29 - Understanding the Impact of Nuclear Verdicts on the Insurance Market
Navigating the Tumultuous Waters of Insurance Claims: Insights from an Industry Expert
Welcome to my blog, where I delve into the intricate world of insurance claims and share insights from industry leaders. In a recent episode of my podcast, "Insurance Claims Innovation," I had the pleasure of hosting Ian Matthes, a seasoned legal expert in the insurance field. As the regional managing attorney and general counsel with Vernon and Bowling, Ian brought a wealth of knowledge to our discussion, and I'm excited to share the key takeaways with you.
Ian Matthes: From Defense Litigation to Insurance Innovation
Ian's journey into the insurance industry began with a firm job in Atlanta, Georgia, focusing on insurance defense litigation. His career trajectory took a pivotal turn when he joined a regional carrier as their national litigation manager, overseeing class actions and bad faith matters. His expertise led him to AIG, where he served as the director of litigation management for the personal lines division. Today, Ian is a driving force at Vernon and Bowling, where he's instrumental in managing litigation from within the firm to support client goals and promote insurance-related topics.
The Challenges Insurance Carriers Face Today
During our conversation, Ian highlighted the current challenges in the insurance industry, with inflation and increasing risks affecting the frequency book. He pointed out the significant impact of tort reform in Florida, which is gradually leading to savings for consumers and modest profits for insurers. However, California continues to grapple with severe losses due to natural disasters, which poses a tough challenge for severity books.
The Rise of Nuclear Verdicts and Settlements
The term "nuclear verdicts" refers to court awards exceeding $10 million, and Ian noted that we're now witnessing verdicts reaching into the hundreds of millions and even billions. This escalation is not only concerning for insurance companies but also for excess and umbrella coverage providers. It raises critical questions for risk managers and CFOs about the adequacy of their insurance towers. Ian also introduced the concept of "nuclear settlements," where settlements soar well over the $10 million mark, further complicating the landscape for insurers.
The Influence of Attorney Advertising on Settlement Values
In our discussion, Ian and I touched on the prevalence of attorney advertisements in states like Florida and Georgia, where large settlements are flaunted on billboards and TV commercials. While these ads may not directly drive up settlement values, they could embolden plaintiffs to hold out for more money, especially in states with favorable settlement rules.
The Impact of Skyrocketing Verdicts on Premiums and the Call for Tort Reform
The increasing frequency of large verdicts has led to higher insurance premiums, affecting both businesses and consumers. Ian emphasized the need for proactive measures to manage these risks, such as engaging excess coverage layers early and being selective about which cases to take to trial. He also discussed the necessity of tort reform, as seen in Florida, and the potential need for state constitutional amendments to ensure lasting change.
Educating Jurors and Mitigating the Effects of Large Awards
Educating jurors about the real-world implications of their decisions is a complex task. Ian suggested that during jury selection, attorneys could try to identify jurors with a more realistic view of compensation. He also mentioned that helping jurors understand the broader economic impact of their verdicts, such as the effect on their own investments, could lead to more rational awards.
Conclusion
My conversation with Ian Matthes shed light on the multifaceted challenges facing the insurance industry today. From the rise of nuclear verdicts to the need for tort reform, it's clear that insurers, legal professionals, and consumers alike must navigate these issues with care and foresight. As we continue to explore these topics, it's my hope that this blog post has provided you with valuable insights and sparked further discussion on the future of insurance claims.
Stay tuned for more episodes of "Insurance Claims Innovation," where we'll continue to unravel the complexities of the insurance world and bring you the latest from experts like Ian Matthes.
