Managing the Threat of Nuclear Verdicts in the Shadow of Complex Risk

Jury awards of staggeringly high monetary damages to victims is driving up insurance prices and impeding some organizations’ ability to find coverage for their complex risks.

A decade ago, a $40 million verdict granted to the families of two people killed in a trucking accident¹ was an anomaly. But today, nuclear verdicts — those of $10 million or more² — are far more common. In 2019, the number of verdicts awarding at least $20 million rose 300% compared to the average from 2001 to 2010.³

With rising negative public sentiment against corporations and a dramatic increase in litigation financing by hedge funds eager to take a cut of a bloated award, experts predict this trend will continue.⁴

The stakes for organizations could not be higher. Nuclear verdicts can change the trajectory of a company’s fortunes permanently. As a result, organizations need to understand their exposures and develop a complex risk strategy to diminish the possibility of a lawsuit with disastrous effects on the company.

5 tactics to tame complex risk and prevent nuclear verdicts

Businesses can’t stop the trend of nuclear verdicts, but they can take steps to avoid litigation in the first place. The following tactics can help organizations keep down the number of major claims and their amounts:

1. Conduct a historical claims review. Organizations need to review past claims, identify those that escalated and evaluate how they were handled. Dissecting individual claims enables an organization to deploy resources to reduce the number and amount of claims. Organizations that analyze complex risk and note business areas most susceptible to expensive claims have the best chance of addressing factors that might lead to a nuclear verdict. For example, a transportation firm may not realize vulnerabilities in its cyber program could allow hackers access to its tractor-trailer brake controls, which could ultimately lead to serious accidents and expensive courtroom battles.

2. Take an analytical approach to predict high claims. Whether it’s cybercrime or an auto accident, organizations need to bring in experts from those areas to evaluate which claims are escalating and build an appropriate plan. Organizations need to consider the jurisdiction of a claim, as court rulings and jury awards can vary substantially between locations. For example, companies may want to work harder to settle claims originating in New York or Texas, where courts have a history of approving massive verdicts. Notify brokers of any claims with the potential to spiral out of control immediately so claims experts can get ahead of costly legal battles.

3. Identify claims prevention strategies. Claims analysis should reveal the genesis of the claim and whether it could have been prevented. What conditions led to an employee committing a violent act against another worker? Did a driver’s extra hours behind the wheel and fatigue lead to a crash? Implement measures such as dashboard cameras, de-escalation training and extra security staff that could prevent incidents that lead to nuclear verdicts.

4. Leverage technology for prevention and defense. Technology can help organizations reduce their exposure and the likelihood of a nuclear verdict. For instance, a transportation firm can use telematics to monitor speed limits and hours driven, as well as dashboard cameras to record accidents and driver behavior. Security cameras at apartment buildings can monitor the grounds and deter crime. Such technologies can show juries when a driver is not at fault or verify an organization’s commitment to safety, reducing the likelihood of a catastrophic courtroom loss.

5. Show the organization is worth the risk. Finding coverage after an organization has been hit with a nuclear verdict can be challenging. Organizations with an adverse loss history need to tell potential underwriters about the business’s history and its risk management practices to show that they are a better risk. A commercial transportation company, for example, could show how telematics and driver training have resulted in fewer and less severe accidents. A real estate firm could explain how its culture of safety has resulted in fewer slips, trips and falls. These success stories can make a big difference with underwriters and lead to better terms and conditions.

Contact HUB International’s complex risk insurance experts to learn more about preventing nuclear verdicts.

¹American Transportation Research Institute, Understanding the Impact of Nuclear Verdicts on the Trucking Industry, June 2020.

²Risk & Insurance, “COVID-19 and Nuclear Verdicts: Disastrous Combination or Phantom Fear?” May 21, 2021.

³Verisk, “The rise of nuclear verdicts and how to rein them in,” August 24, 2021.

⁴Insurance Business America, “US litigation funding impacting costs of liability claims,” February 25, 2022.