How the Pandemic Related Court Backlog Benefits the Insurance Industry

July 27, 2023

By: Chris Beckett

Beckett Personal Injury Office's Scales of Justice's article image

The wheels of justice have always turned slowly. This is especially so with civil cases, such as personal injury lawsuits, due to the fact that our Court system, rightly or wrongly, prioritizes criminal and family matters over civil cases when it comes to scheduling trials.

The pandemic compounded this problem.

It used to take, on average, 3 – 5 years for a civil case to work its way through the Court system. Pandemic related Court backlogs have increased this by 2 years (to 5 – 7 years).

That means insurance companies are holding onto money that they will ultimately pay out to injured people for an additional 2 years.

Delay benefits the insurance companies because they are required to pay very little, if any, interest on the money that they eventually pay out to injured people. They, for example, are only obligated to pay 1.3% interest on damages for pain and suffering and no interest on most our other damages as they typically related to future losses such as income loss or medical care that are not subject to interest.

Meanwhile, the insurance companies invest these funds while cases work through the Court system and receive rates of return on their investment which are significantly higher.

Here is a simple example. Assume an injured person has a claim worth $1,000,000.00. The insurance company can, based on today’s interest rates, conservatively earn at least 5% on that money with little to no risk at all. A delay in paying out that money by an additional 2 years allows the insurance company to make an extra $100,000.00 in interest on top of the money they were already making during the pre-pandemic period of delay which, based on a typical delay of 3 – 5 years was already anywhere between $150,000.00 - $250,000.00.

This means that, from the insurance companies’ perspective, delay saves them money in terms of the real dollars that they pay out.

The insurance companies and their lawyers are well aware of this and use it to their advantage by taking steps to slow down the progress of a case to increase the period of delay and, at the same time, offering less money to victims to settle their cases early and “justifying” doing so on the basis of how long it will take for their cases to get to a trial.

There are no easy solutions to this problem. However, an experienced personal injury lawyer can implement some strategies that shorten the delay in moving a case forward and not allow the insurance companies to use delay as a means to force victims to accept a low ball settlement in order to avoid long delays.

If you have a personal injury case and are concerned that the insurance company is using delay as a tactic; Beckett may be able to help.

Published on July 27, 2023

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