The phrase “nuclear verdict” has become more commonplace in the insurance industry over the last several years. Nuclear verdicts are indeed something many insurance carriers doing business in Nevada, as well as their policyholders, are and should be concerned about.
What is a nuclear verdict?
According to an online insurance industry magazine, a nuclear verdict is any judgment or settlement greater than $10 million.
Every case has a dollar range for which it should get resolved. Insurance companies estimate this dollar range based on several factors, including what courts and juries have historically done. Nuclear verdicts are those verdicts that far exceed predictions.
What causes a nuclear verdict?
Ultimately, judges or, especially, juries award nuclear verdicts. In cases of nuclear verdicts via a settlement, insurance companies would still have to have a well-founded fear that if they did not settle for such a high amount, far worse consequences would ensue.
Those in the industry speculate that juries are more prone to awarding nuclear verdicts when they have prejudices against big corporations.
They also are more prone to awarding exceptionally high damages if they feel doing so is necessary to even the playing field between wealthy individuals who lead or finance corporations and the average citizen.
Not surprisingly, jurors are also more willing to award a nuclear verdict if they hear evidence of underhanded, illegal or dishonest behavior on the part of the defendant.
Geography and the type of case also play a role.
Almost two-thirds of all nuclear verdicts come out of just 6 states. With respect to case types, suits from commercial automobile accidents, medical malpractice cases and product liability litigation are most prone to enormous awards.
Why should insurance companies be concerned about nuclear verdicts?
Nuclear verdicts directly impact insurance companies because of their financial cost, as they will almost certainly require an insurance company to pay their policies limits.
There is also a risk that the target of a nuclear verdict will try to argue that their insurance company is responsible for all of it, even beyond the policy limits.
Economically, nuclear verdicts can necessitate that an insurance carrier pay more to settle many of their claims
Finally, nuclear verdicts may harm the reputation of an insurance company. Even after the carrier pays its limits, policyholders may be stuck with a large judgement that in, the worst case, they are not able to pay even though they relied on their insurance to protect them.
How can an insurance company prevent a nuclear verdict?
The best way to prevent a nuclear verdict is to anticipate the risk of one. If it appears there is a risk of a nuclear verdict, the insurance company defending in a case may want to consider negotiating a settlement early on or trying mediation.
When preparing a defense, the insurance company will also want to make sure that they consider their juries underlying sentiments. They will need to dispel the myth that big companies put profit even over the safety of others.