You know things are bad when the term “nuclear” is deemed inadequate to describe the rise in legal verdicts against corporations.

Executive Summary

P/C insurance professionals may think tort reform is coming as "nuclear" verdicts grow to "thermonuclear" status. But analysts at Assured Research are doubtful. Here, Assured Research President William Wilt and Managing Director Alan Zimmermann look for signs of economic disruption in states tagged as having the worst legal environments—a likely precursor for action on tort reform. They find little evidence that social inflation disrupts local economies. Instead, it is insurers in these states that feel the impact, they reveal through an analysis of loss ratios in states with the best and worst legal environments.

A version of this article was originally published in the May Assured Briefing for subscribers to Assured Research reports. The article is being republished by Carrier Management with permission from the authors.

“Thermonuclear” is the new term coined by the public relations and communications firm Marathon Strategies, which recently released a report on the topic of social inflation and thermonuclear verdicts. For the record, the consultancy examined nearly 900 nuclear legal verdicts against corporations (awards exceeding $10 million) from 2009-2022 and was motivated, we suspect, to add the “thermo” prefix when the researchers noticed that 191 of those verdicts were greater than $100 million (with 23 greater than $1 billion).

The property/casualty insurance industry has been combatting the most recent manifestation of social inflation for five years or more. And with some 22 verdicts against corporations in excess of $100 million in 2022 alone, it’s understandable for insurance professionals to think that widespread tort reform has to happen soon. Except we don’t think it will.

Our reasoning: There’s no evidence that social inflation (used interchangeably with “nuclear verdicts” throughout) leads to below-average economic growth. And as for a parallel to the 1980s when nationwide tort reform stopped social inflation dead in its tracks, the liability combined ratio had breached 150 in 1985; today it’s closer to 100.

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