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Emotion, outside funding driving up cost of litigation

Nuclear verdicts increasingly have little to do with case facts, say experts

Nuclear verdicts are on the rise, and two behind-the-scenes factors playing large roles are the emotional pleas plaintiffs’ attorneys are making to juries and the growing number of hedge funds that invest in civil lawsuits. (Photo: Jim Allen/FreightWaves)

Nuclear verdicts may be few, but their impacts resonate across the trucking insurance space, if only because the numbers are so eye-popping. Payouts of $20 million, $30 million and even $90 million-plus have been awarded to victims of incidents involving trucks but sometimes not even the fault of the truck driver. And these awards drive up costs for everyone.

Defined as a jury award above $10 million, nuclear verdicts are not new, but they are seemingly on the rise. And large jury awards not officially defined as nuclear verdicts are rising even faster. The American Transportation Research Institute studied the phenomenon for the time period from 2006 through 2019. What it found was astonishing: a 335% rise in the number of cases with a jury award over $1 million from 2012 to 2019. The number of verdicts with awards between $1 million and $2 million increased 300% in the same period.

The study also provides evidence to refute arguments that nuclear verdicts reflect real-world cost increases. ATRI’s research found that from 2010 to 2018, the size of verdict awards grew 51.7% annually at the same time standard inflation grew 1.7% and health care costs grew 2.9%.

“As long as I’ve been doing this, we’ve had large verdicts, we’ve had excessive verdicts,” said Clay Porter, national outside counsel for Porter Rennie Woodward and Kendall LLP. “They weren’t numerous. We called them runaway verdicts, we didn’t call them nuclear verdicts.”

Porter was speaking during a recent session on nuclear verdicts at the Truckload Carriers Association’s Virtual Safety & Security meeting. He currently works with a few large motor carriers managing major losses. He was one of the founding members of the Trucking Industry Defense Association (TIDA).   

During the presentation, Porter recalled five verdicts against trucking companies in 2012 with awards averaging $22.5 million — figures that seemed to shine a spotlight on these cases.

An awakening

“This series of verdicts caught the attention of the industry in a way that the so-called runaway verdicts in the past had not done,” he said. “One of the things about these cases is that they were against some of what we’d call the safest motor carriers in America — some of the companies that devote the most resources to the hiring, the safety training, the mechanical device safety and so forth — so it really grabbed the attention of the industry.”

Numerically, very few cases end in nuclear verdicts, Porter said, but they represent a threat to the industry nonetheless. Excess insurance rates, described as the cost to acquire insurance above minimum standards, have increased 10%, he said, as insurers seek to cover these large losses.

Generally, large jury awards, Porter said, are intended to deter future actions, but that doesn’t appear to be the case with trucking verdicts.

“The judicial remedy is inadequate and unreliable, and there really is no valid justification for this to happen,” he said. “There’s no societal benefit that occurs because of excessive verdicts.”

Reasons for nuclear verdicts are numerous, but of the two major factors in play — emotion and outside funding — neither has anything to do with the facts of a given case.

“They are emotional presentations,” Porter said of jury trials. “Almost no trial takes place without a very strong emotional component in the case. If you’ve had anything to do with truck litigation or serious injury litigation, the power of this emotional impact is enormous, it’s just incredible.”

Porter added that plaintiffs’ attorneys use whatever means necessary to place a value on a life.

How much is a life worth?

“It is when the plaintiff’s lawyer gets up and tells the jury they give baseball players $37 million a year, and don’t you think this life has that value for [its] entire life? It’s that kind of presentation,” he said. “Let me make [this] really clear right now — what the plaintiff lawyer tells the jury to award is not [based on] evidence. It astounds me the courts allow plaintiff lawyers, or any lawyer, to get up and when the case has never mentioned a number for noneconomic damages, [allows lawyers to give] a number, to pull it out of thin air.”

In a rebuttal to ATRI”s report, though, the Academy of Truck Accident Attorneys (ATAA) argued that jury awards are factually based and the result of negligent trucking companies.

“Good companies with good drivers rarely kill families, maim motorists, and destroy lives. When they do, they admit fault and settle,” asserted ATAA co-founder Michael Leizerman in a statement.

“Nuclear verdicts are the result of nuclear injuries – paralysis, brain damage and death, when the truck company has acted extremely recklessly – sometimes with impunity – and refuse to be accountable. Verdicts aren’t strangling the trucking industry. Bad trucking companies are strangling the trucking industry.”

Todd Reiser, vice president of transportation for Lockton Companies, also cited hedge funds as a key factor driving up jury awards.

Outside contributors

“They will fund litigation and pay for the attorney with the intent that if they do get a big verdict, they get to keep a large amount of the verdict,” Reiser said during a separate discussion during the Safety & Security meeting. He said it is estimated as much as $10 billion in outside funding from hedge funds and private equity is flowing into litigation, and in most jurisdictions, that fact can’t be disclosed to the jury.

“There is a lot of energy being invested in this,” Reiser said. “There is also a lot of time and effort being invested in trying to fight litigation funding, and I think this is one of the areas where our industry may be making some significant headway — if nothing else at least to make sure the fact that an outside litigation funder funding the case is something the jury is made aware of.”

Porter called for tort reform to address massive jury awards. He outlined his proposal for doing that, including:

  • Caps on noneconomic damages
  • Caps on punitive damages
  • No punitive evidence in the compensatory phase
  • Neutral venue options
  • Strict rules on lawyer argument (e.g., not arguing numbers not in evidence)
  • Judicial oversight of undue lawyer influence
  • Judicial oversight on judge competence

The American Trucking Associations is working on tort reform, Porter said, noting that it is crucial to reining in out-of-control costs.

ATAA argued that the tort system is working exactly as it is supposed to. 

“The ATRI report notes that, as a result of large verdicts, ‘insurance companies are more selective in who they insure.’ This is exactly how the tort system is supposed to work to keep everybody safe,” ATAA said. “If a company isn’t performing required drug tests, for example, then insurance companies shouldn’t give them insurance and allow them to be on the road, since the federal government has insufficient staff to monitor all motor carriers.”

Further, ATAA said it is not the motor carriers responsibility to pay these large awards, that’s why they have insurance.

“Large truck companies don’t have to pay the few $10 million-plus verdicts, they have insurance to cover this. But the trucking companies with only minimum insurance can’t pay for the harm they cause,” ATAA co-founder Michael Leizerman said in a statement.

Porter said tort reform is needed for another reason. “The case to do it is not just [because] … this costs us a lot of money. That is not the case,” he said. “The case is that the system has failed in this area. The system is broken, and it really is to the extent that these things are happening … The excessive verdict is real and extreme.”

Click for more FreightWaves articles by Brian Straight.

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Brian Straight

Brian Straight leads FreightWaves' Modern Shipper brand as Managing Editor. A journalism graduate of the University of Rhode Island, he has covered everything from a presidential election, to professional sports and Little League baseball, and for more than 10 years has covered trucking and logistics. Before joining FreightWaves, he was previously responsible for the editorial quality and production of Fleet Owner magazine and Brian lives in Connecticut with his wife and two kids and spends his time coaching his son’s baseball team, golfing with his daughter, and pursuing his never-ending quest to become a professional bowler. You can reach him at [email protected].