March 27, 2023 - Nuclear verdicts, a term so-coined presumably because of their potential to lay waste to businesses on the losing end of outsized jury awards much like a nuclear bomb is capable of obliterating wide swaths of humanity, have been increasing in recent years in both frequency and severity and show no signs of slowing down.

While any extreme jury award can technically be considered a nuclear verdict, $10,000,000 is the baseline at which nuclear verdict counting begins.

And while the plaintiff bar is understandably giddy about the current situation (even if they might object to the characterization as anything but fair compensation), businesses and insurance companies who pay these losses see things through a very different lens.

The U.S. Chamber of Commerce Institute for Legal Reform published a research paper last September based on a 10-year study which shines a very bright light on the issue and is worth a read if you are involved in personal injury litigation.

Here's the link:

Some key findings of this ten-year (2010-2019) study:

Median nuclear verdicts have increased 27.5% since the study began.

While about half of the verdicts analyzed ranged from $10 million to $20 million,

7.3% of them were "mega" nuclear verdicts in excess of $100 million.

Unsurprisingly, products liability, auto accident, and medical malpractice account for approximately two-thirds of these verdicts.

More than 60% of them include punitive damages.

Ten states account for about three-fourths of all nuclear verdicts with Florida topping the charts in both total number and per capita.

This paper contains much more than just numbers, too, and some of the observations may be controversial.

It wasn't until 1962 when U.S. jurors first delivered a $1,000,000 verdict according to "Characteristics of Million Dollar Awards: Jury Verdicts and Final Disbursements." (The Justice System Journal, V. 11, No. 3, Winter, 1986).

But what began as an outlier at a time when most Americans had yet to experience color television, eventually became more commonplace. While that decade ended experiencing fewer than ten $1,000,000 verdicts annually, the 1970s saw the frequency of these awards double and by the time the 1980s rolled around, million-dollar verdicts were occurring at a triple-digits-per-year clip.

In 1980, there were 134 million-dollar verdicts. In 1984, the number jumped to 401, and it stands to reason the authors by then failed to see value in continuing to track something no longer considered outlandish. So, the study ended in 1986.

While a declining number of insurance claims professionals, attorneys, and/or structured settlement consultants practicing today have any meaningful recollection of the origins of the structured settlements industry, a parallel can be drawn between today's nuclear verdict challenges and those which existed in the 1970s and which gave rise to the industry that helps so many today.

As million-dollar jury verdicts were increasing in the 1970s, inflation, too, was on the rise making for an incredibly challenging environment in which to cost-effectively negotiate and resolve personal injury claims.

Because interest rates also were then at all-time highs, the present value of providing future benefits fell. (Interest rates and present value move in opposite directions.) So, by applying existing tax law to injury settlement discussions, creative defense minds theorized that they could offer guaranteed future benefits to meet future needs more cost effectively by purchasing annuities than they could by simply negotiating on a lump sum basis.

This innovative solution ultimately morphed into what we now call structured settlements (which were fully codified by Congress in 1982) and benefited both sides of the negotiating table.

Absent a structured settlement, many plaintiffs whose financial needs were great and extended far into the future could not have otherwise received sufficient compensation since many defendants would have been forced into bankruptcy.