Drivers include rising corporate mistrust, growth in litigation funding and fake advertising

The rise in social inflation is not a new phenomenon, but it’s increasingly become a factor in a significant number of jury cases.

Nuclear verdicts – exceptionally high jury verdicts (>$10m) that exceed what most would consider reasonable – show no sign of slowing down in 2023, and large public companies are especially vulnerable.

“Nuclear verdicts will be driven by many factors in the coming year, including growing corporate mistrust, growth in third party litigation funding, social pessimism, savvy plaintiff’s lawyers, reptile theory, lottery mentality, actual liability, bad faith and policy limits demand pressures, and fake advertising in the form of plaintiff’s lawyers misrepresenting verdicts/settlements,” according to Fred Fein, a Miami-based partner at Clyde & Co.

Speaking during a webinar, Sierra Signorelli, chief executive, Commercial Insurance at Zurich, put the increase in nuclear verdicts down to a new generation of jurors behaving as community advocates.

It is becoming more and more difficult for companies to operate in such an environment, she submitted.

A common mistake insureds make is failing to adequately document and evidence the companies has taken all the right steps to - for instance - ensuring employees work in a safe and secure environment. 

“Some of our customers will say, ‘We’ve not done anything wrong’. But you leave yourself exposed to large legal actions if you have not demonstrated you’ve followed all the right procedures,” said Signorelli.

Tackling social inflation

Combatting social inflation requires a number of proactive steps, according to Clyde & Co, including:

  • having a strong claims team, proper defense counsel, cooperative insureds and collaborative dialogue amongst them;
  • early development of a detailed case strategy;
  • a realistic and practical defense budget;
  • an aggressive defense;
  • proper jurisdiction/venue analysis;
  • aggressive discovery tactics;
  • strong pre-trial motions;
  • creative settlement strategies/offers of judgment;
  • intense trial and witness prep (mock trials, focus groups, jury and venue research, jury consultants, witness coaches, etc.); and
  • strong trial experience.

While Europe differs from the US in that it does not have jury verdicts, there are plenty of signs to suggest the environment is also becoming more litigious for corporates and their directors and officers.

Zurich group chief claims officer Ian Thompson pointed to the number of litigation funders setting up offices in major European centres. A trend that is also notable in Australia.

Meanwhile, jurisdiction shopping is also becoming a factor, with more actions likely to be brought in centres which have a more favourable redress environment.