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Puzzles of the Tort Crisis, 48 Ohio State L.J. 497 (1987)


The tort crisis, sometimes called the insurance crisis, still afflicts us. Although today some commentators are claiming that the crisis has subsided, they are confusing the recent softening within some insurance lines with the long-term, perhaps permanent, changes in underlying insured activity that has made possible the softening. The playground equipment removed from public parks and the diving boards removed from city schools have not been replaced. The large numbers of products withdrawn from consumer markets remain withdrawn. The huge premium increases of early 1986 are largely intact, thus, necessitating continued price increases and sustaining diminished consumer demand for insured products and services. Many manufacturers, service-providers, and, especially, municipalities no longer openly complain about insurance unavailability because they have continued operations either without market insurance by self-insuring or by joining mutual insurance groups. This adjustment, however, no more than delays the impact of increased tort liability. These entities have chosen to put off paying advance premiums equal to expected liability only to suffer actual liability once it occurs.

The single most important phenomenon of the recent tort crisis, crucial for its diagnosis, is the withdrawal of the insurance industry from the business of insurance. The withdrawal of the industry is obvious with respect to those few insurance lines for which market insurers have refused to offer coverage altogether: nurse-midwives, day care, municipal liability. But the withdrawal from the insurance business is reflected in other, more widespread, changes in commercial casualty insurance offerings. In particular, the adoption of the claims-made as the basic commercial casualty policy, the general increase in retention (insured deductibles), the decline in levels of aggregate coverage, and the introduction of specific coverage exclusions reflect such changes.

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