Rising jury verdicts and insurance gaps a struggle for companies: Chubb

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As large jury verdicts increase in number and cost, many companies do not have adequate liability insurance to cover these losses effectively, a recent analysis by insurance company Chubb has revealed.

ChubbAccording to Chubb’s 16th annual Liability Limit Benchmark & Large Loss Profile by Industry Sector 2024, there is a widening gap between the escalating verdicts and the insurance coverage available.

This disparity is especially pronounced in cases involving “nuclear verdicts,” which are settlements or awards exceeding $10 million, highlighting companies’ consistent underestimation of their required liability coverage.

In 2022, the amount of large jury verdicts against corporate defendants soared to $18.3 billion, a staggering 273% increase from $4.9 billion in 2020.

This significant surge was observed across all 10 industry sectors examined in the report, encompassing healthcare, life sciences, manufacturing, construction, real estate, hospitality, consumer products, and the chemical industry.

Furthermore, in nine out of the 10 industry sectors analysed, the median insurance limits purchased in 2023 were lower compared to nearly a decade ago.

Specifically, in the Construction sector, median limits purchased in 2023 were 44% lower than those recorded in 2014. In Healthcare, median limits purchased were nearly 31% lower, and in Consumer Products, median limits for 2023 were reduced by 28% compared to 2014.

In 2023, only the Utilities sector saw a 9% increase in coverage compared to 2014. Seth Gillston, Executive Vice President, Head of North America Industry Practices for Chubb, commented: “The increase in elevated liability-related loss costs is driven by a number of factors, including a rise in litigation funding and a perception in society today that the system, including big business, is rigged against everyday people.”

“Companies that underestimate the severity of liability losses may face financial, brand, and long-term stock price impacts,” continued Gillston.

Litigation funding is growing alongside shifts in social attitudes and a backlog of cases. Investors are increasingly using opaque financing to gain a share of plaintiffs’ settlements.

The market, valued at $18.2 billion in 2022, is projected to grow by 13.2% annually through 2028. In 2023, TV ads for mass litigation verdicts surged, with nearly 800,000 ads costing over $160 million, as reported by X Ante.

Third-party funders in state and federal cases can see returns of 30% to 40%, especially in mass torts, per the Insurance Information Institute.

There’s a societal trend toward corporate accountability, driving larger jury verdicts that outpace inflation. Factors include corporate distrust, social justice concerns, and emerging risks like climate change, geopolitics, and data privacy.

The pandemic worsened case backlogs, impacting litigation costs, as noted by Chubb. Verdicts from extreme weather incidents have notably risen.

For example, in 2023, a flooded factory claim led to a $112.2 million jury award, and an engineer received $11.6 million after collapsing from extreme heat.

Cases of negligence, such as a $1 billion verdict from a car crash caused by a negligent truck driver and an $800 million settlement in a 2023 mass shooting case, are increasing.

Companies may underestimate the need for sufficient liability insurance, facing significant financial impacts from litigation losses that can harm reputation and stock prices for years.

Brokers and insurers like Chubb help assess coverage needs with tailored solutions, including options like punitive damage wraps, ensuring coverage against unforeseen risks with historical data and industry expertise.

The post Rising jury verdicts and insurance gaps a struggle for companies: Chubb appeared first on ReinsuranceNe.ws.

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