The rise of nuclear verdicts and how to rein them in

August 24, 2021 / 3 min read

One of the most concerning litigation trends over the last ten years has been the rise in nuclear verdicts, which are jury awards that surpass $10 million. In fact, when considering verdicts of more than $1 million, the average size increased nearly 1,000 percent from 2010 to 2018—rising from $2.3 million to $22.3 million. In 2019 alone, there was a 300 percent increase in verdicts of $20 million or more when compared to the average from 2001 to 2010.

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These mega-verdicts trigger higher costs for the insurance industry and eventually result in premium increases. So, what’s been causing the spike in mammoth payouts, and how can insurers and defense counsel combat the trend? Let’s examine the nuclear verdict issue more closely.

What’s driving nuclear verdicts?

While several factors have contributed to the increase in nuclear verdicts, the key drivers are growing public mistrust in large corporations, the increase in third-party litigation funding, and a savvy legal strategy from plaintiffs’ attorneys.

Corporate mistrust

Corporations often enter a jury case at a significant disadvantage because of growing negative sentiment about large corporations. According to a survey, less than half of people trust large companies, and another survey found that more than 30 percent of jurors have negative views of corporations.

These perceptions often lead to juries awarding damages not just to make the plaintiff whole but also to punish the corporate defendant.

Litigation funding

Litigation funding is where a third-party investor provides funding for plaintiff’s litigation costs in exchange for part of the eventual payout. With jury awards well in excess of $10 million, these investments often pay off for the funders. Litigation investors have committed approximately $11.3 billion to plaintiffs for lawsuits to date.

The reptile strategy

The reptile strategy is a tactic where attorneys appeal to the “lizard brain,” which is the earliest portion of the brain that evolved from reptiles and is responsible for humans’ fight-or-flight response. It activates jurors’ survival instincts, prompting them to make decisions based on fear rather than logic.

This strategy aims to convince jurors that the defendant violated the plaintiff’s safety, putting the entire community at risk, and urges them to deter the irresponsible behavior by punishing the defendant.

While these factors are difficult to reverse, the proper defense strategy can curb the trend and contain these sizeable verdicts.

Re-thinking the defense strategy

The best way to avoid nuclear verdicts is to avoid a trial altogether. Claims professionals play a critical role by being the first point of contact when the claim comes in. They need to empathize with the claimant and present a fair, data-based offer.

If a trial is unavoidable, it’s critical to develop a strategy to counter corporate mistrust and the reptile strategy employed by many plaintiff attorneys. This means humanizing the company by having a corporate representative tell their personal story about working for the defendant. Attorneys should also frame the defendant as a good institution by highlighting:

The company’s origin story
How the company serves the community
Charitable causes it supports
How it helps its employees

It’s also critical to avoid just rebutting the plaintiff’s claims and instead show the defendant understands the plaintiff’s experience and cares about their well-being. Finally, the defense should accept responsibility. That could mean accepting full liability, partial liability, or no liability. It’s important to know that you can accept responsibility without accepting full liability.

Taking the approach mentioned above can help defendants appear more empathetic to jurors, resulting in a verdict based on reason rather than emotion.

Leverage litigation technology to limit damages

Developing the right strategy to combat nuclear verdicts requires analyzing data, negotiating settlements, selecting the right defense counsel, and collaborating cross-functionally between claims and legal teams. Legal case management technology makes these tasks easier, providing you with the insights and tools to avoid nuclear verdicts or spot high-risk cases early so you can effectively respond.

To learn more about Verisk’s new Legal Case Management solution and how it helps insurers improve legal strategy and drive down costs, contact me at stephanie.fox@verisk.com.