Michigan State settlement means that we will start to see inflation from #MeToo?

“Michigan State settles Larry Nassar lawsuits for $500 million” (Lansing State Journal):

Michigan State University has agreed to a $500 million settlement with the hundreds of women and girls who say Larry Nassar sexually assaulted them, bringing to a close another aspect of the scandal now in its 20th month.

The settlement and the details were announced in a statement from attorneys representing victims and the university. A portion of the settlement — $75 million — will be held back in the event of future lawsuits filed against MSU over Nassar.

MSU has paid nine law firms more than $11.3 million to represent it and its current and former employees in the civil litigation and state and federal investigations related to Nassar’s crimes.

MSU spokeswoman Emily Guerrant said the university has not determined how it will pay for the settlement or how much will be covered by its insurance providers.

To date, MSU has paid law firms at least $2.5 million to handle insurance aspects related to Nassar’s crimes and the lawsuits.

It’s likely MSU has multiple liability insurance policies and it’s possible for an organization its size to have $500 million in coverage ,although the university’s out-of-pocket costs could still be in the tens of millions, Lars Powell, an insurance expert at the University of Alabama who is not involved with MSU, said Wednesday. It’s likely the insurers were part of the settlement discussions, he said.

“I would guess that whatever settlement they reached would be the amount of insurance they carry,” said Powell, who is director of the Alabama Center for Insurance Information & Research. “They wouldn’t just agree to the settlement, nor would the plaintiffs agree to that settlement, if the insurers weren’t on board.”

The reader comments on the corresponding New York Times article are mostly along the lines of “It should be way more”:

This settlement is about a billion dollars short if they really wanted to send message.

This is a travesty of justice. $1.5mm per gymnast for years of abuse?

So, let me get this straight: $1.5+ million each to 332 victims is supposed to wash away the foul memories of a monster who manhandled and abused them?

There are a few folks who respond to this emotional situation with logical arguments (the sure sign of being a total asshole?):

Lifelong Democrat: Let the funds for this settlement be paid by the athletic department, which has proximate responsibility, rather than from academics. So MSU has to drop some sports, or cut back on athletic “scholarships,” that’s a price they ought to have to pay. (Response from Kara Nemsi: There is no way to separate academic and athletic departments. It will be the students who will pay for this through their tuition and debt.)

(from a man, obviously): I certainly sympathize with the women who were abused, but $500 million could fund a lot of scholarships, new classrooms and laboratories. [He hasn’t visited our Boston suburb. He would learn that building a new K-8 school for 440 town children plus 84 Metco-program children (sorted by race identity) and 20 teachers’ kids will cost roughly $100 million in a best-case scenario.]

This weblog is a safe space for thoughts that would get us all defriended on Facebook. Let’s think about all of the above from the perspective of a Bermuda-based insurer…

If we take the NYT commenters as representative of a likely jury pool, and also look at the total amount (more than $100 for every Michigan resident who has a job), shouldn’t liability insurance rates for employers, universities, etc. rise? Without higher rates, who will rush to line up to pay out the next $500 million? If rates do rise, that has to be passed on to consumers as higher prices, right? Since money invested in the U.S. has to earn a comparable return to what it would yield in a less exposed-to-litigation society, prices must go up to maintain the same profit percentage given a rise in the cost of liability insurance.

Will economic historians look back at the 2010s as the beginning of the Era of #MeToo Inflation?

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10 Comments

  1. Tom

    May 16, 2018 @ 5:35 pm

    1

    Well, that’s one way to spend the endowment.

  2. Dingus

    May 16, 2018 @ 5:42 pm

    2

    This seems like a great experiment for an economics department. The professor has, or claims to have, sex with the entire classroom possibly over the course of multiple years. The classroom(s) then, preferably after graduating, sue the college to recoup tuition and the professor retires in infamy. The students donate part of their winnings to the prof due to his sincere and heartfelt apology so he (or she!) can get treatment for sex addiction.

    1.5 mil per student seems like a decent bit of startup money for a small business.

    Everyone wins?

  3. ScarletNumber

    May 16, 2018 @ 7:01 pm

    3

    > This is a travesty of justice. $1.5mm per gymnast for years of abuse?

    I agree it is a travesty of justice, but not in the way that the poster probably means.

    > So, let me get this straight: $1.5+ million each to 332 victims is supposed to wash away the foul memories of a monster who manhandled and abused them?

    Most people in this world who are “manhandled and abused” don’t see a red cent because of it, so why should these “victims” see so much money? Because a public university is involved?

  4. Jack

    May 16, 2018 @ 8:13 pm

    4

    Even assuming 1.5m is the whole divided by the number of abused gymnasts, it is far from clear that the number anyone will take home 1.5m since the lawyers will likely take a piece and Uncle may as well. But what do you think the right number is, Phil? What would you charge to Nassar to let him do to you what he did to those girls? If it was your daughter what would you charge to let Nassar do to her what he did to those gymnasts? I don’t think 1.5 is a preposterous number. Nor did the lawyers who reviewed the facts and advised the University to settle. Nor did the lawyers who reviewed the facts and advised the insurance company to contribute whatever it may have contributed. What do you know that they don’t?

  5. Coward

    May 16, 2018 @ 10:33 pm

    5

    What happened to Ozell Williams?
    https://www.youtube.com/watch?v=9fwCtT_bZQw

    Apparently not much. Because racism.

  6. Coward

    May 16, 2018 @ 10:56 pm

    6

    @Jack
    If it was your daughter what would you charge to let Nassar do to her what he did to those gymnasts?

    This is a good question to ask men in real life if you need some teeth removed but cannot afford a dentist. No decent father would voluntarily pimp out his daughter to be abused for any price.

    That said, a major reason why we have a legal system is that society has determined that the just penalty for a crime is often less than what the family of the victim would inflict in a pure revenge scenario.

  7. Roger

    May 17, 2018 @ 12:38 am

    7

    Parents paid Nassar to do what he did, and they often watched and were satisfied.

    This case has always been about the money. A lot of lawyers are making a lot of money off this deal. You can be sure that they manipulated the publicity because they saw that $500M coming.

  8. Mememe

    May 17, 2018 @ 12:57 am

    8

    As to the inflation issue, price signals in education are almost as inconsequential as they are in medicine nowadays.

    On the broader topic of sexual sin, I am repeating myself, but were one of these women as virtuous as Lucretia to Tarquinus Nassar’s vice, we would all have been saved a mess of trouble:

    >”It is your responsibility to see that he gets what he deserves,” Lucretia said, “I will absolve myself of blame, and I will not free myself from punishment. No woman shall use Lucretia as her example in dishonor.” Then she took up a knife which she had hidden beneath her robe, and plunged it into her heart, collapsing from her wound; she died there amid the cries of her husband and father.

    >Brutus, leaving them in their grief, took the knife from Lucretia’s wound, and holding it all covered with blood up in the air, cried, “By this blood, which was so pure before the crime of the prince, I swear before you, O gods, to chase the King Lucius Tarquinius Superbus, with his criminal wife and all their offspring, by fire, iron, and all the methods I have at my disposal, and never to tolerate Kings in Rome evermore, whether of that family or of any other.”

    https://sourcebooks.fordham.edu/ancient/livy-rape.asp

  9. philg

    May 17, 2018 @ 8:16 am

    9

    Jack: I hadn’t meant to comment on whether $500 million was fair or not, particularly as I am not familiar with the details of what is alleged to have happened other than some people were touched Larry Nassar (about whom we in turn know virtually nothing; see http://blogs.harvard.edu/philg/2018/01/24/did-larry-nassar-have-a-childhood/ ). The post was about insurance rates and prices. The insurers in Bermuda (at least virtually) don’t care whether $500 million is fair from the point of view of someone who was touched or filmed or whatever. They just know that they had to pay $500 million.

    If you want my opinion on whether this is fair… let’s see. Erin Andrews suffered $55 million in actual damages, according to a jury, from being filmed while naked in her hotel room. Being touched is worse than being filmed, I would say. Therefore the 332 plaintiffs suing Michigan State suffered at least $18.26 billion in damages. Ergo, the $500 million number is unfairly low. On the other hand, according to the NYT, the plaintiffs are also suing U.S. Gymnastics and the U.S. Olympics Committee (“and others”). So they may get their $18+ billion yet, e.g., by being assigned the rights to all Olympics TV broadcasting in the U.S. (roughly $1 billion every two years).

  10. ScarletNumber

    May 17, 2018 @ 2:09 pm

    10

    @Jack

    Yes $1.5 MM seems excessive in light of the fact that whatever he did, some teenage boy had already done or will do. It is just a matter of deep pockets.

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