Nuclear Verdicts
What drives big verdicts against commercial auto companies? Check out this article from Insurance Journal and the report cited within, and our perspective.
At a recent meeting of our industry colleagues including defense attorneys, insurance company claims management, and self-insured trucking company managers, we participated in a lengthy discussion centered on the origin of the term “nuclear verdict” and its initial meaning when it first surfaced at least 15+ years ago. There were several definitions of the term being tossed around, but the consensus was that any verdict substantially in excess of the probable “worst case scenario” could be a nuke. Some self-insured trucking companies and insurance companies at the meeting described how any verdict in excess of $1M over the case reserve amount was especially harmful due to its impact on financial results.
In the case of a nuclear verdict, one can almost always expect a follow up inquiry to find out why it happened - and who to blame. The assumption with “blame” is that someone along the way made a mistake and caused an adverse result OR a jury came back and presented a completely unpredictable adverse verdict. The root of the inquiry typically involves assigning blame to one of these scenarios.
In our discussion, most of us agreed that claims people and defense lawyers know these nuclear verdict scenarios are always possible. We also shared past experiences of c-suite executives and actuaries who don't often accept excuses for these outcomes, as their belief is true experts in claims and law shouldn’t make mistakes at all - let alone big ones.
The Insurance Journal article covers where the most recent nuclear verdicts have occurred and explores the probable reasons why. Real estate and chemical company litigation is a lot different than that of commercial auto, but the bottom-line is the same risks are present: a jury could see things much differently than the defense expects them to be interpreted. The article should pique interest regardless of what cases one might be involved in.
The causes for big verdicts haven’t changed much over the years. What has changed is our ability to avoid them by leveraging predictive analytics and tools such as what we offer at Quaker Analytics. Our models and tools have proven to identify claims with a higher probability of adverse development and thereby a risk of a blow-out verdict. Quaker customers receive daily reports that flag claims of this type, some of which are under-reserved, have a missed exposure, and are wide open for an early resolution strategy.
Strategizing for early resolution isn’t a new concept, but with Quaker’s exposure valuation tools and reports, companies can now fine-tune their early settlement strategies by implementing what used to be the unthinkable: making substantial offers to unrepresented claimants even though the accompanying documentation may be incomplete or questionable. The data-driven results from our customers (Figure A) validate that this approach to claims handling will reduce loss costs, sometimes significantly.
Figure A: Example of financial analysis from anonymous Quaker client
Even the best companies with skilled and experienced claims departments are bound to miss an exposure or overlook something that could have a major adverse impact on the results. Nuclear verdicts are still a threat, but they don't have to be an inevitability. With the right exposure valuation tools, claims professionals and litigators can stay ahead of potential pitfalls and implement proactive strategies that mitigate risks effectively. Visit our home page to learn more about how our innovative solutions can transform the claims management process and shield companies from the devastating impact of nuclear verdicts.
See also: Quaker Focus™ The affordable, interactive online focus group tool aimed to support insurance carriers, claims adjusters, and attorneys to seamlessly run focus groups on more cases and receive robust analyses in a fraction of the time.