Guy Carpenter develops litigation index

Guy Carpenter has developed a Subprime E&O Litigation Index, which measures the combination of factors influencing the country’s E&O litigation climate in the wake of the market crisis related to U.S. subprime mortgage-backed securities.
Factors anticipated to lead to higher rates of E&O litigation in certain U.S. states include:
the state’s foreclosure rate;
subprime mortgage delinquency rate;
litigation attorneys per mortgage professional;
the presence in a state of truth in lending legislation; and the
banking litigation ranking.
Overall, Illinois, Michigan and Massachusetts claim the highest anticipated E&O litigation levels, according to the Index. Mississippi, Indiana and Ohio are close behind.
“It is important to underscore that E&O litigation related to the subprime mortgage crisis could impact any state, even those not classified by our index as particularly risky,” Kevin Griffiths, head of Guy Carpenter’s global casualty specialty practices, said in a release.
“However, it is fair to say that certain states could be considered ‘lightning rods’ for lawsuits. As the number of foreclosures increases, and an increasing number of borrowers become delinquent in their mortgages, the likelihood of E&O lawsuits in these locations also rises.”
There is little to no correlation between those states with the highest number of subprime mortgage delinquencies and/or foreclosures and the highest risk states for subprime-related E&O litigation, according to the Guy Carpenter Index.
“As the subprime mortgage crisis continues to unfold, and the litigation landscape continues to evolve, the states claiming the highest risk levels in our index are likely to change as well,” Griffiths added.