PhillyDeals: Sotomayor's record is pro-insurer, not insured

As a federal judge, Supreme Court nominee Sonia Sotomayor's decisions in insurance disputes "have overwhelmingly been in favor of insurers" and against policyholders, says Philadelphia insurance lawyer Randy Maniloff, partner at White & Williams L.L.P.

"Judge Sotomayor has been very, very insurer-friendly during her time on the bench," Maniloff told me after reviewing a long list of her cases and appeal rulings.

"Has she ever ruled in favor of a policyholder?" Maniloff asked. On Sotomayor's docket, between insurers and their customers, "it's insurers by a landslide," he said.

In a 2004 appeal, Greenidge v. Allstate, Sotomayor wrote that policyholders who didn't use their own lawyers can't blame Allstate for its refusal to accept a settlement offer.

In Hugo Boss Fashions Inc. v. Federal Insurance Co. (2000), Sotomayor dissented from a majority opinion that made it much easier for policyholders to gain a defense against lawsuits at insurers' expense.

In Mount Vernon Fire Ins. Co. v. Chios Constr. Corp. (1996), Sotomayor wrote there was "not even a metaphysical possibility" that a subcontractor's injury had to be paid for by the general contractor's insurer.

There are many more. But is this really moot?

The Supremes haven't shown much interest in insurance, which is mostly state-regulated. "There is a greater chance of me playing in the NBA than the Supreme Court agreeing to hear a pollution-exclusion case," says Maniloff, who's 5-foot-4.

This could change. The House Democrats are pushing federal insurance regulation, which raises new federal issues that could someday land before Justice Sotomayor. The insurers' friend.

Heavy questions. Lots at stake. But Maniloff doubts these heavy issues will elbow aside more familiar political litmus tests during the Senate Judiciary confirmation hearings, the way things work in Washington.

"You know the old saying, 'Don't bet against the U.S. consumer?' That worked for 30 years - most of our careers."

But no more, says Jeffrey A. Rosenberg, credit strategist at Banc of America Securities L.L.C.

For years, "the rest of the world was willing to finance the expansion of U.S. consumption through the expansion" of U.S. borrowing, Rosenberg said.

"This credit crisis, if it's about anything, is about leaving that world."

With U.S. banks tightening credit and borrowers paying down debt or defaulting, "we're leaving that period where U.S. consumers can be the driver of world growth," Rosenberg claimed.

Will the new middle classes in China, India, and other big, growing countries replace Americans as the world's leading spenders?

"It's not a question of 'if,' " he told me. "It's a question of 'when.' "

Why do Chinese save, while Americans spend? "They have to save for health care. They have to save for the risk of losing a job. They have to save for long-term retirement," Rosenberg said. "None of these things are provided for as they are in the U.S. It's rational for the Chinese consumer, lacking a structural safety net, to save."

Now the Chinese government - and capitalists around the world - want Asia consumers to buy more. Maybe they'll get the social insurance that lets people consume with confidence. But "this is something that is not going to change in a quarter," Rosenberg predicted. "It's going to take the next 30 years."

And yet: Emerging-market stocks are already zooming to record levels, notes Rosenberg's colleague, Michael Hartnett, a Merrill Lynch investment strategist.

Investors have lately rushed to those non-Western stocks as if the world already finished changing. Reality could take years to catch up: "Where the U.S. was in the mid-1980s, is where emerging markets are today," Hartnett told me. "They're in an infant stage of what's going to be a prolonged credit cycle."

For instance: U.S. mortgage debt is almost as large as the national product. In Brazil, India, Russia, it's 5 percent or less, Hartnett notes.

It'll take decades to make the rising nations the gang of spenders - and debtors - we are in wealthy North America.