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The $10 Million+ Threat

posted by TrueNorth Risk Management on Tuesday, May 27, 2025

THE $10 MILLION+ THREAT: Nuclear verdicts and the commercial real estate insurance crisis

The commercial real estate sector is facing an increasingly turbulent insurance landscape, primarily driven by the growing prevalence and severity of “nuclear verdicts” – jury awards exceeding $10 million, frequently in lawsuits involving personal injury or wrongful death claims. This trend, identified as a key concern by Allianz Commercial (R&I Editorial Team, 2024), shows no signs of slowing down. Research by Marathon Strategies cited in the Allianz report indicates a 27% surge in nuclear verdicts against companies from 2022 to 2023, with “thermonuclear” verdicts (awards over $100 million) jumping by 35%. 

The effect on commercial real estate insurance

For the real estate industry, the rise of these massive jury awards has a direct impact on your financial health: 

• Soaring premiums: Insurers face increased payouts and the risk of significant future losses. To compensate for this heightened risk, they increase premiums for their liability policies.  
• Reduced coverage limits: Some insurers may become hesitant to offer the same high coverage limits as before, leaving commercial real estate companies with a greater portion of the risk to bear themselves. 
• Increased scrutiny and underwriting: Many insurers have tightened their underwriting processes, carefully reviewing risk management practices and loss control measures. Properties or businesses identified as having higher liability exposures may experience steeper premium increases and difficulty securing proper coverage. 
• The necessity for higher deductibles: To manage rising premiums, commercial real estate companies might be forced to accept higher deductibles, meaning they’ll have to shoulder more of the initial cost of a claim before insurance kicks in. 
• Impact on development and investment: The increased cost and complexity of insurance can also impact the feasibility of new developments or influence investment decisions within the commercial real estate sector. Projects regarded with higher liability risks could become less attractive. 

The scale of this issue is significant. According to the report by Allianz Commercial, liability claims in the U.S. have surged by 57% over the past decade (R&I Editorial Team, 2024), largely attributed to the nuclear verdicts. In 2023 alone, U.S. commercial casualty insurance losses reached $143 billion. The financial strain on the insurance industry directly translates to increased costs and challenges for the commercial real estate sector. 

Understanding the anatomy of a nuclear verdict

Substantial jury awards extend beyond covering financial losses like medical bills. They often include payment for pain and suffering or emotional distress. Furthermore, they can also involve punitive damages, intended to punish defendants for reckless or malicious behavior, serving as a deterrent. 
 
Several interconnected factors are driving the increase in mega-verdicts: 

• Societal perspectives: Juries have grown to be increasingly sympathetic to plaintiffs and harbor less trust in large corporations, leading to a greater willingness to award substantial compensation. 
• The “reptile theory” in litigation: A legal tactic employed by plaintiff attorneys that aims to tap into jurors’ instincts of fear and safety. By framing the defendant’s actions as a threat to the community, they evoke an emotional response that can overshadow logical decision-making. 
• Normalization of large verdicts: The Allianz report highlights that the increasing frequency of significant awards has shifted public perception of what constitutes appropriate compensation. 
• Level of severity: Cases involving particularly severe injuries, fatalities or egregious misconduct by the defendant are more likely to result in higher financial awards. The human element and the jury’s perception of injustice heavily influences their decisions. 
• Scrutiny of conduct: When a company is viewed as grossly negligent, intentionally harmful or demonstrating a lack of care for safety, juries are far more inclined to levy significant punitive damages to send a strong message. 

Nuclear verdict mitigation strategies

While the threat of nuclear verdicts is real, you aren’t powerless. Proactive measures can help mitigate these risks and potentially influence insurance costs: 

• Enact robust risk management: Implement comprehensive safety protocols, regular property inspections, thorough tenant screening and meticulous record-keeping. A well-defined plan for every potential incident is a must. 
• Prioritize safety and maintenance: Invest in proactive safety measures, such as well-maintained common areas, functioning security systems and clear hazard warnings. Regular property maintenance of elevators, escalators and other building systems to reduce the likelihood of incidents that could lead to liability claims is imperative. 
• Understand and address social inflation: Develop an awareness of societal attitudes and how they might influence litigation. Transparent communication, community engagement and demonstrating a commitment to well-being is important.  
• Ensure comprehensive insurance: Obtaining thorough business insurance remains a critical financial safety net. Are your coverage limits adequate enough to address potentially large claims? Explore excess liability (umbrella) policies for additional protection.  
• Partner with a trusted advisor: Work with an experienced insurance specialist who understands the nuances of the commercial real estate industry and the evolving legal landscape. They can help assess your specific risks, navigate the current market and develop tailored strategies to reduce exposures. 

Protecting your interests

Nuclear verdicts pose a significant and growing threat to the commercial real estate industry. The potential for multimillion dollar jury awards is directly impacting insurance costs and coverage availability. By understanding the drivers behind this trend and implementing proactive risk management and insurance strategies you’ll better traverse the landscape and protect your bottom line in an increasingly litigious environment. Proactive preparation is essential for the security of your business. 

Sources:

1. R&I Editorial Team. (2024, Dec. 18). Nuclear Verdicts Drive Rising US Liability Claims. Risk & Insurance. Retrieved from https://riskandinsurance.com/nuclear-verdicts-drive-rising-us-liability-claims/