Fragmented Risk

Fundamental to an understanding of the legal, economic and practical dimensions of liability and insurance is an understanding of how and why insurers fragment risk. This conference on Fragmented Risk sponsored by the Rutgers Center of Risk and Responsibility on March 1, 2013, engaged academics, industry professionals, lawyers, and regulators in discussion of fragmenting risk in property insurance, commercial general liability policies, business interruption insurance, and other areas.

Insurance policies embody a tension between bundling related risks and fragmenting risk through exclusions, narrow definitions, and other limitations. Policyholders benefit from bundling risk because coverage is easier to purchase and more predictable, because there are fewer gaps in coverage and those gaps that remain are more easily understood. Fragmenting risk allows insurers to exclude coverage for correlated risks where potential losses are high (such as flood damage under homeowners’ insurance), to reduce premium costs to respond to market conditions, and to limit potential liability for new and unanticipated risks. But fragmenting risk causes many losses to be uninsured, as is evident following natural disasters such as Superstorm Sandy.

Conference papers are published in the Rutgers Journal of Law and Public Policy.

Fragmented Risk and Bundled Risk 

Jeff Stempel, University of Nevada, Las Vegas, Boyd School of Law: Rediscovering the Sawyer Solution: Bundling Risk for Profit and Protection 

Harold Weston, Georgia State University, Robinson College of Business: A la Carte Coverage—Unbundling Causes of Losses and Coverage Grants to Allow Insured Selection 

Commentator: Dr. Steven Weisbart, Senior Vice President and Chief Economist, Insurance Information Institute 

Catastrophes and Fragmented Risk 

Chris French, Villanova University School of Law: The Aftermath of Catastrophes: Valuing Business Interruption Insurance Losses 

Don Hornstein, University of North Carolina School of Law: The Balkanization of Catastrophe Property Insurance 

Mike Childress, Childress Duffy, Ltd.: Claims Practices After Catastrophes—The Hidden Conflict 

Creating, Interpreting, and Regulating Fragmented Risk Policies 

Michelle Boardman, George Mason University School of Law: Fragmented Insurance Policies – A Reasonable Expectation of the Shards? 

James Davey, Cardiff University School of Law: Fracturing and Bundling Risks: The Coverage Expectations of the ‘Real’ Reasonable Policyholder 

Daniel Schwarcz, University of Minnesota School of Law: Risk Segmentation and Transparency Commentator: Thomas Considine, Chief Operating Officer