Nuclear Verdicts are considered any verdict of $10M or more. According to a 2023 report by Marathon Strategies, in 2022 as courts re-opened after the pandemic closures, there were 882 Nuclear Verdicts totaling $169 Billion. Moreover, according to the Marathon report in 2022 there were twenty verdicts over $100M and 4 over $1Billion. Marathon described the verdicts of $100M or more as Thermonuclear. Some of these large awards involved intellectual property disputes or mass torts with thousands of individuals seeking compensation. Others involved a single individual or family. For example, juries awarded: $745 Million to a family whose daughter was killed by a driver under the influence of nitrous oxide; $148 Million to two election workers who were defamed; $332 Million to man who suffered from cancer following exposure to a widely distributed herbicide; $18 Million to a patient following delay in diagnosis of breast cancer and over $36 Million to a deaf truck driver who was not accommodated for his disability.
Some observers argue that these awards are excessive and disproportionate to fair compensation for the injury or damage and are not necessary to promote the public good. Others assert that large verdicts accurately reflect the value our society considers appropriate to compensate, punish or deter. Experts have offered various opinions on causes for the increase in nuclear verdicts. Regardless of your view on whether these verdicts are good or bad there is no dispute that they have an impact far beyond the specific parties involved in the case. These large verdicts echo through the entire economy.
Negative Impact on Economy
A report prepared by the Perryman Group for Citizens Against Lawsuit Abuse concluded that in 2022 “lawsuit abuse” had a negative impact of almost $285 Billion on the economy nationwide. This translates to approximately $1,303 per person in the United States.
Different studies have attempted to rank the States with the highest frequency and size of large verdicts or otherwise have a challenging litigation environment. Georgia and Louisiana are frequently identified near the top of those lists. The study concluded that excessive tort litigation in Georgia exceeded $5,500 per person resulting in the loss of approximately 137,000 jobs. Similarly in Louisiana the cost exceeded $5 Billion resulting in over 48,000 fewer jobs in Louisiana and imposed a “tort tax” of $1,263 per person in the State. Critics of this report argue it is biased, the impact is inflated, or the methodology is flawed. However, there is no dispute that the increase in large jury awards impact far beyond the parties directly involved.
Insurance Cost Increase, Coverage Options Reduced
Many individuals and businesses rely on insurance coverage to absorb the costs and risk related to the large jury awards. When insurance provides coverage, the companies involved suffer losses because of the large verdicts. Those losses are not limited to the specific claims involved in the lawsuit. Large verdicts set expectations for resolution of all claims and therefore ripple through the full exposure profile for the insurance industry. In response to the increased loss costs insurance companies seek higher premiums, increase deductibles, place lower limits or exclusions on coverage or completely withdraw from markets. Due in part to natural disasters like hurricanes, tornadoes, and wildfires but also because of large jury awards, insurers are no longer offering coverage in some States. Regulators attempt to find a balance protecting consumers but if insurance companies cannot see a path to profitability they will not provide coverage and the insurers that remain will offer fewer choices. When insurance becomes unaffordable or unavailable, the risk that would normally be shifted to insurance is shifted to those injured or damaged and to society.
Recognizing the risk associated with large verdicts, states are enacting or seriously considering revised laws intended to gain control over the size and frequency of the jury awards. States have periodically passed tort reform legislation to curb what was perceived to be abuses or excesses in litigated claims. Over time, some of those legislative reforms are reversed or limited by courts. Once again, States are exploring ways to minimize the impact of large jury awards through legislative action. For example, Florida, Georgia, and Wisconsin have passed or are exploring legislative options. There is of course opposition to efforts to control jury awards through legislation. Regardless of your view on the degree of government intervention, the fact that States have taken and are seriously considering these actions confirms that the trend in large awards has an impact well beyond the specific parties involved in the lawsuit.
Disparate Impact on Small Businesses and Individuals
The risk of large jury verdicts and increased insurance costs may cause large companies to invest less in innovation, new jobs and initiatives intended to drive growth. But the impact on small businesses and individuals is disproportionate. If a small business cannot obtain or afford insurance coverage to reduce the risk, it will either go out of business or operate with the risk that it may not be able to pay a large verdict. Individuals injured by a business that has no or insufficient insurance coverage must bear the cost of the injury. Perhaps those individuals have their own good health insurance, but many injured individuals will not be fully compensated for economic loss or pain and suffering. Similarly, if people cannot afford auto insurance, they may take the risk of driving without coverage or with only the minimum coverage required by law. Individuals involved in an accident with uninsured or underinsured drivers may have been able to afford coverage protecting them, but many injured individuals will not be fully compensated for damages caused by an auto accident. Large jury verdicts have a disproportionate impact on small businesses and individuals who are struggling to make ends meet.
Artificial Intelligence Can Provide a Solution
Despite challenges and imperfections, dispute resolution through jury trials must remain part of our system of justice. When other dispute resolution mechanisms fail, the opportunity to have an impartial group of people evaluate the facts and make awards they consider justified is essential to maintaining a society that is built upon and depends on the rule of law. Data, when effectively used, can help to reduce the risk of excessive litigation-related costs. Fortunately, advances in natural language processing (NLP) techniques, including extractive and generative artificial intelligence (AI) unlock that data and can generate reliable, timely information to improve decision making and outcomes in litigation.
DocLens is at the forefront of providing solutions that help control claim related loss costs reducing the impact of large verdicts.