Juries in the U.S. have ordered a record number of supersized verdicts against companies in recent years. "Nuclear" verdicts have almost tripled since 2020, while the median verdict value has more than doubled.
In 2023 alone, the number of nuclear verdicts (more than $10 million) grew by more than 27%, while the number of "thermonuclear" verdicts (more than $100 million) increased by 35%, according to Marathon Strategies, affecting industries ranging from automotive to entertainment to chemicals. Such verdicts are not just a problem for U.S. companies as they also affect international firms doing business in the U.S., according to a new report from Allianz Commercial.
See also: Top Causes of Business Insurance Loss
The rise in nuclear verdicts
Growth in the number and size of these verdicts is down to multiple drivers, including growing mistrust of corporations, the changing tactics of plaintiff attorneys, the erosion of tort reform, changes in jury pool demographics, and the normalization of such verdicts, including the rise of billion-dollar awards for personal injury. Awards can be driven by a combination of punitive, compensatory and non-economic damages, such as pain and suffering, all of which are increasing. Such upward trends in social inflation are not sustainable for the long term, as the increasing costs from nuclear verdicts ultimately fall back on businesses, consumers and insurers.
Pharma class actions more complex and volatile
Recent years have also seen a growing list of pharmaceutical, food and chemical products become the target of billion-dollar class action litigation, including opioids, talcum powder, indigestion remedies and herbicide. Cancer is increasingly a feature of such litigation. Scientific research, regulatory orders or voluntary withdrawal of products that may be carcinogenic can trigger litigation. Such claims create volatility for liability insurance due to the long latency of cancer symptoms, with risks only understood many years after a product was sold and the insurance underwritten.
PFAS litigation mounts
A class of synthetic chemicals used widely in industrial and consumer products such as food packaging, cosmetics and household goods and even firefighting foams since the 1940s, PFAS, also known as forever chemicals because of their resistance to degradation, have been the subject of mounting litigation in recent years. This has largely been focused on three main areas: environmental pollution; water and waste treatment/contamination; and personal injury, such as people working directly with products, like firefighters.
While litigation has so far concentrated on the U.S. – environmental contamination-related PFAS settlements are already in the double-digit billions of dollars – there have also been cases elsewhere, for example in Europe. The extent of future litigation is uncertain, although further regulatory measures may play a part in shaping the trends.
See also: Climate Change and Product Liability
Collective actions outside of the U.S.
Social inflation is predominantly a U.S. phenomenon, but moves to increase access to justice in Europe could result in a rise in collective actions.
Collective actions are already becoming more prevalent in some European countries, as consumer groups start using collective redress frameworks and legislative change to chastise companies and fund remedial work, while consumer protection agencies have already brought claims in areas like water quality and pharmaceuticals. A record number of class actions were filed in Europe in 2023 (133), up 10% from 2022, according to law firm CMS, with the U.K., Netherlands, Germany and Portugal accounting for over three-quarters of these. Product liability, consumer and personal injury were the largest sources of litigation.
Major causes of liability claims
Defective product incidents account for more than 40% of the value of all liability claims over the past five years, with the other most expensive causes of claims including collision/crash incidents, faulty workmanship/maintenance and bodily injury.
Read the full Allianz Commercial Liability Loss Trends Report here.
