$100M+ Thermonuclear Verdicts Drive Demand for Excess Liability Coverage

Businesses across the U.S. face a heightened risk of casualty losses as jury awards continue to climb. A recent study by Gen Re indicates that there were 89 “nuclear verdicts” — or jury awards of $10 million or more — in 2023, reaching a total of $14.5 billion, a 15-year high, Insurance Business Magazine reported in August. Liability claims have increased 57% in the past decade, due in part to social inflation, a separate Gen Re study found.

The trucking industry, in particular, has seen soaring lawsuit costs, with verdicts and settlements averaging $27.5 million and $10 million, respectively. In response, insurers are adjusting capacity and, in some cases, turning to AI and litigation analytics tools to manage cases more effectively, the publication reported.

“The verdicts that are coming in today are certainly a concern — and it affects all of us,” said Rick Sforzo, Senior Director, Claims Services, Burns & Wilcox, Atlanta, Georgia. “I have been doing this for almost 40 years. A $1 million verdict used to be a large amount, but now we are seeing verdicts of $10 million, $20 million, $40 million. That is just extremely high.”

A $1 million verdict used to be a large amount, but now we are seeing verdicts of $10 million, $20 million, $40 million. That is just extremely high.

In fact, the industry is now seeing a rise in so-called “thermonuclear verdicts” as well, said Adrian Smith, Managing Director, Broker, Casualty, Burns & Wilcox, Brokerage Division, Chicago, Illinois. “These are judgments of $100 million or more,” he said. “This is a more recent trend.”

With liability limits on Commercial General Liability (CGL) Insurance, Motor Carrier Auto Liability Insurance, and other policies being exhausted more quickly, many businesses rely on Excess Liability Insurance for protection against large verdicts — especially as the “steady stream” of nuclear verdicts shows no sign of relenting, said Connor Block, Broker, Commercial Insurance, Burns & Wilcox, Chicago, Illinois.

“Nuclear verdicts are not going away,” he said. “Trucking is one of the main culprits, given the nature of the claims and the potential for more severe injuries. We try to work with our insureds and agents to determine the worst-case scenarios and how to manage that.”

Costs ultimately passed to consumers

In 2024, a jury in St. Louis, Missouri, delivered a $462 million verdict in a products liability lawsuit filed after a 2019 trucking accident that killed two men. The lawsuit claimed trailer manufacturer Wabash International used a rear impact guard that it knew would be inadequate against “underride impacts,” CVN News reported. In March, a St. Louis circuit court reduced the verdict to about $120 million, according to Transport Topics.

A 2024 report from Allianz Commercial showed that nuclear verdicts have tripled since 2020. In 2023, nuclear verdicts grew by 27% and thermonuclear verdicts increased by 35%, Insurance Business Magazine reported.

Juries often assume insurance companies have an “unlimited revenue stream,” Block said, but these payouts strain insurers. “We are really seeing the cost passed along, unfortunately, to the consumer,” he said.

The verdicts affect not only rates but also business practices, Sforzo added. “If an adjuster worries that failing to settle a claim could eventually result in a large verdict, then the settlement amount on a smaller claim is likely to rise as well,” he said. “It is changing the way that claims are adjusted. Only a small percentage of cases go to trial, but if half of those result in nuclear verdicts, it creates a fear of going to trial at all.”

The importance of Excess Liability coverage

As the cost of defending and settling claims rises, business owners are at greater risk of facing an underinsured loss. CGL Insurance policies typically have a $1 million limit — though some carriers are “beginning to consider higher limits” in response to rising costs, Smith noted — but Excess Liability Insurance carriers are “the most vulnerable to huge losses,” he said.

This type of coverage provides additional limits above those included in CGL Insurance and other policies, creating a financial safety net when claims exceed primary coverage. Pricing on Excess Liability Insurance has increased but capacity is largely still available, Block pointed out.

“A lot of business owners do not want to imagine a worst-case scenario — rightfully so,” he said. “So many exposures are out of their control, though. With these nuclear verdicts, it is usually in response to something tragic that happened. How bad things can get financially after that is almost limitless. A nuclear verdict could bankrupt you. Insurance is there to protect you.”

With these nuclear verdicts, it is usually in response to something tragic that happened. How bad things can get financially after that is almost limitless. A nuclear verdict could bankrupt you. Insurance is there to protect you.

In the past, insurance carriers would often offer a single Excess Liability Insurance policy with $25 million in coverage. However, in response to the threat of nuclear verdicts, carriers are more likely to reduce capacity to $5 million or $10 million in Excess layers or, for some classes of business, smaller increments of $2 million to $3 million within the first $5 million of the Excess tower, Smith explained. “Carriers now manage their limits and their capacity much more tightly,” he said.

Nuclear verdict drivers and the potential for reform

The rise in nuclear verdicts has been attributed to a combination of factors, including social inflation, the erosion of tort reform, more aggressive strategies by plaintiff attorneys, and the growing involvement of the litigation funding industry, in which private equity firms fund lawsuits. This “has really accelerated over the last several years,” Smith said, and is prompting calls for greater transparency.

“It is important to look at the drivers behind these nuclear verdicts, from the changes in public sentiment to the acceleration of the litigation funding industry,” he said. “Litigation funding is a tax on American businesses. All of us are paying for this.”

It is important to look at the drivers behind these nuclear verdicts, from the changes in public sentiment to the acceleration of the litigation funding industry. Litigation funding is a tax on American businesses. All of us are paying for this.

Regulatory changes are likely needed to rein in nuclear verdicts, Block said, but such changes do not appear imminent. Business owners can be proactive by thinking through worst-case scenarios, addressing risks before they become a problem, and carrying sufficient insurance limits. “Good risk management is always the most important thing,” he said.

As for the future of increasingly large verdicts, “that is the nuclear question,” Sforzo said. “Ultimately, if somebody is injured or somebody makes a mistake, you want the public to be fairly compensated. The insurance industry wants that, and that is what the system is for — to fairly compensate individuals. That term ‘fairly,’ though, has become out of control. The system is broken in that way and I think legislation has to step in. It is a very, very tough issue.”

Some states are beginning to require the disclosure of litigation funding during the discovery process, which would allow juries to see when private equity firms are driving lawsuits, Smith said. Expanding this practice nationwide, along with broader tort reform efforts seen in states like Florida and Georgia, could help address nuclear verdicts.

“Tort reform and the disclosure of litigation funding would be a huge deal,” Smith said. “Those two possibilities could offer some hope.”