A recent U.S. Chamber of Commerce report revealed a significant rise in massive jury awards of over $10 million, known as nuclear verdicts. These awards are growing in both size and frequency, averaging $21 million in the past decade and peaking at $36 million recently.
As these events can bankrupt companies and disrupt entire sectors, understanding their impact is crucial to protecting your company’s financial stability and reputation. We explain these impacts and advise how to best defend your business against nuclear verdicts
The Impact of Nuclear Verdicts on Businesses
A company impacted by a significant nuclear verdict faces severe consequences far beyond the courtroom. The financial strain can be devastating as the business may struggle to compensate for the awarded damages, potentially leading to bankruptcy. These verdicts can damage a company’s reputation and destroy consumer trust, hindering future sales and partnerships. The fallout from a nuclear verdict can also impact insurance premiums and future coverage options.
Every industry is at risk of facing a nuclear verdict, but those most susceptible include:
- Life sciences
- Health care
- Trucking
- Manufacturing
- Commercial real estate
Curious how social inflation can impact your business beyond nuclear verdicts? Find out more in Trends Driving Social Inflation & How Businesses Can Respond.
Recent Nuclear Verdicts
ProductLiability — Medical Device Lawsuit Settles for $1.1 Billion
Numerous personal injury lawsuits were filed over faulty breathing machines, subsequently recalled due to foam breakdowns causing users to inhale toxic fumes and particles. The FDA linked various health issues (e.g., asthma, infections, chest pain, nodules, pneumonia, cancer) and 500 deaths to these devices. An FDA investigation in 2021 revealed evidence the manufacturer was aware of the issue six years before the official recall.
Employment Practices Liability — Workplace Discrimination $20.5 Million Jury Award
A Pennsylvania home health care employer was found guilty of racial discrimination. A Black employee accused a coworker and supervisor of creating a hostile work environment. Despite being the only Black employee, racial slurs began shortly after they were hired. Court records revealed the judge was appalled by the racial slurs and insensitive conduct. The initial complaint lodged by the impacted employee only generated a written warning for the coworker and supervisor. The judge criticized this outcome as severely inadequate.
Discrimination is just one area in your employment practices that could put your company at risk. Download our Employment Practices Liability Scorecard to determine your vulnerabilities.
Environment Liability — Fire Products Company Settles for $750 Million
A fire products company in Pennsylvania has agreed to a settlement following allegations of water contamination by perfluoroalkyl and polyfluoroalkyl substances (PFAS), also known as forever chemicals. Environment Protection Agency scientific research links certain PFAS exposure to negative health effects such as cancer and childhood hormonal interference and developmental delays. The company is accused of using PFAS in firefighting foam at its Wisconsin facility, causing contamination of soil and sewage system. The settlement, pending court approval, aligns with the company’s financial disclosure that earmarks the $750 million settlement.
Cyber Liability — Telehealth Company to Pay $7 Million
A telehealth startup has agreed to settle allegations by the Federal Trade Commission (FTC) for sharing 3.2 million customers’ sensitive health data with third parties. The FTC alleges that despite assuring data privacy, the mental health services provider employed tracking mechanisms to gather and share details, along with medical records and prescriptions. The company also faces claims of inadequate security practices, insecure patient portal access and a deceptive cancellation policy. The settlement is pending court approval.
Consider the following insurance coverages to safeguard against large legal judgments:
- General Liability Insurance: Covers third-party bodily injury, property damage and legal defense costs. It’s crucial for all businesses, especially those that interact with the public.
- Commercial Auto Insurance: Vital for businesses with vehicle fleets as it covers liability for bodily injury and property damage caused by company vehicles.
- Umbrella Liability Insurance: Offers additional liability protection beyond the limits of general liability, auto liability and other policies. It’s essential for protecting against large claims.
- Professional Liability Insurance (Errors & Omissions): Protects professional services businesses against claims of negligence, errors or omissions causing clients’ financial loss.
- Directors & Officers (D&O) Insurance: Protects senior leaders and directors by covering legal expenses and liabilities from lawsuits over wrongful acts in their roles as company leaders.
- Workers' Compensation Insurance: This covers medical expenses and lost wages for employees injured on the job, which can help mitigate the risk of large injury-related claims.
- Product Liability Insurance: Essential for manufacturers, distributors and retailers. It covers claims related to injuries or damages caused by defective products.
We’re Here to Help Protect Against Costly Lawsuits
Nuclear verdicts pose a growing threat to businesses, with potentially devastating financial repercussions. By understanding these risks and securing robust insurance coverages, your business can protect its assets and maintain operational resilience in the face of massive jury awards. Connect with a member of our team for additional risk management strategies to navigate the evolving legal liability landscape.