By Joseph Doerr
Prior to 2010, the idea of a nuclear verdict being awarded to a plaintiff was almost unheard of, leaving crane business owners with little concern they could face a potential lawsuit in the multimillion dollar range. But the last ten years have seen plaintiff attorneys successfully employ the Reptilian Strategy, and verdicts that were once considered a rarity have started to increase in both frequency and severity.
According to a recent report by the American Transportation Research Institute, there were only 79 cases with verdicts over $1,000,000 during the 2005-2011 timeframe. Compare this with 265 verdicts during the 2012-2019 timeframe, not to mention a 967% increase in the amount being awarded – from an average of $2,305,736 to an astounding $22,288,000.
This dramatic increase has sent shockwaves across the industry, leaving business owners and their insurance partners scrambling to figure out how to deal with this unpredictable exposure. Industry articles, webinars and panel discussions have been devoted to this topic, specifically around possible contributing factors, how to reduce the risk of becoming a “nuclear” target, and the rise of Litigation Funding as the next phase in nuclear verdicts.
What is Litigation Funding?
Litigation funding can provide a plaintiff who otherwise lacks the necessary resources with the funds needed to litigate or arbitrate a claim. In return for providing this upfront financing, the litigation finance investors receive a profitable percentage of any verdicts or settlements awarded.
With an estimated global valuation of over $400 billion, litigation funding is an exploding market. In fact, 77% of respondents in this 2019 Lake Whillans survey predicted continued growth within this market –an insight supported by a 745% increase in litigation funding service usage growth from 2015-2019.
What does this mean for the industry?
The ability for plaintiffs to remove the expenses associated with filing a claim will be a continuing challenge as businesses face off against this growing litigation trend. Another obstacle will be the lack of regulatory oversight within the litigation finance industry, with oversight currently being handled on a state-by-state basis only. For example, litigation funding is permitted in Florida, New York, Ohio and Texas, while Alabama, Colorado, Kentucky and Pennsylvania have passed legislation to restrict it or deem the practice unlawful. It’s important to understand your state’s stance on these practices, as well as to work alongside industry associations to lobby state and federal lawmakers for legislation and tort reform.
Over the last decade, we have witnessed substantial growth in the frequency and severity of large verdicts in the crane industry, creating massive uncertainty in the way we manage risk. If swift action isn’t taken now, how long will it be before our industry witnesses a course correction that could impact our future?