Nuclear verdicts widen gap between insurance coverage and loss
Large payouts against corporate defendants are up 273% over the last decade, Chubb reports.
The gap between liability loss and insurance coverage limits purchased by companies is widening at an alarming rate, according to a recent report by Chubb.
The study pointed a finger at the rise in large payouts, saying: “Nuclear verdicts, or those with settlements and awards of $10 million or more, play a major role in the mismatch.”
Using data from 10 industry sectors including construction, health care and consumer products, the study showed median insurance limits purchased nearly a decade ago have mostly declined while large verdicts against corporate defendants jumped 273%.
Meanwhile, median limits purchased in the construction industry are 44% lower than in 2014, according to the Chubb report, while median limits in healthcare and consumer products backpedaled 31% and 28% respectively over the same time.
Seth Gillston, executive vice president for Chubb, told PropertyCasualty360.com that nuclear verdicts are not only more frequent, they are now, “occurring in cases that we would not have anticipated just a few years ago.”
“It is a trend that is not going away anytime soon,” he added. “If anything, nuclear verdicts are getting larger and more exorbitant.”
The report also pointed at a rise in litigation funding, changing social environment, and extreme weather for the disparity between purchased coverage limits and liability losses.
“Litigation financing distorts the legal system by putting control of litigation into the hands of third-party actors who have no direct stake in the case at hand, no duty to their client, and no interest beyond maximizing their own returns,” Gillston said.
“Financing disincentivizes settlements because plaintiffs cannot resolve cases without first making sure the funders have received an adequate return on investment,” he continued. “Rather than injured parties seeking out lawyers to represent them on a contingency basis, outside money now pours into law firms to conjure up creative legal theories and identify deep pocketed defendants, and then into aggregators and advertisers to vacuum up potential claimants.”
Other industry sectors used in the Chubb report include life sciences, real estate and hospitality, transportation road and rail, oil and gas, manufacturing, utilities and chemical.
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