall though, the conditions in a courtroom are not conducive to social distancing. The same is true for depositions, strategy planning, and more. When clients are in dire financial straits, less money now can mean a lot more than more money a few years down the road.

Litigation funders are weighing their options with this new dynamic in mind. Is it better to settle early, cutting down on the expenses associated with trial? Or does it make more sense to wait and go for a bigger award when the courts finally reopen? Obviously, the answer will vary from one case to the next. What we do know is that things aren’t expected to return to pre-COVID conditions any time soon—if ever.