Insurance Structure and Class-Action Settlements

24 Pages Posted: 12 Apr 2019

See all articles by Bharat Sarath

Bharat Sarath

Rutgers, The State University of New Jersey - Accounting

James M. McCarrick

affiliation not provided to SSRN

Date Written: March 19, 2019

Abstract

This paper examines an aspect of Security Class Action dynamics that has not been previously analyzed using game theory: the effects of fragmentation of interests across the insured defendant and potentially multiple-insurers who are all subject to losses under the class action. Incentive conflicts within the defense coalition not only affects the settlements reached but can result in different level of settlements in cases which are of similar merit (operationalized as facing the same loss function should the case go to trial). Our paper provides an explanation for such outcomes even if the legal system is not subject to any obvious form of inefficiency.

Keywords: Class Actions, D&O Insurance, Game Theory

JEL Classification: D86,K12,K42

Suggested Citation

Sarath, Bharat Sarrukai and McCarrick, James M., Insurance Structure and Class-Action Settlements (March 19, 2019). Available at SSRN: https://ssrn.com/abstract=3355118 or http://dx.doi.org/10.2139/ssrn.3355118

Bharat Sarrukai Sarath (Contact Author)

Rutgers, The State University of New Jersey - Accounting ( email )

94 Rockafeller Road
Piscataway, NJ 08854
United States

James M. McCarrick

affiliation not provided to SSRN

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