mega verdicts liability risk-mitigation approach

Our litigious environment has been exacerbated over the last several years due to several factors including the rise of nuclear liability verdicts that run into the tens and even hundreds of millions of dollars. Contributing to these mega verdicts is anti-business sentiment and corporate mistrust by jurors. Juries feel more sympathetic toward injured plaintiffs and want to punish companies for perceived wrongdoings. In fact, a Gallup poll shows that nearly a third of Americans say they have very little or no confidence in big business. In addition, as you see bigger numbers being awarded in high-profile litigation cases, the idea of really large verdicts is normalized.

The rise of litigation financing in which third parties invest in lawsuits by paying plaintiffs or their attorneys in exchange for an interest in the lawsuit’s proceeds has also fueled the fire for mega verdicts. Critics of litigation funding say that this type of financing contributes to more cases going to trial with plaintiffs seeking treatments and procedures such as physical therapy, MRIs, and CT scans, which can boost claims severity.

How Insurers, Attorneys Are Changing the Litigation Dynamic

There is growing recognition by attorneys, insurers, and defendants of the potential downside of a jury trial with more parties considering alternative dispute resolution tactics including mediation and arbitration. Attorneys and defendants opting to go to court are also taking a page from plaintiff lawyers and humanizing their clients, showing the good they can contribute to society and the workforce.

In addition, defendants are taking accountability for their actions, acknowledging what took place, displaying remorse, and explaining risk-management measures that have been adopted to remedy whatever caused the accident or injury to occur. The idea behind this strategy is that juries don’t want to hear denials and excuses from corporations but rather they want defendants to take responsibility for the event. Juries will likely be fairer in their judgment if they trust and believe the testimony of the defendant and the pursuit to make things right.

The Use of Analytics to Mitigate Risk

Insurers are also using data analytics in larger, high-risk lawsuits to mitigate the risk of mega verdicts in potential court cases. Data analytics can provide information on which courthouses are more plaintiff-friendly and drill down to the judge, the types of claims most frequently tried, and how people choose outside counsel. According to an article in Property Casualty 360, “Legal data analytics provide unequaled insight into the behavior of courts, judges and counsel in litigated insurance cases. Analyzing data from actual cases allows insurers and their counsel an improved understanding of how insurance cases are actually decided, how long cases last, and what litigation strategies have been successful.

With this data, insurers can better understand the litigation landscape and develop successful legal strategies.” The bottom line is that catastrophic liability losses with huge settlements and judgments have contributed to today’s hard insurance market, resulting in higher premiums, diminished capacity, and tighter underwriting criteria. Improving outcomes in liability litigation cases is one way of helping to contain costs that are driving General Liability, Excess/Umbrella Liability, and D&O Liability insurance.