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Is Your Business Prepared for a Nuclear Verdict?

In June of 2022, a California jury awarded a verdict of $464.5 million to two men who claimed that they were forced out of their jobs after complaining about sexual and racial harassment. In August of 2022, a Georgia jury awarded $1.6 billion in punitive damages against Ford Motors for a defect in the roof design causing a wrongful death suit. You also might remember the $26 billion lawsuit against 4 of the largest U.S. corporations in the pharmaceutical industry in February 2022 related to the opioid crisis.

The term “Nuclear Verdict” is defined as a verdict over $10 million.

Increased “Social Inflation” (claims which exceed the increase of general inflation) and the continued attack on Corporate America contribute significantly to the increase in Nuclear Verdicts. Attorneys also continue to increase their use of “Reptile Theory”, playing to jurors’ emotions and appealing to their safety and survival tactics.

Other contributing factors include:

  • Perception of the value of money has changed/increased income inequality

  • Media outlets & social media impact on public opinion

  • Erosion of caps on punitive damages for pain & suffering

  • Erosion of tort reform (time limit to file a lawsuit)

Nuclear verdicts are growing, not only in frequency but in severity

Since 2010, there have been over 1,400 nuclear verdicts; an average of over 115 verdicts above $10 million dollars each per year! Between 2015 and 2019, the average nuclear verdict has more than tripled, from $64 million to $214 million[1].

As you can imagine, these jaw-dropping numbers make it difficult for insurers to assess risk.

How does this impact you?

Nuclear verdicts don’t only impact those directly involved in a lawsuit; they also have cascading effects on all buyers of insurance. Every bad verdict drives up the cost of future cases, causing underwriters to increase rates on certain lines while simultaneously losing their appetite for certain classes of business altogether. The most prevalent impact is in claims related to professional/product liability, commercial auto, directors & officers, and employment practices liabilities.

Because underwriters have no way of predicting or preparing for verdicts of this size, the increasing number of nuclear verdicts is causing a significant amount of unexpected and catastrophic losses. We anticipate these dynamics to cause even more pain for buyers in an already hard market. As the difficulty to underwrite legal risks increases, so does the chance of liability insurance becoming out of reach for businesses.

What can you do?

The best claim is a claim that never happens. By prioritizing risk management efforts and working with your insurance partner and legal counsel to leverage data and trends, you can take proactive measures to minimize the likelihood and reduce the impact of nuclear verdicts. A few ideas:

  • Scrutinize contracts and use best practices when it comes to third-party risk transfer: Utilizing specific language, requiring certain limits, and reviewing who is responsible for what when working with third parties is crucial in today’s “it wasn’t us” environment.

  • Analyze claims history: Past claims may be indicators of problem areas or lawsuits that are just waiting to happen. Getting in front of these and being aggressive early on is the key to avoiding drawn-out and large lawsuits.

  • Enlist the right team of experts: Certain teams with an understanding of your specific class of business or types of risk can drive drastic differences in both mitigation efforts and claims outcomes.

  • Assess alternative program structures: Having a backup carrier is important as we start to see limiting coverage language and less interest in tougher classes of business.

[1] National Law Journal’s 2015 and 2019 editions of the Top 100 Verdicts studies


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