3 Factors Fueling Today’s Supersized Verdicts

In today’s litigious climate, the rise of the “nuclear” legal verdict – one that surpasses $10 million – is an all-too-real trend. In 2018, the 100 largest U.S. jury verdicts ranged from $22 million to $4.6 billion.

What’s behind the escalation in jumbo jury awards and related legal costs? The liability landscape is changing in many ways, but three issues in particular are having a substantial impact.

1. Corporate Mistrust

According to one comprehensive analysis of jury verdicts, the highest maximum verdicts are returned in business and product liability actions. Why? Corporate mistrust is likely playing a role, leading to juries feeling more sympathy for injured plaintiffs – and wanting to punish offending companies.

Nearly a third of Americans recently polled by Gallup in annually conducted research, for instance, say they have very little or no confidence in big business. This finding continues a downward trend of the public perception of corporations since Gallup began surveying these attitudes, four decades ago.

2. Growth in Litigation Financing

In recent years, third-party litigation financing has emerged as a new source of funding to litigants – in which third parties invest in lawsuits by paying the parties or lawyers in exchange for an interest in the proceeds obtained in the lawsuit. The number of litigation funding providers could more than double this year, according to one forecast, from about 20 to 50 nationwide. Hedge funds also are expected to continue to add in-house legal funding investment units.

“The annual tort liability price tag for small businesses is $105 billion, $35.6 billion of which consists of out-of-pocket costs not covered by insurance.

While proponents claim this method broadens litigants’ access to legal remedies, critics say it adds an outside party to the mix – which disrupts the fairness of the process. They contend that litigation funders may exert control and contribute to more cases going to trial. Plaintiffs may also be more inclined to seek treatments and procedures like physical therapy, MRIs, and CTs, which can boost claim severity.

Nevertheless, this burgeoning practice of litigation financing appears to have a distinct impact on settlement values and the length of litigation, according to a recent academic study that examined the impact.

3. Social Pessimism and Jury Sentiment Favoring Plaintiffs

At the same time, a growing feeling of public pessimism is widespread. Only one-in-five respondents to the 2019 Edelman Trust Barometer, for example, believe that “the system” is working for them, with nearly half believing the system is actually failing them. This sentiment leads to a loss of faith and a desire for change, the report suggests, which may be spurring people to shift their trust to things they can exert control over – like verdicts.

“A sizable judgment against your business can damage your reputation, market share, and bottom line.”

This attitude, legal and liability insurance experts believe, can lead juries to be biased toward the rights of plaintiffs – thinking businesses should bear a greater share of responsibility than individuals. The end result? When it exists, this prejudice can place any corporate defendant at a disadvantage.

Preparing for Expanding Legal Risks

While no one expects to get sued, a sizable judgment against your company can damage your reputation, market share, and bottom line. As the incidence of nuclear verdicts rises, it’s especially important to partner with your insurer to make sure your business has the extra protections it needs.

In today’s fast-moving business environment, many risk factors are converging – and expanding the scope of liability. To learn even more about risk trends affecting companies in 2019, check out our related article, The Changing Nature of Business Risk.