Over the past two years, there has been a significant drop in medical professional liability (MPL) nuclear verdicts. Why? The majority of medical malpractice cases that go to court have jury trials, which were on hold during the worst of the pandemic. Even though most state and federal courts have reopened, a backlog of cases remains, with criminal trials receiving priority over civil ones. Whether MPL claim severity and nuclear verdicts will now start to climb again remains to be seen.
Nuclear verdict is a term typically used to defined damages in excess of $10 million. As nuclear verdicts overall have risen in both number and cost over the years, some now see the threshold as high as $50 million in damages in certain industries.
In the healthcare sector, between 2016 and 2019, the average MPL verdict rose 50% to $23 million, according to data from the American Society of Healthcare Risk Management.1 One of the most frequently cited nuclear verdict examples is a 2019 medical malpractice judgment for $205 million against Johns Hopkins Bayview Hospital, although a Maryland Court of Special Appeals did overturned that verdict.
Social inflation – which refers to the rising costs of insurance claims due to societal expectations and views on litigation rather than what is fair compensation for damages – is also feeding the nuclear verdict trend.
The factors that have contributed to social inflation include:
- Erosion of tort reform due to either state courts or legislative bodies modifying existing laws that had limited punitive damages.
- Litigation funding, in which a third party agrees to fund the cost of litigation or arbitration in return for a set percentage of any award, which could be as high as 40%.
- Public sentiment, as jurors have a tendency to assume that a large corporation or organization, and/or its insurance company, can afford to pay an award.
- Desensitization to large numbers in a time of billion-dollar government bailouts and six-figure college debt.2
"Because it's typically several years between when a lawsuit is filed and when it is settled, it takes time for MPL claim trends to surface," noted Kyle Pass, a broker with RPS. "As a result, insurance companies were slow to take into account the impact of social inflation on claims. They didn't realize the extent to which juries were getting tougher on their insureds and becoming more sympathetic to the plaintiffs."
Fortunately, while MPL claim severity has jumped, claim frequency has gone down.
"While most of us agree on the reasons behind the significant change in claim severity, the reasons for the decline in claim frequency is a matter of opinion," explained Karen Bennett, area senior vice president, RPS.
"It might have resulted from changes in the delivery of healthcare or improved risk management," Bennett continued. "Or, it could be related to either tort reform or attorneys diverting their focus to other industries. Whatever the reason, if we do see the frequency start to climb back to the levels we saw 15-20 years ago, coupled with the nuclear verdicts we are experiencing, the last challenging market will look like a cake walk."
Learn more about the impacts nuclear verdicts will have on the healthcare industry in the 2022 U.S. Healthcare Market Outlook.
1 Inside Medical Liability, Nuclear Verdicts Escalate, Inside Medical Liability, first quarter, 2021, accessed September 26, 2020.