Social inflation continues to dog casualty market on both sides of the Atlantic

Nuclear verdicts on the rise in the US, while UK legal delays could see inflation driving up costs

In the US casualty market, with a continuing groundswell of social upheaval, social inflation has been driving up the number of ‘nuclear verdicts’ – in which the median cost of court awards is in excess of $10 million – particularly in sectors such as medical liability, automotive, transportation and product liability.

In two of the worst-affected states, California and Florida, the pandemic has also exacerbated this phenomenon, with the $4.7 million average verdict size having risen to $6.1 million and $5.5 million, respectively.

One of the key factors behind this convergence of social and legal issues is the rise in deep-seated anti-corporate sentiment, particularly among younger jurors, which is creating an inflection point for large verdicts, as courts seek to expand the definition of a company’s duty of care.

Additional drivers include the increasing normalisation of nuclear verdicts by TV and billboard advertisements, and a rise in third party litigation funding, which is contributing to the frequency and severity of verdicts.

The phenomenon of nuclear verdicts is barely relevant in the UK: awards are made by judges, not juries, and the courts have been historically averse to punitive damages.

One notable trend in the UK appears to be growth in mass claims pursued in UK courts against UK-based parents of multinational subsidiaries – either for abusive working practices involving employees in other parts of the world, or for significant environmental damage. These claims are generally backed by the commercial litigation funding industry.

In addition, relatively new UK ‘anti-trust’ regulations have seen the first significant case, one involving the interchange fees charged by a credit card company to banks and retailers and passed on to consumers.

UK carriers should also keep a close eye on secondary psychiatric harm claims coming before the Supreme Court in 2023 – in particular, a trio of medical malpractice cases relating to failed diagnoses.

Meanwhile, a lasting impact of the pandemic on casualty claims is that delays in the legal system mean it can take upwards of 70 weeks for a case to reach trial. With current inflationary pressures on costs, a delay of 18 months could mean a significant increase in resulting court awards.