Webinar focuses on the rise of massive jury verdicts

Massive jury verdicts are on the rise, leading to higher claims costs for insurers and their customers. Driving factors behind these trends include changing juror attitudes, evolving tactics of plaintiff’s attorneys, litigation funding and eroding tort reform.

But the insurance industry, customers, trade organizations and business leaders are mobilizing to reverse these trends and create a level playing field in the courtroom.

Zurich Insurance hosted a webinar recently to highlight the drivers, trends and response to increasing jury verdicts in U.S. liability claims. Hundreds of brokers and customers from more than 43 countries participated. The discussion was led by Allen Kirsh, Head of Claims Judicial and Legislative Affairs for Zurich North America; and Scott Toland, Global Head of Liability, Commercial Insurance for Zurich Insurance.

After a brief introduction by Ron Davis, Zurich’s Global Head of Customer Management, Commercial Insurance; Kirsh and Toland discussed the phenomenon of “social inflation,” defined as the trend of increasingly higher loss costs over and above what one would expect from economic inflation. 

Toland explained the role of insurance and how social inflation disrupts the contract between insurers and customers.

“It’s really a promise to pay and to make whole again that injured party,” he said. “As an industry, we are 100 percent still behind that promise. The point is that the injured party is made whole again, but not that they win the lottery or the plaintiff’s attorney bar has a windfall on the back of that injured person or group of people.”

Toland compared outsized verdicts to catastrophic property (CAT) claims. “I would suggest that liability has a CAT exposure as well, and that really comes in the form of catastrophic bodily injury claims.”

Social inflation

Social inflation drives higher insurer claim payouts and loss ratios. Ultimately, policyholders pay more for coverage. A simple way to think about social inflation is to compare its impact on claims losses over time with growth in an inflation measure like the Consumer Price Index (CPI). For example, the CPI rose 10.5% from 2017 through 2021, while property and casualty industry general liability-incurred losses have skyrocketed more than 57% during this same period.

Kirsh shared statistics that illustrated the rising costs of “nuclear” verdicts, defined as those with damages in excess of $10 million.

For example, the median claims cost of a single fatality with no other injuries more than doubled between 2015 and 2019. And the median cost of gender/sexual discrimination and harassment claims more than tripled in the same period.

Kirsh talked about the need for regulation of litigation funding, whereby a third party invests in a lawsuit in exchange for a share of the outcome. 

“There’s virtually no governance over this,” he said. “These investors are allowed to charge whatever they want. There’s no requirement for disclosures. There’s a lot of issues with this, not the least of which is exorbitant interest rates being charged to the consumer.”

The laws that impact the cases that lead to nuclear verdicts occur at the state level, so insurers and justice reform advocates are targeting the legislators and governors in key states to effect change and bring about tort reform. Kirsh said Zurich, through its Claims Judicial and Legislative Affairs and Government & Regulatory Relations departments, is advocating state legislatures to pass laws to level the playing field when it comes personal injury claims. 

The webinar was part of a series of invitation-only events hosted by Zurich.