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Life insurance settlements, or life settlements, are life insurance policies owned by investor-beneficiaries on the lives of unrelated individuals. With life settlements, investors make substantial payments to the insured individuals upon purchasing such policies, pay any remaining premius, and collect the death benefits upon the demise of the insured individuals. Transactions involving life settlements seem poised to become a major source of profits for investment banks, comparable in dollar amount to subprime mortgages. With life settlements, the insured individuals suffer no immediate harm, and the sale of a policy an individual owns is permissible under current law. Nevertheless, moral questions can be posed about the social values expressed by these practices, the effect of these practices on the virtue of charity, and the overall loss of social utility that will result from life settlements. We consider life settlements from utilitarian and libertarian perspectives, and then consider the effects of life settlements on social values and on individual character. On balance, we favor legislative changes in insurance and tax laws to discourage life settlements, and argue that certain forms of life settlements should be banned outright.

Life insurance settlement (LIS) is a US$15 billion global industry and is expected to grow tenfold or more by 2040. It involves the controversial practice of investors acquiring the life insurance policies of living people and then receiving the proceeds of the policy after the death of the insured. This article examines LIS exchange and consumption from a consumer-focused public policy and marketing perspective. The authors find that the vast potential of LIS to meaningfully expand consumer choice has yet to be fully realized as a result of (1) LIS consumers often being inherently at a high risk of experiencing vulnerability, (2) incosistent and inadequate industry regulation, and (3) ethically or legally questionable industry marketing practices. Public policy recommendations are formulated with a view toward facilitating regulatory reform that benefits both LIS consumers and ethical LIS marketers.

Third parties complicate World Trade Organization (WTO) dispute settlement by adding voices and issues to a dispute. However, complainants can limit third parties by filing cases under Article XXIII of the General Agreement on Tariffs and Trade (GATT), rather than Article XXII. We argue that third parties create “insurance” by lowering the benefit of winning and the cost of losing a dispute. We construct a formal model in which third parties make settlement less likely. The weaker the complainant's case, the more likely the complainant is to promote third party participation and to settle. Article XXII cases are therefore more likely to settle, controlling for the realized number of third parties, and a complainant who files under Article XXIII is more likely to win a ruling and less likely to see that ruling appealed by the defendant. We provide empirical support using WTO disputes from 1995 to 2011.

Why is it difficult to restructure sovereign debt in a timely manner? In this paper, we present a theory of the sovereign debt-restructuring process in which delay arises as individual creditors hold up a settlement in order to extract greater payments from the sovereign. We then use the theory to analyse recent policy proposals aimed at ensuring equal repayment of creditor claims. Strikingly, we show that such collective action policies may increase delay by encouraging free riding on negotiation costs, even while preventing hold-up and reducing total negotiation costs. A calibrated version of the model can account for observed delays and finds that free riding is quantitatively relevant: whereas in simple low-cost debt-restructuring operations, collective mechanisms will reduce delay by more than 60%, in high-cost complicated restructurings, the adoption of such mechanisms results in a doubling of delay.

This Article analyzes the degree to which outside directors of public companies are exposed to out-of-pocket liability risk--the risk of paying legal expenses or damages pursuant to a judgment or settlement agreement that are not fully paid by the company or another source, or covered by directors' and officers' (D&O) liability insurance. Recent settlements in securities class actions involving WorldCom and Enron, in which lead plaintiffs succeeded in extracting out-of-pocket payments from outside directors, have led to predictions that such payments will become common. We analyze the out-of-pocket liability risk facing outside directors empirically, legally, and conceptually and show that this risk is very low, far lower than many commentators and board members believe, notwithstanding the WorldCom and Enron settlements. Our extensive search for instances in which outside directors of public companies have made out-of-pocket payments turned up thirteen cases in the last twenty-five years. Most involve fact patterns that should not recur today for a company with a state-of-the-art D&O insurance policy. We offer a detailed assessment of the liability risk outside directors face in trials under corporate and securities law, including settlement dynamics. We argue that, going forward, if a company has a D&O policy with appropriate coverage and sensible limits, outside directors will be potentially vulnerable to out-of-pocket liability only when (1) the company is insolvent and the expected damage award exceeds those limits, (2) the case includes a substantial claim under section 11 of the Securities Act or an unusually strong section 10(b) claim, and (3) there is an alignment between outside directors' or other defendants' culpability and their wealth. Absent facts that fit or approach this \"perfect-storm\" scenario, directors with state-of-the-art insurance policies face little out-of-pocket liability risk, and even in a perfect storm they may not face out-of-pocket liability. The principal threats to outside directors who perform poorly are the time, aggravation, and potential harm to reputation that a lawsuit can entail, not direct financial loss.

Securities class actions impose enormous penalties, but they achieve little compensation and only limited deterrence. This is because of a basic circularity underlying the securities class action: When damages are imposed on the corporation, they essentially fall on diversified shareholders, thereby producing mainly pocket-shifting wealth transfers among shareholders. The current equilibrium benefits corporate insiders, insurers, and plaintiffs' attorneys, but not investors. The appropriate answer to this problem is not to abandon securities litigation, but to shift the incidence of its penalties so that, in the secondary market context, they fall less on the corporation and more on those actors who are truly culpable. This Essay proposes a variety of means to this end involving the settlement process, insurance, and attorneys' fees.

While studies of the motives for intentional insurgent violence against civilians are now common, relatively little academic research has focused on the impact of victimization on conflict processes or war outcomes. This article addresses this gap in the literature. Specifically, the authors examine the influence of civilian victimization on bargaining between the regime and insurgents during a civil war. A curvilinear relationship between the level of civilian victimization used by insurgents and the likelihood that conflict ends in negotiated settlement is posited. The probability of settlement is highest for groups that engage in a moderate level of civilian killing but declines at particularly high levels. A competing risk analysis using monthly conflict data on African civil wars between 1989 and 2010 supports this argument.

This article presents the first systematic theoretical and empirical study of high-low agreements in civil litigation. A high-low agreement is a private contract that, if signed by litigants before trial, constrains any plaintiff’s recovery to a specified range. In our theoretical model, trial is both costly and risky. When litigants have divergent subjective beliefs and are mutually optimistic about their trial prospects, cases may fail to settle. In these cases, high-low agreements can be in litigants’ mutual interest because they limit the risk of outlier awards while still allowing mutually beneficial speculation. Using claims data from a national insurance company, we describe the features of these agreements and empirically investigate the factors that may influence whether litigants discuss or enter into them. Our empirical findings are consistent with the predictions of the theoretical model. Other applications include the use of collars in mergers and acquisitions.

A significant policy concern about the emerging plaintiff legal funding industry is that loans will undermine settlement. When the plaintiff has private information about damages, we find that the optimal (plaintiff-funder) loan induces all plaintiff types to make the same demand, resulting in full settlement; implementation may entail a very high repayment amount Plaintiffs' attorneys with contingent-fee compensation benefit from such financing, as it eliminates trial costs. When the defendant has private information about his likelihood of being found liable, we find that the likelihood of settlement is unaffected. In both settings the defendant's incentive for care-taking is unaffected.

The price reactions to corrective disclosures often serve as a benchmark for settlements in securities class action lawsuits. When the firm bears litigation costs, this benchmark creates a feedback effect that exacerbates the price reaction to news that contradicts managers' earlier reports. Litigation insurance provides value in this setting by reducing the need for investors to price the effects of anticipated litigation. Insurance also affects how changes in the litigation environment impact the firm, with some changes having opposite effects on the frequency of lawsuits against uninsured and insured firms. The pricing behavior of rational investors eliminates the valuation impact of the portion of settlements paid to the investors, similar to dividends. The valuation impact of litigation arises from transaction costs, such as attorney fees, which the firm can mitigate by constraining misreporting and by purchasing insurance.