As jury awards continue to rise in the United States, the insurance industry is feeling the pressure. Significant verdicts, often reaching into the hundreds of millions, are pushing liability costs higher. This trend is prompting insurers, corporations, and defense attorneys to rethink their strategies.
Experts believe that the next phase in addressing these massive verdicts might involve technology, particularly artificial intelligence. Steve Ellis, vice president at Sedgwick, suggests that AI can be a powerful tool in predicting trial outcomes and understanding jury behavior. He emphasizes the importance of using predictive analytics to counteract strategies employed by plaintiffs.
Ellis notes that advanced analytics has already changed how insurers and third-party administrators approach high-risk claims. For example, they can now evaluate attorneys based on their performance, which includes win/loss records and case durations. This data-driven approach helps ensure that when a case is worth millions, the best legal representation is secured.
Moreover, this analytical method extends to selecting expert witnesses and crafting case themes. By using mock jurors that reflect the local community, attorneys can receive valuable feedback on which arguments resonate and which do not.
Sedgwick’s research indicates that only a small fraction of litigated claims actually go to trial, but when they do, the stakes are incredibly high. Ellis points out that early intervention is crucial, especially within the first two weeks of a claim. This is when the most critical decisions are made, and Sedgwick has developed an algorithm to identify cases that are likely to lead to severe outcomes.
Meanwhile, plaintiffs’ attorneys are often quick to position their cases, sometimes with the backing of third-party funding. They are not hesitant to invest in resources that will strengthen their case from the start, including witness interviews and accident scene reconstructions.
In contrast, defense teams sometimes wait too long to engage top experts. Ellis warns that this could be a costly mistake, especially as the likelihood of high-stakes claims becomes clearer.
The insurance landscape is also shifting due to recent court trends. Last year saw a significant rise in large verdicts, with 49 cases exceeding $100 million, nearly double the number from the previous year. The median value of these large verdicts has also increased.
Social inflation, which refers to the rising costs of claims driven by societal factors, is estimated to be increasing at about 7% annually. Insurers are responding by tightening their policies, adjusting risk limits, and refining their strategies to identify cases backed by third-party funding.
Tort reforms in states like Florida and Georgia have been met with approval from the industry, as they have led to a decrease in lawsuits and allowed some insurers to reduce rates. However, even in these reform states, large verdicts remain a concern due to various factors, including aggressive marketing by attorneys and increasing representation rates in liability claims.
Ellis remains cautiously optimistic about the future of the litigation environment. He believes that with the right use of technology and early intervention, insurers can mitigate the risk of nuclear verdicts. As the industry adapts to these challenges, embracing technology will be essential in shaping effective strategies moving forward.