You may have heard the term “social inflation” in recent months. Social inflation is a sharp increase in the frequency and severity of jury awards as a result of societal factors. Because of social inflation, it is much more difficult today than a few years ago to accurately anticipate a jury award or to predict the cost of a claims settlement. The facts of a case simply are not always a good indicator of a monetary judgment.

Social inflation is highly dependent on emotional responses to a case. Increasing media publicity surrounding high verdicts and the spread of personal injury legal advertising influence this increase, as well. One large verdict—often termed a “nuclear” verdict—can easily exceed even high liability insurance limits. Just one of these punitive judgments could bankrupt your business.

Excess liability insurance can help protect against these outsized judgments, and directors and officers should consider securing individual D&O protection to complement what is offered by the company they serve.
While these nuclear verdicts often hit large corporations, no business is exempt. Some juries want to send a message to defendants or hyper-compensate victims. Moreover, individual jurors frequently don’t see a million dollars as significant, with some misunderstanding the role of insurance in the equation. Lawyers often use sophisticated technology to sway jurors, and plaintiffs are increasingly availing themselves of third-party funding for litigation costs. These financing arrangements allow plaintiffs to sue more often and drag lawsuits out longer, which eats up defense cost provisions in insurance liability policies. These lenders essentially “bet” on high verdicts and lend their money to fund litigation preparation and trial costs, taking a percentage of the verdict in exchange for their investment.

Rettino Insurance is aware of this trend and can help you find suitable liability insurance that protects you and may even offer early, affordable legal help. Contact us to learn more