“Nuclear” Verdicts Go “Thermonuclear”: What is the Impact on Life Science Companies?

Researchers studying litigation in the United States over the past several decades have coined the phrase "nuclear” verdict to mean a jury award exceeding $10 million. There is no question that over the past twenty-plus years, the number of nuclear verdicts, and the amounts awarded, have increased exponentially, to the extent that one self-described independent communications and research firm, Marathon Strategies, has coined the term “thermonuclear” verdict, which is a jury award that surpasses $100 million. Researchers speculate that such verdicts can drive up the price of goods and services, adversely affect the cost and availability of insurance, and undermine fundamental fairness and predictability in the rule of law.

Prevalence of Nuclear Verdicts

Products liability lawsuits, many of which concern life science products, encompass one area amongst several in which increases in “nuclear” or even “thermonuclear” verdicts have been documented. Other areas where significant litigation activity has been reported include commercial auto, directors and officers, and professional liability.

Recent “nuclear” verdicts in the personal injury and product liability space include:

• $18.8 million awarded by a California jury against Johnson & Johnson to a single cancer patient who claimed he contracted mesothelioma from exposure to asbestos in talc-based baby powder (July 2023);
• $980 million awarded by a Pennsylvania jury against Mitsubishi in a defective seat belt case that left a driver paralyzed (October 2023);
• $1.5 billion awarded by a Missouri jury against Monsanto for three individuals diagnosed with non-Hodgkin’s lymphoma cancer allegedly caused by exposure to the weed killer Roundup (November 2023); and
• $165 million awarded by a Washington state jury against Monsanto for a group of school employees who allegedly became ill from PCBs that leaked from light fixtures made by the company (November 2023).

The growth of nuclear verdicts often varies by jurisdiction. See American Tort Reform Foundation report. The report highlights Georgia as one of the most prolific jurisdictions where nuclear verdicts have been entered: the report identifies twelve Peach State nuclear verdicts in 2022 alone.

In addition to Georgia, other jurisdictions reporting a disproportionate number of nuclear verdicts in 2023-2024 include the Philadelphia, PA Court of Common Pleas; Cook County, IL (i.e., Chicago); California; New York City; South Carolina for Asbestos Litigation; Lansing, Michigan; Louisiana; and St. Louis, Missouri.

What Fuels Nuclear Verdicts?

In its study of nuclear verdicts, the Institute for Legal Reform identified four significant factors potentially driving nuclear verdicts:

1. “Reptile Theory” tactics: plaintiffs’ lawyers seek to manipulate juror emotions to reach decisions based on fear rather than the evidence presented at trial.
2. Noneconomic damages: plaintiffs’ counsel emphasizes noneconomic damages, such as pain and suffering, as a means to punish a defendant and deter similar conduct by others.
3. “Anchoring:” Plaintiffs’ attorneys propose extraordinarily high awards to create a psychologically powerful baseline for jurors, effectively skewing what may be considered a reasonable monetary value of difficult-to-define damages.
4. Third-party litigation funding: An entity without any connection to the litigation extends a loan to the plaintiff to pursue the litigation, in exchange for receiving an agreed-upon percentage of the overall award if the claim is successful. This impacts how cases are settled, as the driver may no longer be the plaintiffs’ desire to resolve a case, but now includes the interest of a third party seeking to recoup an investment.

Nuclear Verdict Deterrence

Nuclear verdicts can lead to higher insurance rates and increased consumer costs. For this reason, it is essential for companies to develop and implement “best practices” to derail “reptile theory” and the other tactical drivers of nuclear verdicts referenced in the study cited above.

Of critical importance is for companies to set up and follow through with a written procedure to ensure that claims are brought to the attention of risk management personnel as soon as they are discovered, so that brokers and insurance carriers can be notified immediately. This will allow carriers to perform an early case assessment, and more effectively utilize their internal resources and skilled panel counsel for input and recommendations on potential exposure and strategies for avoiding nuclear verdicts.

Of course, taking steps to avoid an accident in the first place is the best defense against the possibility of a nuclear verdict. Solid quality control, vendor due diligence, and other risk management tools are essential. It is a best practice for companies to review risk management protocols on a regular basis to ensure that they are up-to-date and consistent with current industry standards and requirements, especially in highly regulated areas such as the life science industry. This will help not only in minimizing the potential for accidents, but also in defending claims when accidents are unavoidable. Defense counsel’s ability to present evidence to a jury that a company did all it could to avoid the potential for accidents helps establish the company as a good corporate citizen, thereby defusing the impact of reptile tactics and other strategies employed by plaintiffs’ counsel to inflate verdicts.

On a macro level, disclosure of third-party litigation funding is an important deterrent to nuclear verdicts. As noted above, litigation funding may serve as a disincentive for the parties to reach a settlement, thereby increasing the overall cost of litigation.

In 2021, Congress had before it the Litigation Funding Transparency Act, which would have required disclosure of litigation funding arrangements in any federal class action or multi-district litigation. This bill ultimately was never brought to a vote. A significant challenge for the bill’s supporters was the lack or unavailability of data to show the real impact of third-party funding. Unfortunately, with disclosure not mandated in most cases, it is difficult to assess the impact of such funding on the ultimate result.

Some states, including Wisconsin, and West Virginia, have enacted laws addressing disclosure of litigation funding agreements in civil actions, and in other states, such as California and New Jersey, local court rules require some disclosure. The states requiring disclosure, however, remain in the minority. Absent a disclosure requirement, the financial interests of the third-party financer are not known by the court or the parties. They are essentially a “silent plaintiff” with a say in the litigation without accountability and over whom the court has no jurisdiction.

The Impact of Nuclear Verdicts on Life Science Companies

While no industry is immune to the potential for nuclear verdicts, pharmaceutical and medical device companies are particularly at risk. Medical treatments, by their very nature, have side effects, which may vary significantly in extent amongst patients. It is the mission of the U.S. Food & Drug Administration (“FDA”), in determining whether to approve new drugs and medical devices, to make a judgment as to whether a new product’s benefits to users will outweigh its risks. Yet, when side effects do happen, they can be severe and may result in litigation. Sympathetic bodily injury claims and mass tort litigation expose life science companies to the potential for verdicts nuclear, or even “thermonuclear,” in scope.

Given the continued escalation in the number of nuclear verdicts and the amounts awarded, it is imperative for companies and their insurers to work together on strategies to mitigate this exposure and engage in statewide efforts to encourage tort reform, as unreasonable nuclear verdicts could have sweeping negative consequences for insurers, insureds, and society.

Authored by Kimberly Kayiwa, J.D., Berkley Life Sciences, AVP, Claims