Cole.Nuclear

Reading: “Nuclear Verdicts, Tort Liability, and Legislative Responses,” Journal of Insurance Regulation, 2023, pp. 9-19.

Author: Cole, C and Marzen, C.,

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BA Quick-Summary: Nuclear Jury Awards A "nuclear verdict" refers to extremely large jury awards, typically in excess of $100 million, often including substantial punitive damages. → (This reading is completely and totally unrelated to nuclear power!!!) The paper aims to explain the rise of nuclear verdicts (extremely high jury awards) and their impact on various industries, particularly insurance and trucking. The paper also suggests strategies to mitigate these verdicts, including legal reforms and defense strategies. Reasons for the rise in monetary verdicts include: case-specific details plaintiff/defendant attorney tactics Consequences of these verdicts include: higher insurance costs business bankruptcies

Study Tips

This reading on nuclear verdicts is well written, easy to read, and is only 10 pages. It isn't a terrible idea to read it if you're having trouble falling asleep some night. :-)

There are 4 very obvious potential exam questions from this reading and if you click the links you can go directly to the answers:

• What are the reasons for nuclear verdicts? (There are 6 in total and you just have to memorize them.)
• What are the impacts of nuclear verdicts? (5 answers)
• What are the defense strategies against nuclear verdicts? (5 answers)
• What are some state legislative reforms that address nuclear verdicts? (5 answers)

Alice-the-Actuary's Pro Tips! You could probably skip reading the source text entirely (and even the wiki article) and just use the Battle Cards to memorize the answers to the above questions! You don't even have to memorize all the answers to each question because on the exam, they often only ask you for 2 or 3!

Estimated study time: 1 hour (not including subsequent review time)

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No past exam questions are available for this reading.

reference	part (a)	part (b)	part (c)	part (d)

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In Plain English!

Reasons for Nuclear Verdicts (p9)

There are many reasons that nuclear verdicts have become more common.

Question: Identify industries that may be particularly vulnerable to nuclear verdicts. (2)

• Insurance
• Trucking (see example below)

Insurance is an obvious answer because insurers get sued all the time. The problem with trucking is that people's cars can slide underneath the truck (if there are no guardrails on the side of the truck to prevent this) and this often causes serious injury or death.

The Nature of the Facts of the Case (p9)

The source text has a good (hypothetical) example of an injury case that could have a high likelihood of resulting in a nuclear verdict. It is paraphrased below:

Assumptions:

1. A 25-year-old woman is seriously injured in a terrible accident involving a commercial truck.
2. The commercial trucking company is at fault in the incident, and the woman was working as a nurse making approximately $100,000 per year.
3. The injured party’s car was completely totaled in the incident, worth approximately $40,000.
4. The woman incurred serious injuries, with medical bills of approximately $500,000, which include bills for the ambulance, hospital stay, necessary surgeries as a direct and proximate result of the incident, and therapy costs.
5. The woman is unable to return to work as a nurse because of the incident.
   • With the nurse’s annual salary of approximately $100,000 per year, and 40 years remaining until the nurse reaches the age of 65, there is approximately $4 million in damages on a future wage loss claim.

Question: Identify reasons related to the facts of an injury case that a jury verdict may be "nuclear". (3) (You may use the above example as a guide, but the reasons should be generally applicable.)

• plaintiff is young
• plaintiff is seriously injured
• plaintiff had a high-income job (and requires lifetime compensation because they can no longer work at that job)

Jurisdiction of State versus Federal Court (p10)

Another factor influencing the verdict size and the chance of a nuclear verdict is whether the case goes to trial in state court or federal court. A federal court has been found to be preferable for the defendant.

Question: Identify reasons that federal courts are more favorable to a defendant and may lower the odds of a nuclear verdict. (4) [Hint: Dr. J(C)← click me!]

• federal court may be more likely to Dismiss the case entirely
• federal court may be more likely to Resolve the case before trial
• federal courts choose Juries from a broader range of individuals
• federal court judges may be less likely to be from the same City as the plaintiff

Note that personal injury suits are often filed in the state where the injury occurs, but this isn't always the case.

Question: Identify potential conditions whereby a personal injury suit might be moved from state to federal court. (2)

• if the amount in controversy exceeds $75,000
• if the plaintiffs and defendants are from different states (diverse parties)

Another way of saying the second bullet point is: The case must meet the conditions of diversity jurisdiction.

Several of the cases mentioned in the source text where the jury delivered a nuclear verdict were in state courts. It seems then that defendants should push to have the cases heard in federal court.

Plaintiff Utilization of “Reptile Theory” or “Reptile Tactics” (p10)

Another possible reason for nuclear jury awards is the use of "Reptile Tactics" by the plaintiffs' counsel. It's based on neuroscience and our common evolutionary origins with reptiles. The details are outside the scope of actuarial work, but you should be understand enough about it to know why it might contribute to excessive judgments against defendants.

Question: Briefly describe [1] Reptile Theory/Tactics and [2] why those tactics might contribute to excessive jury awards.

1. Reptile Theory: Both we, and reptiles, have a part of our brains that focuses on the protection of the individual, family, and community
2. Excessive Awards: Plaintiffs' counsel appeals to the reptilian part of our brain and focuses on safety rather than the proper legal standard.
   • The jury then improperly uses the safest possible standard rather than the proper legal standard in determining level of liability and monetary award.

Note that reptile tactics are tactics of plaintiffs' attorneys. In the next section, we consider tactics by defense attorneys.

Other Reasons: Stealth Jurors, Tactics at Trial, and Egregious Conduct on the Part of Defendants (p11)

Stealth Jurors: The concept of a stealth juror is easy to understand. This is a juror who is skilled at hiding their bias against defendants during jury selection, and who is then more likely to propose a higher monetary award against the defendant.

Tactics at Trial: Another reason for the increase in nuclear verdicts is that defense attorneys often focus on "preserving a record on appeal." This means they make sure to raise objections and follow certain procedures during the trial so that, if the case is appealed, they have a strong basis to argue that errors were made. However, this focus on creating a good record for appeal might lead them to spend less effort on persuading the jury during the trial itself. As a result, the defense might not present their case as effectively, potentially leading to higher verdicts. A concise way of expressing this is:

defense attorneys focus on preserving a record on appeal  →  less focus on winning over jurors  →  higher jury awards against defendant

Egregious Conduct: This is another reason for high awards that's very easy to understand. Big corporations (or medium or small corporations) sometimes exhibit very bad attitudes towards the injured plaintiff. This encourages sympathy for the plaintiff and may lead to higher awards. It isn't too hard to find examples of this. Just google it. That's what the Julia Roberts movie "Erin Brockovich" was all about. That wasn't insurance or trucking which, as mentioned earlier are often the defendants in case that go nuclear, but it's still a good example of egregious conduct that lead to a nuclear award. You could make a good case that it was indeed justified in that circumstance.

Question: Identify all reasons for nuclear verdicts discussed in this wiki article. (6)

• plaintiff-related reason: plaintiff is young, seriously injured, and had a high-income job
• plaintiff-related reason: reptile tactics by plaintiffs' attorneys
• the case is tried in state court
• stealth jurors
• defendant-related reason: if defense attorneys focus on "preserving a record on appeal" instead of focusing on winning over jurors
• defendant-related reason: egregious conduct by defendant

To remember these reasons, use the color-coding in the bullet points above to organize your thoughts. There are 2 plaintiff-related reasons, then 2 sorta miscellaneous reasons, then 2 defendant-related reasons

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The Impact of Nuclear Verdicts (p12)

Nuclear verdicts have significant impacts on the insurance industry, particularly in commercial trucking, causing a 22.5% increase in annual insurance payments between 2019 and 2020. These verdicts lead to higher insurance costs across various sectors, influencing both the cost and availability of coverage. Companies facing the risk of nuclear verdicts may reduce innovation and product development, and some small businesses, like trucking companies, have been driven to bankruptcy. Additionally, the fear of nuclear verdicts often results in larger settlements and changes to insurance programs, such as reduced coverage limits and increased excess insurance attachment points.

Question: Identify direct and indirect impacts of nuclear verdicts on insurers and other industries. (5) [Hint: BIDDS]

• Bankruptcy (Ex: small trucking businesses)
• Increased cost of insurance
• Decreased availability of insurance
• Decreased innovation & product development
• Shadow effect larger pre-trial settlements (because defendant anticipates the potential for the jury to assess an even higher amount)

Sometimes people tell me they remember the memory hints sprinkled through the wiki but that they can't remember the question it goes with. That's not good! This is where making up a personalized story comes in handy. To me, the word BIDDS reminds me of the card game "Bridge" because Bridge is all about "bidding". And what you bid has a big "impact" on whether you win the hand. Now, my dumb story about Bridge might not resonate with you but you can make up your own dumb story. The dumber, the better! 😜

Mitigation of Nuclear Verdicts (p13)

Companies can enhance safety measures and attorneys can employ specific defense strategies and appeals to reduce the likelihood of nuclear verdicts, while state and federal actions, such as recent legislative proposals in Texas and Iowa, also aim to mitigate this issue.

The Use of Defense Strategies and the Appeal Process (p13)

Defense attorneys can try using the comparative fault defense. This means that the degree of fault attributable to the plaintiff is assessed by the jury (in addition to the fault of the defendant). In practice, several jurisdictions use something called modified comparative fault defense. Specifically, this means:

• no compensation if plaintiff > 50% at fault
• pro-rated compensation if plaintiff is ≤ 50% at fault

That seems fair because there could be situations where the plaintiff was a dumb-ass. There are some pretty bad defendants out there, but there are also some pretty dumb plaintiffs and that shouldn't be ignored!

Another defense strategy is to file a pre-trial motion to limit questions from plaintiff's counsel that relate to Reptile Tactics. And a third defense strategy may be to work harder at identifying stealth jurors. This could take the form of a supplemental jury questionnaire.

A 4th defense tactic is an offer to confess, which is just a fancy way of saying that the defense offers to settle prior to the trial. The plaintiff can refuse, of course, but the catch is that if the verdict is less than the pre-trial offer, the plaintiff is then responsible for a portion of the defendant's costs, possibly even including attorney fees.

The 5th and last defense tactic is simply for the defendant to appeal the verdict. Sometimes this is successful; sometimes it isn't. In any case, let's summarize this into "Battle Card" format. I rearranged the order to group them a little better.

Question: Identify defense strategies against nuclear verdicts. (5)

• Pre-trial:

• defendant uses a supplemental questionnaire to better identify stealth jurors
• defendant offers to confess (if plaintiff refuses, they may have to pay some of the defendant's costs)

• During trial:

• defendant uses a (modified) comparative fault defense (no compensation if plaintiff > 50% at fault, pro-rated compensation if ≤ 50% at fault)
• defendant limits questions based on Reptile Tactics (because that could inflame the jury's emotions which could induce then to ignore appropriate legal standards)

• After trial:

• defendant appeals verdict

State and Federal Legislative Activity (p15)

Some states with lots of lawsuits and high liability losses tend to adopt tort reform faster, and these reforms can lower costs for insurers and consumers. Many states cap punitive damages either by a dollar limit or a ratio, like $500,000 or a 3:1 ratio. Some states have unique rules based on the defendant's income or net worth. Additionally, federal legislation like the Stop Underrides Act aims to improve truck safety and could reduce huge verdicts in trucking cases.

Question: Identify and briefly describe STATE & FEDERAL legislative activity related to tort reform and nuclear verdicts. (5)

1. State Tort Reform Adoption:
   • States with higher liability losses, more lawyers, and more lawsuits tend to adopt tort reform faster, aiming to reduce litigation costs.
2. Caps on Punitive Damages:
   • Many states cap punitive damages using either a fixed dollar amount (e.g., $500,000) or a ratio (e.g., 3:1) to limit excessive awards.
3. Unique State Limits:
   • Some states base punitive damage caps on the defendant's income or net worth, such as Kansas, Mississippi, and Montana.
4. Specialized Rules:
   • Certain states have specific rules for punitive damages in cases like product liability (Connecticut) or wrongful death (Rhode Island).
5. Federal Legislation - Stop Underrides Act:
   • This act aims to reduce underride accidents involving trucks, potentially lowering the occurrence of nuclear verdicts in trucking-related cases.

Note that the #1-4 are state activities, and only #5 is a federal activity. A potential exam question may ask you separately for an example of state legislative activity and federal legislative activity. It makes more sense for the "Stop Underrides Act" to be federal rather than state because trucks usually cross state lines so a state law wouldn't be very useful. As soon as the truck left the state, it wouldn't be subject to the law anymore.

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