Nuclear jury verdicts here to stay in commercial auto

Nuclear jury verdicts here to stay in commercial auto | Insurance Business America

Nuclear jury verdicts here to stay in commercial auto

A 26-year-old trucker called Rogel Aguilera-Mederos was sentenced to 110 years in prison after a deadly crash in 2019, which left four people dead and several others injured in the state of Colorado.

The young driver was transporting timber in the Rocky Mountains foothills when the brakes on his truck failed, and the vehicle careered downhill into stationary traffic, when it burst into flames and caused a major pile-up. Prosecutors said Aguilera-Mederos drove dangerously and failed to act when he knew his brakes were failing.

Aguilera-Mederos was convicted on 27 counts and was initially told he must serve the minimum sentence for all convictions consecutively, reaching a total of 110 years in prison. His sentencing was later reduced to 10 years, following widespread outcry across the United States - especially from the trucking community, who threatened to boycott Colorado - over the severity of the sentencing.

While the trial judge was simply following state law when sentencing Aguilera-Mederos to so many years behind bars, this case is reflective of a wider theme impacting truckers and the commercial auto industry, which is that any collisions or incidents (especially fatal ones) will be ruled on harshly.

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In recent years, the commercial auto insurance market has been severely impacted by social inflation and a big increase in nuclear jury verdicts demanding payouts of $40 million-$50 million, which standard insurance policies were not meant to cover. These rising litigation costs have impacted insurers’ claim payouts, loss ratios and, ultimately, how much policyholders have to pay for commercial auto insurance. These are some of the core traits of social inflation.

“I don’t see a whole lot changing anytime soon,” said Dennis Brady, president of Burns & Wilcox Brokerage. “Unfortunately, a lot of these nuclear verdicts centered around the auto personal injury area. The average verdict size for truck crashes has increased 1,000% over the last 10 years. It’s gone from an average of $2.3 million 10-years-ago to $23.3 billion today. They are staggering numbers.

“I don’t know what it’s going to take to mitigate that or change it, but I don’t see it changing anytime soon. Should you be thinking about larger limits? Absolutely. Should you think about protecting yourself? Absolutely.”

It’s not just the commercial auto sector that has felt the wrath of social inflation and nuclear jury verdicts in recent years, it has also made its way into professional liability and other excess liability lines.

“Social inflation is nothing new, but it’s certainly been in the news a lot more recently,” said David Derigiotis, national professional liability practice leader for Burns & Wilcox. “I think [it will stick around] as long as there’s a mistrust of corporations, emotions driving jury thinking, and a changing demographic.”

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In Derigiotis’ realm of professional liability, social inflation typically rears its ugly head in medical malpractice lawsuits and cases against large pharmaceutical companies. For example, in 2021, three major drug distributors (Cardinal Health, AmerisourceBergen and McKesson) and the pharmaceutical giant Johnson & Johnson reached a $26 billion settlement to end civil liability cases around the opioid epidemic in the United States.

Derigiotis said he expects those types of severe settlements – perhaps not quite in the $26 billion range – to continue. He said: “We’re going to continue to see lawsuits, we’re going to continue to see those higher awards being given out. That’s why we do a lot of benchmarking. That’s why we stay in tune with what’s going on across a variety of industry verticals. We want to make that information available to our clients so that they can make the best decisions possible from not only a coverage but eliminate perspective as well.”