Stemming the tide of social inflation

Defense attorney Robert F. Tyson, Jr., believes that insurance companies have the power to do away with nuclear verdicts. (Photo: Shutterstock)

The rise of social inflation in the insurance industry or nuclear verdicts, as they are known in the legal industry, is creating a chilling effect for insurers. Jury verdicts have been steadily climbing for at least 10 years but seemed to reach an all-time high more recently.

Defense attorney Robert F. Tyson, Jr., managing partner of the California-based law firm Tyson & Mendes, finds that the number of jury verdicts over $10 million have risen dramatically since 2009 when the ‘reptile theory’ came out. “That changed the way plaintiffs lawyers tried cases. The great recession was also well underway then,” explains Tyson. “Since then, insurers have not been focused on nuclear verdicts. They took a hard look at expenses and their lawyers focused on cutting expenses for these cases, while plaintiffs focused on indemnity.” It was this disconnect that aided the rise of social inflation for claims-related cases.