What does the rise of “nuclear” verdicts mean for commercial insurance?
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24-Jul-25
The US has seen a rise in recent decades of so called “nuclear” court verdicts – referring to huge payouts; higher than could be anticipated. They often run into multiple millions or even billions of dollars. One research paper, looking at 1288 nuclear verdicts between 2013 and 2022, put the average payout at $89 million.[i]
What do nuclear verdicts look like?
In nuclear verdicts, damages are in three categories; noneconomic, in which compensation is paid out for suffering which is not financial, such as for chronic physical or emotional pain; economic damages, in which a plaintiff is compensated for a financial loss or burden; and punitive damages, in which the company is obliged to pay out as a punishment, and to force a change of policies or behaviour. [ii]
It affects industries such as the auto industry and the medical / pharmaceutical industry and is a big issue with regards to insurance for product and public liabilities.
The concern is that these nuclear verdicts are not always proportionate to the actual damage caused, and that the payouts are unpredictable and – to a certain extent – infinite, making the system difficult to manage and almost impossible to properly insure against. The US Institute for Legal Reform is concerned that rather than being “justice”, the payouts are more like a “massive payday for plaintiffs’ lawyers.” [iii]
While nuclear verdicts have generally been seen as a US problem, the issue is moving into Europe. Zurich has warned that litigation funding firms are looking to enter the UK legal system and trying to purchase stakes in UK legal firms. [iv]
Why do nuclear verdicts occur?
One of the big reasons that nuclear verdicts can happen, is the ability for plaintiff’s lawyers to instigate fear and anger in the jurors. In recent decades this has become easier, as we have seen a healthy rise in the expectation for large corporations to take responsibility for their actions. Huge payouts may make a jury feel that the power and wealth is being fairly redistributed, and they may also believe that nuclear verdicts will be a warning fire to other organisations to be more responsible.
Most jurors would have little real-life knowledge around what makes a “reasonable” payout and may be guided by the plaintiff’s lawyers. A recent report by Allianz shows that of the annual 10 biggest awards in the US, there are often 5 or 6 which are personal injury. While these awards (which can be as high as $1 billion) may later be settled at a lower amount, these initial figures are out in the public domain, sensationalised by the media and juries will be aware of them, normalising this kind of amount for the next time. In 2023, a total of $143 billion was paid out for US commercial casualty insurance. [v]
The effect on commercial insurance
For insurance companies dealing with property and casualty insurance, nuclear verdicts are extremely concerning. The effect on product and public liabilities is impossible to account for in advance.
This makes underwriting complicated, as there is almost no upper limit to a payout, which may mean that some risks can’t be covered at all. It also means that huge financial reserves need to be held, tying up money which could otherwise be invested.
Managing claims becomes more complicated. And, of course, all these costs are passed on to the policy holder, making policies less attractive, and risking companies becoming under-insured in an effort to save money.
What can be done?
As the potential for nuclear verdicts to enter the UK increases, it is vital that insurance companies have robust strategies in place.
Underwriters will need to look at the risks, and policies will need to be worded very carefully, in order that insurance companies are not liable for unreasonable risks. Insurance brokers need to work closely with corporations, discussing their requirements so that they are not left underinsured. Risk management will also be extra important, with insurance specialists offering their clients advice around minimising risks.
Relationships with reinsurers will be very significant, as insurance companies seek partnerships for further protection against this new risk landscape.
Defence strategies need to be strong, with the employment of top-tier legal professionals who are familiar with the risks of nuclear verdicts and can advise insurance companies on the best approaches.
All these issues require an excellent staff team that are skilled and well trained, with an understanding of nuclear verdicts. As a specialist insurance recruitment agency, Aston Charles are well placed to support with job candidates across all types of insurance roles. Speak to us today for further information.
Mitigating the risks
Although the rise of nuclear verdicts is a concern, there is much that can be done to reduce the risks. Insurance companies, reinsurance companies, and the corporations they insure can work together to protect consumers. In the event of unforeseen loss or accident, good legal advice and excellent claims specialists are critical in ensuring that settlements are fair and reasonable for all parties.
[i]What are nuclear verdicts (2024) US Chamber of Commerce Institute for Legal Reform. Available at: https://instituteforlegalreform.com/blog/what-are-nuclear-verdicts/ (Accessed: 11 January 2025).
[ii]What are nuclear verdicts (2024) US Chamber of Commerce Institute for Legal Reform. Available at: https://instituteforlegalreform.com/blog/what-are-nuclear-verdicts/ (Accessed: 11 January 2025).
[iii]What are nuclear verdicts (2024) US Chamber of Commerce Institute for Legal Reform. Available at: https://instituteforlegalreform.com/blog/what-are-nuclear-verdicts/ (Accessed: 11 January 2025).
[iv] Guy, J. (no date) Litigation shift creates nuclear verdict fears, Emerging Risks. Available at: https://www.emergingrisks.co.uk/litigation-shift-creates-nuclear-verdict-fears/ (Accessed: 11 January 2025).
[v]Five liability loss trends to watch (November 2024) Allianz Commercial. Available at: https://commercial.allianz.com/content/dam/onemarketing/commercial/commercial/reports/liability-loss-trends-2024.pdf (Accessed: 11 January 2025). Page 6.
[vi] Information from: Schatte, E. (2023) Nuclear Verdicts and the Impact on Property & Casualty Insurance, Waterstreet Company. Available at: https://www.waterstreetcompany.com/nuclear-verdicts/ (Accessed: 11 January 2025).
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The US has seen a rise in recent decades of so called “nuclear” court verdicts – referring to huge payouts; higher than could be anticipated. They often run into multiple millions or even billions of dollars. One research paper, looking at 1288 nuclear verdicts between 2013 and 2022, put the average payout at $89 million.[i]What do nuclear verdicts look like?In nuclear verdicts, damages are in three categories; noneconomic, in which compensation is paid out for suffering which is not financial, such as for chronic physical or emotional pain; economic damages, in which a plaintiff is compensated for a financial loss or burden; and punitive damages, in which the company is obliged to pay out as a punishment, and to force a change of policies or behaviour. [ii]It affects industries such as the auto industry and the medical / pharmaceutical industry and is a big issue with regards to insurance for product and public liabilities. The concern is that these nuclear verdicts are not always proportionate to the actual damage caused, and that the payouts are unpredictable and – to a certain extent – infinite, making the system difficult to manage and almost impossible to properly insure against. The US Institute for Legal Reform is concerned that rather than being “justice”, the payouts are more like a “massive payday for plaintiffs’ lawyers.” [iii]While nuclear verdicts have generally been seen as a US problem, the issue is moving into Europe. Zurich has warned that litigation funding firms are looking to enter the UK legal system and trying to purchase stakes in UK legal firms. [iv]Why do nuclear verdicts occur?One of the big reasons that nuclear verdicts can happen, is the ability for plaintiff’s lawyers to instigate fear and anger in the jurors. In recent decades this has become easier, as we have seen a healthy rise in the expectation for large corporations to take responsibility for their actions. Huge payouts may make a jury feel that the ...- 24/07/2025
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