Crystal balls and litigation catastrophe odds

Thinktank Rand is working with Risk Management Solutions, a risk-modeling firm based in Newark, California to see whether litigation filings and insurance records can help predict the odds of mass litigation striking a company or industry.

According to the article in BusinessWeek, April 10, 2006 at 14, this effort to model major litigation – “L-Cats”, liability catastrophes – considers lawsuits to be major where the financial exposure is above $100 million (See my post of Dec. 4, 2005 about catastrophe modeling.). It was not clear from the short item whether an individual lawsuit must exceed that threshold, or whether all the lawsuits pending of a certain type might in the aggregate exceed that threshold and be studied. I suspect the former.

The results of L-Cat research will help insurance companies write coverage and law departments plan their defenses.

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