The effects of state legal environments on automobile insurance claims and compensation: Evidence from the Royal Globe doctrine

Brian Richman and Sharon Tennyson

Risk Management and Insurance Review, 2022, vol. 25, issue 4, 491-513

Abstract: This paper uses the historic 1979 California Supreme Court decision in Royal Globe Insurance Company v. Superior Court to examine the effects of expanding insurers' legal liability in claims disputes. The decision expanded insurers' good‐faith duty to settle liability claims to the injured third‐party claimant, extending the set of eligible plaintiffs to those with the greatest incentive to sue. The legal environment created by this decision changed payoffs for insurers and claimants in third‐party claims negotiations with potential effects for insurance claiming and compensation. Using data on automobile bodily injury liability claims, we make use of the quasi‐experimental nature of this decision to examine these effects. We find that Royal Globe led to larger claimed amounts of loss and higher claim payments for claims involving only minor strain injuries. Such claims were also more likely to involve attorney representation and were less likely to be closely examined by insurers after Royal Globe.

Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/rmir.12232

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:rmgtin:v:25:y:2022:i:4:p:491-513

Access Statistics for this article

Risk Management and Insurance Review is currently edited by Mary A. Weiss

More articles in Risk Management and Insurance Review from American Risk and Insurance Association
Bibliographic data for series maintained by Wiley Content Delivery ().