Peter A. Lefkin


In their article, Sources of the Crisis in Liability Insurance: An Economic Analysis, Richard Clarke, Frederick Warren-Boulton, David Smith, and Marilyn Simon ("the authors") of the Justice Department's Antitrust Division confirm the insurance industry's view that the limited federal antitrust exemption accorded to the industry under the McCarran- Ferguson Act did not contribute to the crisis in property-casualty insurance which occurred in 1985 and 1986. Indeed, their report dispels some of the myths that have been perpetuated by industry critics, who have attributed the blame for the liability crisis to (1) collusive activity by insurers, (2) price increases by inefficient and inept insurance companies damaged by their investment losses in the early 1980s, and (3) inadequate state insurance regulation. The authors substantiate the views of the Justice Department's Tort Policy Working Group, which in two earlier analyses concluded that these factors were unlikely to have caused the crisis. The Working Group concluded that changing patterns in our civil justice system are the principal cause of the liability crisis.

Included in

Law Commons