Nuclear Verdicts Surge With Median Award Near $24M in 2023

Jury verdicts exceeding $10 million are on the rise, impacting businesses, industries, and society, according to Institute for Legal Reform analysis.

By: R&I Editorial Team | June 11, 2024

Nuclear verdicts in civil litigation cases are becoming increasingly frequent and severe, according to an analysis by the U.S. Chamber of Commerce Institute for Legal Reform (ILR).

These extreme jury awards of $10 million or more, dubbed “nuclear” for their devastating impacts on businesses, entire industries, and society at large, can have far-reaching consequences even when later reduced or thrown out by an appellate court, according to ILR’s report, which analyzes the cause of increasing nuclear verdicts and offers some suggestions for tort reforms that could blunt their growth.

Trends in Nuclear Verdicts

The frequency of nuclear verdicts rebounded to near pre-pandemic levels by the third quarter of 2021 after dropping during COVID-19 shutdowns, ILR found in its analysis of jury verdicts of $10 million or more between Jan. 1, 2013 and Dec. 31, 2022.

Over the past decade, both the median and mean nuclear verdicts have increased significantly, particularly in product liability cases. Over the 10-year study period — which includes the COVID-19 pandemic, when courthouses where largely shut down — the median nuclear verdict for all personal injury/wrongful death cases was $21.1 million and the mean was $88.9 million.

Based on preliminary data, which is subject to change, the ILR said the median 2023 nuclear verdict was $23.8 million, generally on par with the previous two years. However, the number of reported verdicts greater than $100 million hit an all-time high of at least 23 last year, the report noted.

“Mega nuclear verdicts typically (but not always) include a substantial punitive damage award. For example, all but one of the 14 nuclear verdicts exceeding $1 billion during the 10-year study period were primarily punitive damage awards,” the report stated.

Product liability, auto accident, and medical liability cases account for two-thirds of all reported nuclear verdicts. These high-stakes cases often involve catastrophic injuries or tragic deaths, leading to substantial jury awards, ILR noted.

Nuclear verdicts are not evenly distributed across the United States, according to the findings.

Half of all nuclear verdicts occur in just four states: California, Florida, New York, and Texas. However, when considering population size, Florida stands out as the state most susceptible to nuclear verdicts per capita, with 0.939 nuclear verdicts per 100,000 people, ILR said. Georgia and Washington also host a disproportionately high number of nuclear verdicts relative to their population, the report noted.

While California had the most reported nuclear verdicts between 2013 and 2020 — 199 — it ranks eighth for nuclear verdicts per capita “demonstrating that the number of nuclear verdicts in the Golden State does not stem from its population but is driven by its liability friendly laws and courts,” the ILR report said.

Factors Fueling Nuclear Verdicts

Plaintiffs’ lawyers employ various tactics inside and outside the courtroom that contribute to the rise in nuclear verdicts, according to the report.

In the courtroom, they may resort to manipulative strategies to inflate damages. One such tactic is the use of “reptile theory,” which aims to instill a sense of fear or danger in jurors’ minds, causing them to lash out at perceived attackers, ILR said.

Plaintiffs’ lawyers may also suggest that jurors award a specific, exorbitant amount of damages or apply a method for calculating damages that will produce a nuclear verdict. These “anchors” are often relied upon by jurors when assessing damages, even though they are completely arbitrary.

Another prejudicial tactic is urging courts to combine the trials of multiple, unrelated plaintiffs whose only connection is alleging an injury from the same product. The multi-plaintiff trial approach hides inadequacies in individual cases and substantially raises the likelihood of a jury finding a defendant liable and returning a nuclear verdict, ILR said.

Outside the courtroom, plaintiffs’ law firms and “lead generating” companies may flood the airwaves with lawsuit advertising that touts extraordinary verdicts and shapes potential jurors’ views of appropriate compensation, ILR said.

Plaintiffs’ lawyers are also increasingly bringing litigation funded by third parties seeking a return on their investment, which not only enables such advertising and speculative claims but third-party litigation funding (TPLF) also contributes to nuclear verdicts by driving up award demands and widening the gap for parties to negotiate a reasonable settlement, according to the report.

“Like a gambler playing with house money, TPLF may fuel speculative mass tort lawsuits that chase nuclear verdicts. Funders recognize that by bankrolling a portfolio of lawsuits, they can spread the cost of litigation and reduce the downside risks of pursuing questionable claims
in a particular case for a chance at a financial windfall,” the ILR report stated.

In the legislative arena, the plaintiffs’ bar is engaged in a campaign to pass laws that will lead to more nuclear verdicts, such as expanding damages available in actions like wrongful death lawsuits and eliminating or weakening existing safeguards on excessive awards, including statutory limits on noneconomic damages, according to ILR.

Impacts and Solutions

Nuclear verdicts adversely affect society, leading to unnecessary litigation and appeals that make it more difficult to fairly resolve claims, the ILR report states. These verdicts can threaten the viability of businesses, the availability of needed products, or create insurability problems for entire industries.

For example, due in large part to nuclear verdicts, fewer companies offer insurance to commercial trucking companies, and the cost has led many independent businesses to stop operating, the report found. Meanwhile, premiums for health care professionals in areas known for nuclear verdicts, such as Georgia and Illinois, are rising. Nuclear verdicts construction companies resulting from New York’s “Scaffold Law” have made it significantly more expensive to build schools and bridges and difficult to develop needed affordable housing, according to the report.

More nuclear verdicts also mean more “nuclear settlements,” as plaintiffs’ lawyers make higher demands, and businesses, understanding the risk, agree to settlement levels that would have been rejected as unreasonable only a few years earlier, ILR said.

Legislators can adopt sound civil justice reforms that reduce the likelihood of excessive damage awards before they occur and respond to unjust awards that do occur.

“The factors that fuel rising nuclear verdicts provide a blueprint for reforms. Legislators can take a variety of actions to prevent inflated awards before they occur and to respond to nuclear verdicts that occur in spite of safeguards,” the ILR report said. “No single reform will stop all nuclear verdicts, but a comprehensive approach that addresses core causes of nuclear verdicts can mitigate the trends seen during the 10-year study period.”

They could adopt reforms that do not permit lawyers to inappropriately file cases in areas known for nuclear verdicts but rather where the plaintiff lives or the injury occurred, the ILR said. Another reform would prohibit manipulative trial lawyer tactics, such as arbitrary anchoring arguments, or prejudicial practices, like multi-plaintiff trials, that fuel nuclear verdicts.

Legislators and courts can also require transparency and prohibit conflicts of interest in third-party litigation funding and stop misleading practices in lawsuit ads, ILR said. Legislators also can reject proposals backed by the plaintiffs’ bar that would authorize more subjective forms of damages or weaken or repeal laws that have helped ensure that damages awarded provide reasonable compensation for a plaintiff’s injury.

To view the complete report on nuclear verdicts, visit the ILR website. &

The R&I Editorial Team can be reached at [email protected].

How Frustrated Homeowners Brought Personal Lines Captives to Utah

Greg Fears Jr., Director and Consulting Actuary, Pinnacle Actuarial Resources

The amendments to Utah’s captive legislation came after homeowners and HOAs expressed frustration at not being able to find insurance coverage. Historically, domiciles have only made captives available to commercial insureds.

“This represents a significant shift in the captive insurance space, as most domiciles have traditionally prohibited captives from operating in the personal lines market,” Fears said.

Under the amended regulations, HOAs can establish an association captive to provide homeowners insurance policies to their members.

Each HOA will be able to determine if all of its members are required to participate or if some can opt out of the program. HOAs should have no issue bolstering membership, however. They often have meetings where they can tell association members about captives and their advantages.

The approach can be used to offer coverage in areas where insurers have withdrawn or to fill gaps created by policy exclusions. HOAs will also be able to access reinsurance through their captives, opening up that market to their members as well.

“It’s an exciting new business area with significant potential for growth and innovation in the reinsurance sector,” Fears said.

HOAs are uniquely positioned to run an association captive program for personal lines insurance. Many of them already set guidelines for how members must maintain their homes and what vegetation they can and cannot have. These are valuable tools in making properties resilient against natural disasters.

“HOAs can require homeowners to take specific risk mitigation measures,” Fears said.

“By leveraging these assessments, HOAs can ensure that all participants in the captive insurance program adhere to the necessary risk mitigation measures, ultimately reducing the overall risk exposure for the community.”

Utah may be the first state to amend its regulations, but that doesn’t mean these captives are limited to the state. HOAs located anywhere across the country can domicile their captive in Utah, subject to state laws and banking requirements.

If the experiment proves successful, other states will likely amend their regulations to allow for similar systems — especially since natural catastrophes and dwindling homeowners insurance policies are a national problem. Florida is contending with similar issues due to its hurricanes and sinkholes. Tornadoes, hailstorms and derechos have the potential to create the same kinds of problems for the Midwest.

“Coastal properties, in general, face heightened risks,” Fears said. “Assuming Utah’s approach proves successful in attracting captives, I expect this to become one of the most significant trends in the captive insurance market over the next year or so.”

The Best Practices for Personal Lines Captives

Utah’s law is still new, and the best practices for HOA-sponsored captives are still evolving (the first HOA captive hasn’t launched yet). Still, there is a lot that HOAs considering captives can learn from commercial insurance companies.

“The general approach is to follow the lead of traditional carriers while addressing the specific exclusions and risks that commercial policies often fail to cover,” Fears said.

For starters, HOAs will need to determine how much capital they need for their captive. To do that, they’ll need to assess the value of the homes in the program, determine any deductibles and complete a number of other calculations so that they know how much they need. At this stage, they’ll also want to assess how much reinsurance they think the program needs.

“Determining the appropriate amount of capital for a captive is crucial,” Fears said. “The captive must have enough funds to pay claims, which relies on homeowner participation and premium contributions.”

A significant amount of learning will be needed for HOA captives to be successful: “[As] homeowners associations and individual homeowners are often new to the concept of captives, there is a significant educational component involved,” Fears said. Captive managers and consultants can help them learn what it takes to launch a captive and keep it stable in the long term.

“They are well-positioned to outline the necessary steps for forming a captive and obtaining the required licenses,” Fears said.

Finding the Right Captive Management Partners

Utah’s new regulations might be intriguing, but for this to be a viable risk financing solution for homeowners policies, HOAs will need to find the right partners to support their captive.

Strong captive managers, actuaries and other team members are critical to ensuring a captive’s success.

Pinnacle Actuarial Resources has a wealth of experience working in both the captives and the homeowners insurance spaces. Its actuaries are well-poised to help HOAs that are starting down the path of developing their captives.

Actuaries can assess past loss experience and help HOAs set appropriate reserves for their exposures. Pinnacle has already taken steps to establish itself as a leader in this new space. Shortly after Utah amended its regulations, Pinnacle published an article outlining what these changes could mean for the industry.

“It’s clear that this topic has piqued the interest of many in the industry, as it represents a unique and innovative approach,” Fears said. “The volume of inquiries we’ve received since publishing our findings speaks to the relevance and potential impact of this development.”

While these developments are intriguing for the captives space at large, the solutions will need some fine-tuning to help HOAs operate as effective captive owners. Pinnacle feels eager and able to help potential insureds explore these new opportunities.

“We are well-positioned to address these challenges, and I’m optimistic about the potential solutions on the horizon,” Fears said.

To learn more, visit: https://www.pinnacleactuaries.com/.

This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Pinnacle Actuarial Resources, Inc. The editorial staff of Risk & Insurance had no role in its preparation.

A full-service actuarial firm, Pinnacle provides your business with data-driven research backed by clear communication. Our expert Consultants work with you to look beyond today’s numbers in planning for tomorrow.