Nuclear verdicts: The drivers, impacts and solutions

Record date: 01/09/25
Air date: 02/12/25

In this crucial discussion, guests explore the pressing issue of nuclear verdicts and the massive jury awards that can drive up costs for businesses and consumers. Join Rachelle Mortimer, Senior Director of the U.S. Chamber of Commerce Institute and Lisa Bellino, VP, Claims Judicial & Legislative Affairs, Zurich North America, as they highlight the urgent need for stakeholders to collaborate in developing effective strategies to mitigate these impacts and to protect the economy. 

In this miniseries, the episodes include:

January 15: 2025 Legislative outlook: Reforming legal system abuse

January 29: Wide implications of third-party litigation funding

February 26: The role of claims fraud in social inflation

March 12: Plaintiffs’ Tactics

March 26: Premises Liability

Guests:

Rachelle Mortimer
Senior Director
U.S. Chamber of Commerce Institute

Rachelle Mortimer serves as a senior director at the U.S. Chamber of Commerce Institute for Legal Reform (ILR). She is primarily responsible for legal reform advocacy efforts in state capitals throughout the eastern and mid-western portions of the country.

Before joining ILR, Rachelle worked in copyright law and policy, advising clients on proper intellectual property protections and clearance as well as advocating for creators’ intellectual property rights in Congress.

Rachelle is a graduate of Duquesne University in Pittsburgh, Pennsylvania. She holds a J.D. from the Antonin Scalia Law School at George Mason University and is admitted to practice law in Washington, D.C.

Lisa Bellino 
VP, Claims Judicial & Legislative Affairs
Zurich North America

Lisa M. Bellino is Zurich North America’s VP, Claims Judicial & Legislative Affairs, combatting social inflation and its drivers, most often at a national level. In this role, she analyzes these issues and educates others about them, building a coalition of attorneys, carriers, brokers, businesses and tort reform groups to achieve a level playing field within our civil justice system.

Previously, Lisa was the Chief Trial Attorney of Zurich’s Philadelphia Staff Legal Office, handling a wide variety of cases for Zurich North America through trial and appeal, as well as training attorneys in the art of trial advocacy. She obtained her undergraduate degree from La Salle University and her JD from Temple University School of Law. In addition to being the attorney advisor for two mock trial teams, PREP teacher at St. Patrick Church, and volunteer/foster for Brookline Lab Rescue, Lisa sits on multiple committees and advisory boards.

Host:

Al Orendorff
Chief Communications Officer
Zurich North America

Al Orendorff is Chief Communications Officer at Zurich North America, where he is a member of Chief Executive Officer Kristof Terryn’s senior leadership team. He previously held communications leadership positions at Allstate Insurance, Aon Corp., Genworth Financial and Choose Chicago.

Orendorff began his career as a journalist working in television and radio news, including stints at NBC-TV in Peoria, Illinois, Black Entertainment Television, and WBEZ and WGN radio in Chicago. He is based in Chicago.

(PLEASE NOTE: This is an edited podcast transcript, capturing speakers with natural speech patterns that may include incomplete sentences and/or asides, grammatical errors, verbal shorthand and some statements that may be less clear in print.)

Episode transcript:

Al Orendorff: Massive jury awards, or nuclear verdicts, continue to increase in size and frequency. These sky-high jury awards are making headlines, leaving businesses reeling and sparking debates across the legal community. Are they a sign of a justice system demanding accountability, or are they driven by emotion and runaway damages? Our guests today will help unpack the causes and implications of these blockbuster cases, as well as what may come next.

Welcome to the Future of Risk presented by Zurich North America, in which we explore the changing risk and resilience landscape and share insights on the challenges that businesses face to help you meet tomorrow prepared.

This podcast miniseries is all about social inflation. The term, social inflation, refers to the rising costs of insurance claims and litigation costs beyond general economic inflation. It's driven by societal factors rather than traditional market forces. Those factors include society attitudes, legal practices, legal system abuse, and cultural norms. The impact goes beyond the insurance industry and can lead to higher insurance premiums for businesses, a strain on the economy and growing financial impacts on everyday consumers.

In today's episode, we're talking about an explosive topic, nuclear verdicts. I'm Al Orendorff, and today I am speaking with Lisa Bellino, Vice President, Claims Judicial and Legislative Affairs at Zurich North America. And Rachelle Mortimer, Senior Director of Legislative Affairs at the U.S. Chamber of Commerce. Lisa and Rachelle, welcome to the podcast.

Lisa Bellino: Thank you, Al. Thanks for having us.

Rachelle Mortimer: Great to be here.

Nuclear verdicts: The increase in size and frequency

ORENDORFF: We've all seen the headlines in recent years about supersized jury awards that seem to be increasing in size and frequency. How much does a jury award have to be in order to be defined as a nuclear verdict?

MORTIMER: Yes, Al. So actually, I work at our Institute for Legal Reform here at the U.S. Chamber, and we've recently released some research into these nuclear verdicts. In our research, we define a nuclear verdict as $10 million or more. What our research found is that these nuclear verdicts, as you said, are increasing substantially year to year.

Our data looks at nuclear verdicts between 2013 and 2022 and looks at the verdict state by state and these verdicts are basically happening everywhere. There are record numbers of verdicts in large states like Georgia, Pennsylvania, California, but also in smaller states when you look at the number of nuclear verdicts that they have compared to their population, states like Wyoming and Rhode Island. So, these have a very substantial impact on businesses, and we broke those all down by types of cases.

Product liability is one that we see a lot of these nuclear verdicts in, as well as others. Just maybe going a little bit too far into the weeds, but one of the main causes of these nuclear verdicts is what's called non-economic damages.

And to your point that you mentioned in the opening [introduction], Al. With the emotion driving these sorts of things, non-economic damages mean, the damages for emotional suffering pain, things like that, that can't be a dollar can't be assigned to them. So, these are often hard for juries to assign a dollar value to. And these are leading to a lot of these nuclear verdicts. They're often the largest part of a verdict that comes out of a case.

BELLINO: Yes, and I agree with Rachelle, Al. One of the things that we've seen though, is that not only is the term nuclear verdict common parlance, but they've also added terms like mega nuclear and thermonuclear, which are 50 million and a hundred million (dollars), respectively.

Another thing that gets into the basis for a nuclear verdict or a mega, or a thermonuclear verdict, is the punitive damages aspect, which I'm sure we'll talk about later. But just as an example, Rachelle mentioned Georgia and Pennsylvania, one of the biggest verdicts in the country, and definitely the biggest verdicts in Georgia was $1.7 billion, in a case that involved a car rollover, which just a week or two ago was overturned.¹

But nevertheless, [it] just shows the impetus, and the ability that a jury has to make a lasting mark. I mean, $1.7 billion is even beyond thermonuclear. And in Pennsylvania last year, there was a $255 million verdict for a man that worked in the gasoline station. So, I mean, you can see how the numbers just keep going up.

ORENDORFF: Rachelle, you touched on this a second ago, so let's continue to go down this road and, and talk about for a second, the drivers that are causing such high jury awards.

MORTIMER: So, one driver that the U.S. Chamber is particularly focused on is called third-party litigation funding. And this is essentially an outside party that's not involved in the lawsuit, investing in the lawsuit for a return, based on the verdict or settlement. They get a portion of whatever the recovery is from the lawsuit. And the reason that that's leading to these nuclear verdicts is there are a few different problems with third party litigation funding and why they're leading to these. One of those is the control that these funders often have over the litigation. So, this leads to litigation lasting longer [and] being harder to settle. When it frustrates settlements, it drives people to trial and to some of these nuclear verdicts. And creates more litigation going into the courts because these investors are really focused on the return on investment that they get for these different cases. So, their main focus is getting the highest verdict possible or the highest settlement possible when they're funding and driving these suits.

ORENDORFF: So, I don't mean cut you off for a second but just had a quick follow up to that. So, you're really saying that one of the drivers is kind of how they've changed, they're changing how, or have changed how they see the, or I guess the role of these court cases, that it's not just about righting a wrong, it's actually seeking a level of damage, almost providing an income stream.

MORTIMER: Yes, absolutely. So, what we've seen in some of the examples of this investment in litigation is that when the parties agree on a reasonable settlement or what the parties in the case think is a reasonable settlement. The funders will object to that because, as I said and as you said, they're looking for to make a profit off of these cases. So, they will object to these settlements.

Going back to what I said about taking control, when they object or stymie the abilities of the parties to settle for a reasonable value and force them to keep litigating until the case has been driven up to a value that they deem acceptable. We don't have a lot of insight into third-party litigation funding right now. I think that we'll talk about some of the solutions a little bit later on, but that is one of the problems is that you don't really know when these investors are involved.

So, there is not a lot of transparency into when the TPLF (Third Party Litigation Funding) is causing these verdicts to be increased. We have a few that have come out in the media, but it's really hard to tell right now without any transparency.

ORENDORFF: Lisa, I didn't mean to cut you off. I know you've got a thought or two about the drivers.

BELLINO: Thanks, Al. I always have a thought or two about everything. So, in my mind, one of the biggest drivers is attorney advertising. Which in many instances can be tied to the third-party litigation funding that Rachelle just mentioned. But when you think about it, anybody that's listening to this knows, that radio right has advertisements, television, social media, everywhere we turn… billboards. There are all types of advertising, and a lot of it is legal advertising. Not just, “Hey, I'm a great lawyer, you should come to me when you have a case.”

But more in the effort to accumulate additional claims and plaintiffs. For example, “Have you been harmed by this drug?” or “Have you had this happen to you?” And a lot of that creates a frenzy within the public, so that they automatically think if there's a lawsuit, there must be a problem. If there's a commercial, there must be a problem. They bypass the jury responsibility of actually making that link and finding that causation before coming to a verdict. So, advertising plays a huge role.

Along with that advertising and sometimes subliminal to the advertising, is that companies or corporations, as well as insurance companies, have an obligation to pay a lot of money, period, end of discussion. And that pervades the justice system so that when a juror comes into a courtroom and sits in a seat, he, she or they already have a preconceived notion of how this is supposed to turn out.

I will say as well that we've seen shifting jury attitudes depending upon demographics, particularly upon age. We've seen that the younger jurors have a predilection to automatically assuming that a corporation has done something wrong or is at fault with whatever the case is. And nowadays, rather than listening to the judge's instructions on the law and following them in coming to a verdict or even just a finding of liability, jurors believe it is their duty to right a societal wrong and completely change the landscape.

As I mentioned before, there are punitive damages which are to punish a defendant for an alleged wrongdoing. Jurors find it incumbent now more than before to punish a defendant simply because they're a defendant. Which adds fuel to all of these nuclear verdicts. So, there's an awful lot that goes into it in addition to what Rachelle said, too.

MORTIMER: Yes, and I think, Lisa [crosstalk]

ORENDORFF: Please go ahead.

MORTIMER: I think that another aspect of that is just the numbers that are in these advertisements. So, in addition to kind of preconceived notions of the guilt of the defendant, they see these billion/million-dollar verdicts cited in the advertisements. And it's somewhat implied that if you want to join this case or bring a similar case, this is maybe what you could expect to get.

And when jurors see that all the time, they're kind of also expecting that. And they don't see that as kind of an outlier number. They see that as kind of, well, this person got this in this other case, so it can't be that strange to award someone, in this case a multimillion dollar, potentially billion-dollar number. I think a couple other things to mention related to the jury or some of the tactics that are used in trials to imply to jurors that they should award high damages.

Like using that emotional and fear[ful] response, to make them think that, you know, they kind of need to award these large verdicts in order to avert a crisis. Or also, kind of using numbers that aren't really related. So, you know, sports star’s salaries or the cost of a house in Beverly Hills, something like that to use as an anchor to kind of encourage the jury to assign a high value to especially the non-economic damages and the punitive damages that don't have number component that can be looked at like a bill or something that has an actual monetary value.

Societal factors and the impact on insurance costs

ORENDORFF: So what impact, what effect does this have on businesses and everyday consumers?

MORTIMER: Yes, so we actually have done some research into trying to put some numbers on the impact as well. In our most recent study, we found that in 2022, the U.S. tort system costs the country $529 billion, it's billion with a “B,” and that's been increasing over the study period.

So, the study period was from 2016 to 2022, and the average increase over that period was 7.1%. Which doesn't sound like a lot, but the average general inflation rate, which I think everyone can agree, we're all suffering under was 3.4% over that period. The inflation in these verdicts has been much higher than general inflation. And that gets even worse when you look at the inflation rate for business liability for commercial liability. That was at 8.8% and that $529 billion dollars. If it continues increasing at the rate it is, [it] will be near a trillion dollars in 2030.²

So, we're definitely seeing the impact of those increasing verdicts on the cost that everyone is paying, and those costs trickle down. So, a multimillion dollar, a billion-dollar verdict, is existential to many businesses. What the businesses have to pay in these verdicts becomes a cost that they have to account for when they're planning out the cost of their goods or services.

ORENDORFF: It's kind of like the definition of social inflation.

BELLINO: Yes, it is indeed. As Rachelle mentioned, like that whole “trickle-down” — not to borrow a euphemism from past time — but that trickle-down theory, it impacts businesses and consumers alike. You'll see it when you walk into the grocery store, even though the particular product you're with the lawsuit.

So, we see prices rise for things for the everyday consumer without people actually knowing where part of that increase is coming from and they attribute it to something completely different, like corporate greed or greedflation. When indeed it's, “We need to make up the loss that we just incurred by paying out this multimillion-dollar verdict.”

The other thing that I will say, as you mentioned earlier, Al, is that studies have shown that these increased verdict awards impact premiums and also insurability. And by that, I mean, there are places where some carriers don't want to do business because of the hotspot that it might be. And the studies have shown — Like for example, how Florida used to be where insurers left, but once tort reform had taken place, how they're starting to come back. So, the impacts are far and wide of these nuclear verdicts. People just don't see it because it's camouflaged as something else.

ORENDORFF: So, you're saying that if a particular geography has exhibited a predilection toward these kinds of nuclear verdicts, it impacts how, in a given situation, how a given situation [or] a given risk is perceived by insurers?

BELLINO: That is a distinct possibility and there have been plenty of studies on that. I would never speak for any one particular insurer and say “yes or no” to them or in particular Zurich either, but the studies do reflect that that insurability is affected by the jurisdiction and how difficult it is for any corporate defendant located there.

Collaboration and advocacy for business

ORENDORFF: Wow. I understand that both Zurich and the Institute for Legal Reform, are important players in a multi-industry coalition that's actively involved in efforts to create a fair and balanced legal system. How did this coalition come about?

BELLINO: Sure. So, I can speak from Zurich's end and thankfully Rachelle is somebody that I work closely with in the ILR (Institute for Legal Reform) all the time because they are an incredible partner in this coalition.

So, Zurich, in approximately 2022, started the Claims Judicial and Legislative Affairs group, of which I am a part. The point of the group was to be almost a social inflation think tank. To get involved in these issues because they affect our customers, most importantly, in addition to the company itself.

So, one of the things that we decided to do was to form a coalition to fight lawsuit abuse across the board. That coalition includes not just Zurich, not just the ILR, but other carriers, our customers, the trades, and any other industry partner, like the ILR or any of the other ones that would become involved with us to try to make an effective change. And so, we banded together, shared a lot of thoughts, goals, and common themes, so that we could take positive steps forward.

So, in 2022, approximately 45 people from these various groups, other carriers, customers, industry leaders, came together in Schaumburg— because remember it was right on the heels of the pandemic.

So, it's our first big in person meeting. And we started to sit down together, take a look at these firsthand and say, okay, here are the problems, what can we do going forward? And of course, the ILR was one of the primary groups that was there, and in fact presented to the large group on some of the issues, including third party litigation finance that Rachelle mentioned earlier.

Since then, the coalition has grown. Every year since then, we have had an in-person meeting as well as virtual meetings for the coalition. And it has been held by a different partner, a different carrier for the most part each year.

And in 2024 when we had our last coalition meeting, 250 people approximately gathered. So, you can see the effect that our efforts in 2022 are having because we've like quintupled, I guess it is the number of people that have become involved. And so, each growing, and that's really important.

So, from a Zurich perspective, that's the coalition that we've tried to form to bring everybody in the industry together to have a common goal and get there as a group. But go ahead, Rachelle.

MORTIMER: Yes, I think that's great. And I mean, just to take it even a further step back, expansions of liability and damages and the allowance of lawyer advertising started really in the 1950s and basically went unchecked mostly through the 1970s. And then in the 1980s and ‘90s, was when businesses and organizations like ours really started to take notice of these changes and the effects that they were having on their ability to do business.

So, first State Chambers of Commerce and other organizations started to be formed. And then, we kind of trickled up to the national level. My group, ILR is a national group that worked very closely with a lot of our state allies across the country.

So, at that time in the ‘80s and ‘90s, we really started to work on a lot of these reforms to try and push back against these expansions of liabilities and enable businesses to provide goods and services to folks around the country. I think that it has continued to grow, like Lisa said, from way back in the 1980s and ‘90s until today.

And I think that there's even given some of the recent developments, some of the recent information that we found out about third-party litigation funding, some of the recent spikes in attorney advertising and other issues that have really caused crises for folks who are trying to operate their businesses, that it's growing even more quickly now.

With case in point being, this coalition that Lisa and I are part of and I think that the point of all of this is to make sure that the court systems and businesses get a fair shake when they go into the courts and aren't being kind of used for their deep pockets to just get a large verdict for an investor or others who are looking for a large payday.

The coalitions solutions and the successes

ORENDORFF: You were talking about in our conversation about the coalition. We've talked about some of the efforts underway to reverse this tide. I think it's important to talk about that as well as the successes we've seen, because we do want to make it clear to the folks listening that this is a problem that can be solved [and] there are solutions.

MORTIMER: Yes, I think that the solutions are varied. We're working across a lot of different areas. One for example is legislation. Last year, five states now have enacted legislation trying to address third-party litigation funding and three of those were enacted in the last year in 2024.

So, you can see some momentum there. There are a lot of other issues like caps on damages and other things that are really being worked on at the state level and the federal level, to try and put in place through legislation some reforms that will help address some of these issues and bring those verdict sizes back down to where they're fair and businesses can operate with some predictability and consistency.

BELLINO: Yes. That's a key word, Al. Predictability, because let's face it, we're in a risk business, right? And predictability is everything to us. So, on top of what Rachelle mentioned, one of the things that we try to do at Zurich, separate and apart from the coalition, is we try to train the attorneys that defend our insureds [and] our customers, on how to combat the tactics that they're going to see in the courtroom that will try to trigger these nuclear verdicts.

For example, CJLA holds two defense counsel summits every year on different topics that deal mostly with the plaintiff's tactics. And we invite our claims partners to attend, as well as all of the attorneys that defend any Zurich customer. But we also invite our underwriters, and any other BU (business unit) that might want to be involved, so that they can see what it might take to do this. We try to advocate for reform within the court system, either through the attorneys or through whatever process we might have built in at CJLA to do this.

And let's not forget, Zurich also has a Government Regulatory Relations group that works not only at the legislative level that Rachelle was talking about, but with all of our trade partners throughout the industry.

So, we're coming at it from many different angles, but it's an onion with so many layers to peel back because if you take care of attorney advertising, you also have to go to third-party litigation financing and you have to change your attitudes. Which I think is really going to be a very big hurdle because that's very well ingrained within society today.

MORTIMER: Yes, and I think to your point, with educating young attorneys is really important too because of their participation in the court system and another aspect of some of the things we work on are court rules and changes to court procedures.

So those are important because, you know, a lot of courts use an advisory committee that's made up of attorneys from the state and having participation from those that are kind of educated on a lot of these issues is really useful as we're moving forward.

Business strategies to get involved and make a difference

ORENDORFF: As we wrap up our conversation, which has been tremendous by the way, thank you both for being here. What can businesses do to get involved?

MORTIMER: I think one thing that I would always encourage businesses to do, is to reach out to their local or national state Chamber of Commerce. So, they can get involved in the efforts that are ongoing and get involved with any of the other resources that might be available such as education to get them into the community and allow them to share their experiences as well.

Because it's always useful to hear when businesses can kind of exchange notes and say, “Hey, I'm experiencing this it's causing me problems with my litigation.” Being able to hear that other businesses are experiencing that as well, and then coming together to solve those issues.

BELLINO: Yes. I agree with Rachelle there. And another thing that I might add is, from a Zurich perspective, our customers can become involved in all of this. First of all, they can just reach out to us, whether it's to my group at CJLA or GRR and say, “Hey, I want to be involved.” You can literally contact us through an email that is specifically designed for the coalition that's LSAcoalition@zurichna.com. I personally will read that email because it will come to me.

But also, people can become involved in their local civic organizations, their local bar associations, or any other kind of committee that might in any way influence what it is that we are trying to do and get to the outcome that we desire.

I might also add that grassroots efforts make all the difference. We saw that, particularly in Florida, we're seeing it in New York, and we would never ask a customer or a person to advocate or be in a position that is anything other than completely above board and in their best interest. So, it always pays to pay attention to what's going on at your level so that you can have a direct impact through whatever means it is that we have available to us.

ORENDORFF: Wow. This has been a really important conversation. Lisa and Rachelle, thank you so much for joining us today.

MORTIMER: Thank you for having us.

BELLINO: Yes. Thanks Al.

ORENDORFF: We've talked a lot about third-party litigation funding today. If you want to learn more, we recently did a deep dive with Keith Daley, Chief Claims Officer at Zurich North America, and Sherman Joyce, President of the American Tort Reform Association. We will put a link to that episode in our show notes.

And thank you for listening. If you like the show, leave a comment or review wherever you get your favorite podcast, or you can drop us a note at media@zurichna.com. Stay tuned for our next episode in our social inflation miniseries, where we'll explore the role of claims fraud with Delpha DiGiacomo, Lynne Grinsell and Kristin Thorne. This has been the Future of Risk presented by Zurich North America.

1. Georgia’s largest verdict wiped out in $1.7B case against Ford, The Atlanta Journal-Constitution News, November 7, 2024

2.  Tort Costs in America: An Empirical Analysis of Costs and Compensation of the U.S. Tort System - Third Edition, U.S. Chamber of Commerce Institute for Legal Reform, November 20, 2024