Defending the insurance companies

The events of July 27, 1990 came back to haunt us this past week as those businesses that suffered losses and had initiated legal action against their insurers were called upon to pay legal expenses of around $15,000 each in order to have their matters formally withdrawn and brought to an end. If we as a people learn anything from this most traumatic event in the country’s history is that insurance companies will not pay for losses whether directly or indirectly resulting from any attempted overthrow of a duly elected government. The army must stay in the barracks and no group however well intentioned should try to unseat the government by force as the consequences of any such action will only cause mayhem and destruction to innocent bystanders without the hope of compensation from the insurance industry. Whereas insurance companies have tried to introduce policies that provided some measure of coverage against events like an attempted coup, sabotage and terrorism they are no longer able to sell such coverage following the 9/11 events in the USA. The international insurance and reinsurance markets have now totally excluded all such losses and coverage is simply not available for land-based risks at the present time. This is not to say that sometime in the future this coverage might not once more be available but in the light of worldwide terrorism threats it is unlikely that coverage will be sold anytime soon.

Turning to the attempted coup, the recent adverse publicity in the media that insurance companies not only did they not compensate their insureds but they were now making demands for legal costs painted a picture of an industry that seemed heartless and without a touch of human kindness. Insurance companies are generally looked upon as having deep pockets and could afford to pay out monies but would rather use their might to effect settlements that disadvantage their customers. This is true in some cases but in the main reputable insurance companies try to ensure that claims are fairly settled. It was clear immediately following July 27, 1990 that what took place in the country would fall within the exclusion clause in the fire policy and therefore no claims would be entertained. However, much work was carried out to get a ballpark figure of the values involved and discussions were held with the main international reinsurance markets to see whether special consideration would be given to making some kind of payment to claimants especially as the country was in a period of structural adjustment.

The international community was satisfied that the event was excluded and that they did not have to pay and they rejected outright any concession as that would make for bad precedent. It was only after much dialogue that they even entertained the idea of paying their share of legal expenses to defend the legal actions in the Courts and even then a number of international reinsurers flatly refused to pay as they contended that the claims had no merit. It was to the credit of the insurance industry that the market could come together and map out a way that would ensure an efficient handling of the legal actions that were at one time in excess of 300. If this approach was not taken a nightmare situation might have arisen where some 300 matters would have to be litigated with the same facts being presented and the legal work would have multiplied to the detriment of claimants and insurers alike. Instead, only two matters went ahead while all others remained alive pending their determination. If the insurers lost, obviously all the claimants’ legal actions would be alive and they could then seek to obtain settlements from their insurers. From the very outset, the legal precedents and arguments were heavily weighted against the claimants and therefore their chances of winning were extremely slim. However, some claimants were persuaded by their attorneys that the insurers would lose and that they would have to pay and so they had expectations or delusion of success. The rulings of the High Court and the Court of Appeal were only an affirmation of what the insurance companies already knew and the claimants were the losers. The insurance companies not only paid the costs which were substantial to defend the two cases but also the costs involved in defending every writ that had been filed against them. The insurance industry will only receive a mere fraction of the monies spent in defending the two decided cases since the winning party never receives his outlay in legal expenses.

If litigants are made aware from the outset that legal expenses are never fully recoverable then it is possible that there will be fewer legal actions. The Court is an expensive proposition and one should only resort to the Courts when all else fails. The only winners in this whole tragedy are the lawyers!! Lawyers on both sides — those who acted for the Plaintiffs and those who acted on behalf of the insurance companies. They were all paid and they would say that they deserve to be paid for their time and expertise but in the end the Plaintiffs received no compensation for their losses and the insurance companies had to fork out monies when with the passage of time they would have had difficulty in recovering from their reinsurers —some of whom are no longer in business. And that is the real tragedy — no winners except the lawyers. The recent flare-up over the costs sought by the insurance companies to finally bring closure to all the legal actions suggests that the insurance companies are rubbing “salt in the wound” and gleefully wringing their hands. Nothing is further from the truth! All the insurance industry wants to see is an end and the withdrawal of the legal actions so that the slate would be wiped clean and expunged from the Court List. In order for that to take place, further legal work has to done and here is where the difficulty lies. It is not the insurance companies that will receive this money but rather the legal firm/firms involved and in fact only a small amount will ever reach the insurance companies. It is the lawyers who will earn much of these fees — and they will argue that that is the system!!!

Indeed, the insurance industry is quite sympathetic to all those who have in some way suffered, especially the businesses and workers some of whom have lost their jobs. All the insurance industry wants is to bring an end to this unfortunate event in the country’s history and it does not want to incur any further legal costs in doing so. Its mandate to the attorneys is to negotiate reasonable costs where the insurance companies can recover some part of its outlay on the individual actions and that they should moderate their charges so that an agreement can be reached and the matters closed. The industry is taking a flexible position but essentially it is a matter between attorneys on both sides to arrive at a resolution. The insurance companies have received bad publicity but they do not deserve the bad reporting in this instance. The events of 1990 have caused enormous hardship on many businesses some of which are gone forever. The world is a much different place today and the international community is less willing to come to your assistance in cases of your own making — an event that should never have happened. Let us resolve that such an event will never again happen as we will all be losers.

email: daquing@cablenett.net