Editorial: Striking a balance in liability reforms

Rising court awards and settlements have become a huge issue for the insurance and risk management sector, regularly cited as the principal cause of continued increases in liability insurance premiums, particularly for commercial auto rates.

Plaintiffs lawyers are often blamed for the rise, and one only needs to drive along a busy highway and read the adjacent billboards to see how frequently and effectively they ply their services to interested parties who may have been injured in a crash or at work.

Insurers hit back with references to social inflation, nuclear verdicts, thermonuclear verdicts and so-called legal system abuse.

The root causes are also debated by both sides, with plaintiffs blaming greedy and heartless corporations and insurers decrying soulless lawyers who use emotionally charged “reptile theory” tactics to sway juries as well as profit-driven, largely anonymous third-party litigation funders standing behind the lawsuits.

It would be nice to think that both sides could use more measured tones and arguments, but also Pollyannaish in the era of hyperbole we are living through.

Regardless, the available numbers show a situation that will only continue to drive up costs for companies and their insurers.

According to a recent Marathon Strategies analysis, 135 lawsuits resulted in jury awards exceeding $10 million in 2024, a 52% increase over the prior year. Even more striking, verdicts above $100 million nearly doubled, to 49.

What will ultimately be paid after appeals are exhausted remains a matter of debate; however, the trend appears to be clear.

A fair justice system must serve all interests: fairly compensating injured parties while preventing unreasonable financial burdens on companies and insurers, which ultimately increase costs for consumers. Quantifying harm is inherently subjective; however, reaching a balanced consensus on liability awards is essential for long-term stability for everyone.

There is reason for cautious optimism. Several states, including Florida, have implemented tort reforms aimed at reducing excessive verdicts. Florida, once known for frequent verdicts over $10 million, experienced a significant decline after reforms, with insurers reporting noticeable improvements. Georgia also recently enacted reforms, though the results are still to be determined.

Additionally, several states are introducing transparency laws for third-party litigation funding, ensuring that while citizens can access the courts, the financial backing behind the lawsuits is visible. Insurers rightly view greater transparency of lawsuit funding as an essential step in changing the David vs. Goliath narrative in corporate legal disputes.

Wider changes may take some time, but liability reform is always a long game, given the array of constituents involved. Input from risk managers and insurers, though, remains vital, along with accurate and realistic data on the scope of the problem.

Reform takes time and collaboration, but the promise of a fairer, more stable system is worth the effort.