Impact of Nuclear Verdicts on the Construction Industry

The impact of lawsuits continues to be a challenge for US companies. Nuclear verdicts have impacted every industry, but it can feel as though the construction industry has a target on its back due to highly visible projects and the number of vehicles on the road. This has created significant challenges for both small and large construction firms. 

Automobile insurance market

Construction companies, regardless of their fleet size, are at risk of experiencing accidents that could lead to nuclear verdicts. It seems like we see large verdicts every week from automobile accidents. Contractors are feeling this impact from the insurance marketplace, with premiums continuing to increase or reductions in coverages/limits.

For the past 10 years, the automobile insurance marketplace has struggled to keep auto coverage profitable. Vehicles have become more expensive to fix, and liability claims have skyrocketed. This is why underwriters ask more questions regarding the fleet for contractors.

Underwriters consider several factors when providing a quote for a business:

• Number of vehicles: The more vehicles in a fleet, the higher the risk of an accident.
• Type of vehicles: Heavier or larger vehicles create a higher probability of severe accidents.
• City of operations: Certain cities and states have a higher probability of large claims due to congestion or legal environment.
• Driver records: Qualified and trained drivers play a significant role in reducing premiums.

We have continued to see carriers decline to offer an umbrella or excess liability option along with the automobile liability if they feel like a company’s fleet is too heavy or large. This usually leads to increased pricing as the contractor has to find another market to quote their umbrella/excess policy.

General liability market

According to a Leaders Edge 2024 article, the average award for general liability verdicts increased by 224% from 2010 to 2019. For example, a Florida jury awarded $20 million to a motorist who was severely injured in a collision with construction equipment left unattended on a highway. The plaintiff’s attorneys argued that the construction company failed to properly secure the equipment and provide adequate warnings, leading to the accident.

Having a strong risk management program and consistently following agreed upon processes will help reduce the risk and potential impact of a nuclear verdict. Some examples are investing in advanced safety technologies, conducting safety audits, and implementing worker training programs to keep employees and the public safe.

Affordability and availability of insurance

As we see more nuclear verdicts in the US, insurance carriers are handling the risk by increasing premiums and/or deductibles, offering lower limits, or eliminating coverages previously provided. Carriers are less likely to offer high limits, and those that are offered come at a higher premium. Although nuclear verdicts are unpredictable, regularly reviewing insurance coverage with a knowledgeable construction broker is important.

Contractors should discuss their current insurance coverage and limits to make sure their business is protected versus what is required by contract or their bank.

If you need a trusted broker specialized in the construction industry, advisors at The Miller Group are ready to help.