Expecting the unexpected is smart risk management, but even in a business where we’ve all seen a thing or two, a “nuclear” verdict can be shocking.
What, exactly, is a nuclear verdict? The most widely accepted definition is any jury verdict that exceeds $10 million. But it’s not just about the size of the award. It’s about how appropriate the verdict might be relative to the actual economic damages caused. It’s about what might be justified vs. what most of us would agree is wholly out of whack.
To say there’s been more of this lately is, sadly, a serious understatement. We’re talking about an explosion of blockbuster verdicts fueled by at least two trends:
- Corporate mistrust. According to the most recent surveys, nearly half of Americans appear to distrust pretty much every important institution in our lives, from business to government to the news media.
Consequently, juries are feeling greater sympathy for injured plaintiffs – and are all too happy to punish offending companies.
Taking advantage of this, plaintiffs’ attorneys increasingly focus on building mistrust of corporate defendants by focusing on what they could have done to prevent an incident and less on any actual wrongful conduct.
- The rise of litigation financing. A nasty bit of financial skulduggery, this practice has seen hedge funds and other third parties stepping in to pay the costs of the plaintiffs’ lawyers in exchange for a cut of the proceeds.
American Lawyer magazine described the trend thusly: “Capital has rushed into our space like a flash flood into a canyon gully. Many of the benefits are obvious: for litigants, a wider choice of funders; for law firms, tools to boost profits and realization rates.”
See anything in that description about what might be fair and just to address an injured party’s complaint? Nope? Neither do we.
There are ways to protect yourself from some of this but before we dig into that, allow us to share a few quick examples of cases that led to nuclear verdicts, as reported in the National Law Journal:
Falling Pipe Kills Worker
A 1,000-pound pipe was knocked loose at a South Texas refinery when a heat exchanger, being moved by a crane, struck it. The pipe landed on a worker, killing him instantly. His family filed suit against the facility, the crane company and the rigging company, alleging negligence and violation of the operator’s safety plan.
Two defendants settled with the family before trial. The plaintiff’s lawyer alleged that the remaining defendant, B&G Crane Services, was 90% responsible for the incident. B&G denied negligence, arguing that the facility owner and the rigging company oversaw the move. The jury found negligence for all three parties, awarding $44.3 million in damages. That number was reduced to $20.7 million post-trial, a still-staggering amount.
Unsafe Work Environment
It seemed like a simple request from a supervisor to a dockhand. The plant supervisor asked the worker to investigate a loud noise coming from underneath a loading arm on a floating dock.
The equipment failed and crushed the worker’s leg under 7,000 pounds of counterweight. The accident rendered him an amputee and caused lasting physical and psychological injuries. It also turned out that the equipment was known to be faulty. The verdict? A $37 million judgement.
Failure to Warn
When the polypropylene straps of a tree chair failed, a father, his son and a friend ended up in the emergency room - and then in court.
The father suffered a permanent disability and accused the company that manufactured the straps of not properly warning customers about possible wear and tear from exposure to outdoor elements. It was a costly oversight, resulting in a $54 million verdict.
There’s no doubt that each of the above examples led to devastating loss of limb or life. But there’s a big difference between holding a corporation accountable vs. leaving it to face one of these nuclear verdicts that leaves it bankrupt.
General Liability insurance, of course, helps companies pay claims when bodily injury or property damage occurs. But the explosion in nuclear verdicts underscores the need for an Excess Liability policy. These policies will provide you with an extra layer of protection to handle losses that exceed the underlying primary coverage afforded by a General Liability policy.
If you’re in the home-building business, trucking or whatever industry, your most important contracts will more than likely already include provisions requiring you carry Excess coverage.
If that’s the case, the question then is, are you carrying an adequate amount of Excess insurance to protect you against the worst-case scenarios we’re seeing?
With the right carrier, the more robust Excess policies also include crisis management help so that you’re not dealing with negative publicity on your own. They also include claims professionals who will work with you to evaluate the cause of loss and damages.
We’re not fortune-tellers but it’s pretty clear that nuclear verdicts aren’t going away anytime soon. How would your business fare against a catastrophic liability claim? If you own a midsize or large business, having the extra protection to guard against these big, unexpected jury awards just makes good business sense.
The Mahoney Group, based in Mesa, Ariz., is one of the largest independent insurance and employee benefits brokerages in the nation. As an employee-owned organization, we’ve been protecting what’s yours since 1915. Contact us at email@example.com or 480-730-4920.
This article is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.