Have you heard of “nuclear verdicts”? No, it’s not a new military stratagem involving ballistic missiles, but they are about as devastating as one.
Nuclear verdicts are rulings against companies with payouts in the millions. Over the past 10 years, two-thirds of these verdicts occurred in product liability, auto accident and medical liability cases.
There’s more to this, however. Nuclear verdicts don’t just happen in a vacuum. The plaintiff’s attorneys usually frame the company’s actions as deeply negligent, dangerous and preventable.
Juries are persuaded of the perceived risk that these companies pose, and rule that the payouts should be punitive and expensive. These multi-million-dollar damages have the capacity to hollow out and bankrupt companies, eating through its insurance like tissue paper.
The issue isn’t necessarily that these companies are found guilty. After all, the evidence and arguments prove that these companies were responsible for wrongdoing.
The issue lies in these payouts, which can destroy smaller companies that may be vital to the local economy. These payouts also dig deep into the pockets of insurance companies: insurance provides an important safety net for services in society, and eroding at it with nuclear verdicts can do long-term damage.
Ultimately, how should companies protect themselves from these verdicts? For starters, prevention is one of the best steps companies can take. All companies should meet compliance standards, but going the extra mile for safety can help.
Providing extensive training, regularly updating employee manuals and maintaining equipment are just a few things companies can do to keep workers and the public safe. It makes it less likely a company will have to pay heavy damages if it can prove that safety was its top priority. This also keeps insurance companies from digging less deeply into their pockets to cover damages.
There also are systemic solutions, like introducing legislation to put caps on payouts or providing evidence in the proper context in court, but this route would take grassroots effort, time and money.
In the last 10 years, the median cost of nuclear verdicts is $20 million dollars according to the U.S. Chamber of Commerce on page eight of their report on nuclear verdicts, but the mean cost of these verdicts is at $76 million dollars. This means that there are enough verdicts that are so expensive that they skew the data set and drag up the mean.
If professional insurance agents frequently provide coverage for business owners, they should have a discussion with them to help provide the necessary safeguards to protect themselves from these costly and devesting verdicts. While businesses can be found liable for wrongdoing, settlements that hollow out a company can create a ripple that affects employees and the community the business is a part of.
Matt McDonough is PIA Northeast's writer, editor and content curator. Matt joined PIA Northeast in September 2023. Before that, he had been an editor for the online entertainment magazine Collider from 2021-23 as a copy editor for its lists section. Matt entered the world of journalism at his alma mater, SUNY New Paltz, writing and reporting for the college's student run newspaper, The New Paltz Oracle. He graduated from SUNY New Paltz with a Bachelor of Arts in English and a minor in Creative Writing in 2020.
