Monday, June 24, 2019

Rant: One of the benefits of liability insurance is that it encourages safe practices

In this Pacific Standard article writer Jack Denton  complains that the insurance industry will bring about the downfall of football.  Why?  Because "with the cost of concussion and CTE [a degenerative brain disease caused by concussions] lawsuits mounting, the NFL has been unable to find a company to provide general-liability insurance to cover head injuries, and struggled mightily to find workers' compensation coverage -- only securing it at tremendous cost."

Not only that, but insurers don't want to provide coverage to football helmet manufacturers and youth leagues.

Why do insurers not want to insure football teams and the related industries?  Because the cost benefit analysis done by an industry that specializes in cost benefit analyses leads to the conclusion that the cost of the injuries caused by football is too high for the premiums it can charge.

The obvious takeaway for me is that . . . football, in its current incarnation, is too dangerous.

The article comes to a different conclusion:  "Insurance coverage" (not the dangers inherent in the sport) "is arguably the biggest threat to football."

Why?  Because the evil insurance industry seeks "to significantly reshape Americans' behavior in the interest of their bottom line."  How dare it?  Apparently insurers should be required to insure all behaviors, regardless of the risk . . . And presumably do so with affordable premiums.  But also manage to not go out of business.

If the football industry can't get insurance because the sport is so dangerous that it's not a good risk, and the industry does not want to make the sport safer for its players, it can choose to self-insure.  But that's unlikely, for the same reason that it can't get coverage:   if the insurance industry expects to lose money paying out concussion claims then the football industry certainly doesn't want to put its own profits at risk.

Self-insurance is not the solution suggested by the article.  Instead, the players -- actually, the parents of youth league players -- should sign waivers so that if they are injured they can't recover from anyone!

If you are a regular reader of this blog, you know how much I hate liability waivers.  You also know that I understand the need for them in some circumstances.  As I have said many times, if I sign my kid up for a gymnastics program, I don't mind signing a waiver of liability stating that I won't sue if she falls off a balance beam.  But I do not want to sign a waiver saying that I won't sue if a balance beam falls on her.  Falling off a balance beam is a risk of participating in gymnastics, not a feature of it.  Concussions seem to be a feature of football. 

The article includes this old chestnut about an alcohol exclusion in fraternity liability policies:  "The very fact that a young man finds himself in need of insurance coverage is often grounds for denying it to him."

That sentiment demonstrates a complete misunderstanding of the purpose of insurance and how policies work.  If the fraternity member slipped on a loose brick on the steps leading to the frat house, his injuries would be covered.  If he started a fire while trying to make French toast in the frat house kitchen, the property damage would be covered.  The fact that the insurance excludes coverage for alcohol-induced injuries does not mean that the policy does not protect him.

The article ends with a complaint that insurers should not take over regulatory functions.  "Who is protected by these decisions?  It's the insurance companies."  Or, maybe, it's the players who never get a concussion because the sport is made safer in response to a business decision by insurers.

Friday, June 21, 2019

Ransomware Insurance

Ransomware "kidnaps" data on a computer system and holds it hostage until the owner of the system pays a ransom.  Slate has an interesting article on the pros and (in Slate's view, mostly) cons of insurance coverage for ransomware.