Why have nuclear verdicts skyrocketed in the last 10 years? Did the law change? Did Congress pass a sweeping bill in favor of plaintiffs that mandates they must recover tens of millions of dollars in pain and suffering damages? Nope.
Executive SummaryPlaintiff lawyers have discovered they can cause nuclear verdicts by simply asking juries for astronomical amounts of money. What can P/C insurers do? Tyson and Mendes Partner Robert Tyson Jr. suggests that P/C insurers’ best defense may be to hire plaintiff lawyers themselves—or at least incentivize defense lawyers with success fees.
Are people suffering significantly more serious injuries? Do people experience more pain or loss and need more money? No. Are there novel lawsuits being filed that are leading to new types of exorbitant damages that didn’t exist before? No—nuclear verdicts are happening in every type of lawsuit across America.
What is causing this wave of nuclear verdicts across America?
The answer is simple: plaintiff lawyers.
Plaintiff Lawyers Cause Nuclear Verdicts
Plaintiff lawyers are the biggest cause of nuclear verdicts. Over the last 10-15 years, plaintiff lawyers have radically changed the way they try lawsuits. Previously, plaintiff lawyers were trying to elicit sympathy for their client from a jury, which was a big driver of settlements and jury verdicts. Today, all focus is on the defendant and getting a jury angry. Anger is the No. 1 motivator of nuclear verdicts—and plaintiff counsel have figured this out in a big way.
Another radical change is how plaintiff lawyers try lawsuits. They ask juries for astronomical amounts of money. Twenty years ago, it was rare a plaintiff lawyer would ask a jury for millions of dollars; the jury would find it offensive. Today, every nuclear verdict involves a seemingly outrageous “ask” from plaintiff counsel. Through research and psychology, they have figured out that the best way to get a nuclear verdict is to ask for it.
The plaintiffs’ bar shares this information with each other. They have listservs and write books for each other. The infamous “Reptile Theory” teaches plaintiff lawyers how to get juries angry and has purportedly achieved over $8 billion in settlements and jury verdicts in just 10 years.
Has the Defense Industry Changed?
We know the plaintiffs’ bar has changed the way they try lawsuits. But what is the defense industry doing differently? How have defense lawyers evolved over the last 10 years? Can you name one innovative change the defense has made in response to the new tactics of plaintiff counsel?
Unfortunately, the answer to all these questions is no. Despite skyrocketing verdicts achieved by creative plaintiff lawyers seemingly every week for years, the defense industry has not changed its approach to defending cases. They continue to fight everything at all costs and shy away from the worst part of our cases, especially damages.
Instead, the defense needs to follow this successful strategy:
- Accept responsibility (not necessarily liability) in every single jury trial.
- Give the jury a reasonable defense number in every case.
- Personalize the corporate client for the jury.
- Argue noneconomic damages and defuse juror anger.
But are defense lawyers using these new, creative defense tactics?
The insurance defense industry is a slow-moving behemoth that does not quickly embrace change. In fact, we regularly receive pushback for changing anything in the way we defend jury trials.
So, if the defense industry is reluctant to change but wants to stop nuclear verdicts, what can you do?
Hire Plaintiff Lawyers
It is a radical idea—and there might be some initial concerns about conflicts or other roadblocks—but if you want to stop nuclear verdicts, hire the attorneys who are achieving them. Other industries do it all the time. Tech companies hire each other’s executives. Law firms take each other’s partners. In sports? That is all they do. LeBron James, Tom Brady, Alex Rodriguez, Pele—they all left to join their competitors, often for more money.
So, why don’t insurance companies hire the best plaintiff lawyers—and maybe their stiffest competition—to defend their biggest cases against nuclear verdicts?
Say you have a $50 million products liability case against Brian Panish in California or a $20 million employment case against Carney Shegarian. Why not hire plaintiff lawyers Sacks and Sacks in New York or Mark Lanier in Texas to defend you?
Plaintiff lawyers are fighting for justice—just look at their websites and TV commercials. Don’t you want justice, too? If so, what is preventing you from hiring the best plaintiff lawyers in America to defend your biggest cases?
Money is likely the holdup in this scenario. Plaintiffs’ counsel receive 40 percent or more of any recovery they achieve. So, there is no way a high-profile plaintiff attorney is going to defend an insured in a $50 million products liability trial for $250, $500 or even $1,000 an hour. Not when he can make $20-$25 million for prosecuting that same case.
Of course, there are excellent insurance defense lawyers that are both good trial lawyers and affordable. But has that been enough to avoid nuclear verdicts?
Like it or not, money motivates people. It may not be the only motivator, or the biggest motivator, but it can be a driver of success. For instance, why are plaintiff lawyers constantly pushing the envelope in high stakes litigation? Is it because they care more about justice than the defense does? Why are plaintiff lawyers more creative than the defense—were they born that way?
Of course not. It’s the money. The bigger the verdict, the more plaintiff counsel stand to earn. Is that fair or just? It doesn’t matter. The fact is that money is a motivator to many.
Insurance companies are in the risk business and are naturally risk-averse. Why then take on the risk of nuclear verdicts? Why hire lawyers who get paid the same amount of money whether they win or lose an important trial? In fact, why are you paying a trial lawyer the same exact amount of money to give a closing argument in a $30 million professional liability trial as you would for a medical records summary?
Think about it. Does a deposition summary or records review keep you up at night? Do you worry about having the right defense attorney summarizing interrogatory responses? No, you worry about the risk of losing a big trial. Then why pay your defense counsel the same amount of money for every task? Why not have your defense counsel focus on your risk? You certainly have the power and tools to make your counsel focus where you want.
Happy Medium: Success Fees
Obviously, most insurance companies are not going to want to hire or pay plaintiff lawyers to defend their cases. So, what is the happy medium?
Why not incentivize the defense lawyers on your biggest cases to act like plaintiff lawyers? Shouldn’t there be a difference in how much defense attorneys get paid for giving a closing argument in a $50 million products liability trial as opposed to summarizing medical records in that same case?
One way to address the risk of a nuclear verdict and incentivize your defense counsel to win is a success fee. This would be in addition to the hourly rate you pay your counsel. It would be a way to have your defense counsel be more financially invested in your large jury trial versus preparing a monthly report at the same rate somewhere else in your portfolio.
Success fees can be added onto your typical defense counsel panel arrangement in many ways. Here is one example:
In a big products liability case, your defense firm could receive 25 percent of any savings they achieve for you. Say the settlement demand in this brain injury case is $50 million, and liability is not good for the defense. You are pitted against one of the best plaintiff lawyers in the country, and you know he may be asking for $100 million at trial if it does not settle. But you do not believe it is worth the $50 million demand, or there is some other reason you cannot settle. What do you do? Incentivize your defense counsel to win and avoid a nuclear verdict through a success fee.
In this example, if your defense firm is able to bring this case in for a $10 million jury verdict, they would have “saved” you $90 million of the $100 million trial request. It would also be a savings of $40 million off the lowest settlement demand of $50 million. Either way, it would be quite the win for the defense. Under your success fee agreement, the defense firm would receive a fee of 25 percent of the savings from the settlement demand (not the ask at trial) on top of their hourly rate—or 25 percent of the $40 million savings, which is $10 million.
This example is a lot of money to your defense counsel, but did you receive value for your defense spend? Is avoiding a nuclear verdict a current metric you use to measure your outside counsel and compensate them? Remember, you only pay a success fee if you win. You are not increasing your defense spend unless you reduce your indemnity payment. And wouldn’t it be better to pay your defense counsel for winning than paying plaintiffs counsel when you lose?!
Money Is Just One Tool
Nuclear verdicts are not going away. But insurance companies do have the power to stop them. Education, training and communication are all critical for raising the bar of the defense industry to combat nuclear verdicts. These efforts are underway to a limited extent, but more is needed. Incentivize your counsel to change the way they try lawsuits. Make winning a behavior you measure and reward—especially on the risks that keep you up at night. Your defense counsel will respond to your concerns and your money.
And if all else fails, you can try hiring a plaintiff attorney.