3 ms·

> responsibility to act ethically They have the opposite responsibility, if anything... They have a fiduciary duty to their shareholders, and considering that

> responsibility to act ethically They have the opposite responsibility, if anything... They have a fiduciary duty to their shareholders, and considering that the behavior being suggested here would see them quickly run out of business by their less-moral competition, it would probably be a breach of that duty. The solution is to change laws about redress. For example, statutory punitive damages and attorneys' fees in lawsuits against insurers where the final judgement is significantly different from the insurer's initial offer. Talk about what is ethical is idle because that simply does not drive corporate behavior.

specialist 5y ago
> They have a fiduciary duty to their shareholders... Citation please.
- nwiswell 5y ago
  Does this work? https://www.nolo.com/legal-encyclopedia/fiduciary-responsibility-corporations.html#:~:text=Fiduciary%20Duty%20of%20Loyalty,personal%20or%20other%20business%20interests https://www.nolo.com/legal-encyclopedia/fiduciary-responsibi....
  - Bootvis 5y ago
    No, that paragraph describes the duty of officers of the company to put the interests of the company before their own. It doesn’t claim that these officers need to behave unethically. You could even argue that displaying unethical behavior is not in the best interests of the company in the long run but this is of course hard to prove in any direction.
    - nwiswell 5y ago
      You asked for a citation of fiduciary duty. I already explained why that precludes moral action in this case
  - specialist 5y ago
    I now realize I misinterpretted your prior reply as copypasta of the "maximize shareholder value" trope. My apologies.
gruez 5y ago
>The solution is to change laws about redress. For example, statutory punitive damages and attorneys' fees in lawsuits against insurers where the final judgement is significantly different from the insurer's initial offer. 1. I you're supposed to have negotiated with the counterparty in good faith prior to a lawsuit. If not, that will be looked negatively by the judge. https://www.sbwllp.com/rule-68-offers-of-judgment/ https://www.sbwllp.com/rule-68-offers-of-judgment/ 2. This probably doesn't play well with probabilities/statistics. Suppose we accept your proposal, and say any final judgement that's 5x larger than the offered settlement should be hit with extra damages. Now a lawsuit comes along that the insurance company thinks there's a 12.5% chance of winning, and if they win, the damages awarded will realistically be $1M. Based on expected value calculated from the previous facts, and factoring in court/attorney's fees, the insurance company offers the plaintiffs $150k to settle. That seems like a good offer for all parties involved. However, if the plaintiff gets greedy, and on the off chance he wins, the insurance company will have to pay extra damages, because from an initial offer to final judgement perspective the disparity is huge.
- nwiswell 5y ago
  Part 1 is just a matter of public policy. This is all armchair theory anyway. Regarding Part 2, I actually don't see the problem. If the result is causing insurance companies to be more cautious about lowball offers when there's a range of reasonable outcomes, is that bad? The plaintiff still must succeed at proving damages, so it's not like that outcome is unforseeable. It does increase "settlement risk" for insurers, but _they're insurers_. Of every kind of entity out there they should be the most comfortable with risk. The greater risk of unfavorable settlements would obviously increase insurance premiums, but if premiums increase because insurers are actually paying more in fair settlements and/or punitive judgements because they failed to pay a fair settlement, again I cannot see the problem.
  - gruez 5y ago
    >but if premiums increase because insurers are actually paying more in fair settlements and/or punitive judgements because they failed to pay a fair settlement, again I cannot see the problem. But the problem is that in the example I given, the lowball option is fair given the probabilities/expected value.

specialist 5y ago

> They have a fiduciary duty to their shareholders... Citation please.

nwiswell 5y ago
Does this work? https://www.nolo.com/legal-encyclopedia/fiduciary-responsibility-corporations.html#:~:text=Fiduciary%20Duty%20of%20Loyalty,personal%20or%20other%20business%20interests https://www.nolo.com/legal-encyclopedia/fiduciary-responsibi....
- Bootvis 5y ago
  No, that paragraph describes the duty of officers of the company to put the interests of the company before their own. It doesn’t claim that these officers need to behave unethically. You could even argue that displaying unethical behavior is not in the best interests of the company in the long run but this is of course hard to prove in any direction.
  - nwiswell 5y ago
    You asked for a citation of fiduciary duty. I already explained why that precludes moral action in this case
- specialist 5y ago
  I now realize I misinterpretted your prior reply as copypasta of the "maximize shareholder value" trope. My apologies.

gruez 5y ago

>The solution is to change laws about redress. For example, statutory punitive damages and attorneys' fees in lawsuits against insurers where the final judgement is significantly different from the insurer's initial offer. 1. I you're supposed to have negotiated with the counterparty in good faith prior to a lawsuit. If not, that will be looked negatively by the judge. https://www.sbwllp.com/rule-68-offers-of-judgment/ https://www.sbwllp.com/rule-68-offers-of-judgment/ 2. This probably doesn't play well with probabilities/statistics. Suppose we accept your proposal, and say any final judgement that's 5x larger than the offered settlement should be hit with extra damages. Now a lawsuit comes along that the insurance company thinks there's a 12.5% chance of winning, and if they win, the damages awarded will realistically be $1M. Based on expected value calculated from the previous facts, and factoring in court/attorney's fees, the insurance company offers the plaintiffs $150k to settle. That seems like a good offer for all parties involved. However, if the plaintiff gets greedy, and on the off chance he wins, the insurance company will have to pay extra damages, because from an initial offer to final judgement perspective the disparity is huge.

nwiswell 5y ago
Part 1 is just a matter of public policy. This is all armchair theory anyway. Regarding Part 2, I actually don't see the problem. If the result is causing insurance companies to be more cautious about lowball offers when there's a range of reasonable outcomes, is that bad? The plaintiff still must succeed at proving damages, so it's not like that outcome is unforseeable. It does increase "settlement risk" for insurers, but _they're insurers_. Of every kind of entity out there they should be the most comfortable with risk. The greater risk of unfavorable settlements would obviously increase insurance premiums, but if premiums increase because insurers are actually paying more in fair settlements and/or punitive judgements because they failed to pay a fair settlement, again I cannot see the problem.
- gruez 5y ago
  >but if premiums increase because insurers are actually paying more in fair settlements and/or punitive judgements because they failed to pay a fair settlement, again I cannot see the problem. But the problem is that in the example I given, the lowball option is fair given the probabilities/expected value.