After a two-year hiatus from the US courts slowdown, nuclear verdicts in medmal have made their comeback with a vengeance, with jury awards doubling in size from pre-pandemic years, according to new claims data from TransRe.
In 2024, the top 50 largest verdicts in medical malpractice averaged $56mn, according to the reinsurer. This was more than double the annual average of 2019, when the figure stood at $27mn, right before the Covid-19 pandemic started disrupting US courts.
However, the frequency of nuclear verdicts - or cases that resulted in an award of more than $10mn - has recovered to pre-Covid levels but has not trended upwards in the same way.
In short, the severity of 2022-24 medmal nuclear verdicts has deteriorated beyond the pre-pandemic trend whereas frequency has merely bounced back to previous levels.
“It's showing that when we're losing claims at trial, we're unquestionably losing them for consistently larger numbers,” said Rich Henderson, TransRe SVP and head of medmal claims.
Medical malpractice, along with commercial auto, was one of the first lines of business that spurred a reckoning in the P&C industry on claims inflation and nuclear verdicts.
With the help of exclusive data from TransRe and WTW, the Insurance Insider US team took a deep dive into how the medmal segment’s claim trends have developed over the past decade or so through to the end of 2024.
1. Frequency is in full recovery
While current data suggests that there were 49 nuclear verdicts in medmal last year, Henderson suggests that it’s likely this figure will be revised to 51 or 52 as trailing data rolls in.
Leading up to the pandemic, nuclear verdicts were on a six-year streak of increases, going from 19 in 2014 to 52 in 2019. Then came a hiatus of two years during the slowdown of US courts due to Covid-19 restrictions.
That slump immediately recovered in 2022 to 52 and since then has remained at a similar level.
What has noticeably changed in the post-Covid-19 years, however, is the size of nuclear verdicts.
Excluding the years of 2020 and 2021, the average value of top 50 medmal verdicts show a clear upward trajectory from $14mn in 2014 to $56mn in 2024.
Another interesting data point is the percentage of $10mn+ verdicts that reach $25mn. Last year, it was 55%. For years leading up to 2019, that ratio never surpassed 40%.
Meanwhile, actuaries and claims experts are still trying to decipher the effects of the disruption caused by the pandemic, which many say is still ongoing given backlogs are still in process.
When US courts were closed for trials, many small and mid-value lawsuits were settled by plaintiffs’ attorneys, which contributed to lower frequency of nuclear verdicts during 2020 and 2021. The large ones, however, remained on the docket.
“A lot of times what we found was that the plaintiff attorneys were unwilling to negotiate the really big cases,” Henderson said. “To that extent, we likely had a bit more severity in the portfolio when trials resumed in 2022.”
At the same time, the executive stressed that TransRe’s verdict data only represents a fraction of the claims trend, given that a majority of medmal claims end up being settled out of court.
More often than not, settlements are achieved at “10%-15% or sometimes more” than what the insured would have considered a maximum payment, rather than deal with the possibility of a catastrophic verdict.
On that note, the relatively steady frequency of nuclear verdicts may not be entirely positive, from a claims perspective. “Because it just could mean that more of those claims are settling rather than risking a jury trial,” Henderson added.
2. Severity is rising with no ceiling in sight
WTW data from hospital and health systems clients also shows a stark increase in indemnity costs.
In 2024, the average value of closed claims was around $868,493 among WTW clients. Before the pandemic, that figure was under $550,000.
Jeremy Brigham, managing director of WTW’s healthcare professional liability practice, told Insurance Insider US that 2024 represented an acceleration in the growth of claim costs over what he had seen in prior years.
“The settlement statistics, the average claim costs - there's no peak. It's still going up,” he said.
The pace of increased claims and the pressure it puts on insureds becomes more evident when the figures are compounded multi-year, according to the WTW executive. The 5-year rate of increase is 11.6%, with the 3-year rate of increase up to 15.2%.
“This is an unsustainable cost trend for most health systems who have operating margins that are 1% to 5%,” Brigham said.
In the medmal world, hospitals and health systems are the equivalent of Fortune 1000 firms in general liability. They have larger limits, reputational risk when it comes to liability lawsuits, and are massive in size – all of which make them a lucrative target for the plaintiffs’ bar.
Hospitals are retaining more risk than they have in the past. Brigham said that some clients whose excess coverage attachment points were $10mn five-plus years ago are now retaining $25mn of every claim, which puts an enormous amount of pressure on their balance sheets.
“You got to believe at some level that's having an impact on their psyche around what they want to roll the dice on, with juries and verdicts,” added the executive.
He said that one of the central long-term challenges is that unless people are willing to fight, the plaintiffs’ bar will likely continue to come to the table with unreasonable demands.
“It's hard to envision what could cause that cycle to stop,” he said.
3. Defense costs are rising too
Claims are at the top of P&C executives’ minds these days – an elevated status from when the segment was considered an afterthought and a candidate for cost-cutting.
As the broader industry continues to struggle to gauge where loss-cost trends are heading, commentary around improving claims practices has increasingly come up in private and public discourse over the past year.
But nothing comes for free. WTW’s data from hospital clients show a sizable jump in average defense costs of 2022-2024 compared to pre-Covid-19 years.
For 2023 and 2024, the average expense cost for a closed claim with indemnity payment went above $95,000. Between 2015 and 2019, that figure was within the $58,000-$74,000 range.
When Brigham showed clients the spike in recent years, they were not surprised.
“Their response was - ‘We're fighting harder on claims. We're spending more on defense because there's more at stake on these claims than there's been in past years,’” he said.
That not only includes litigating more, but also investing in tools like mock juries and damages experts, as well as paying more to defense attorneys, according to Brigham.
Rick Soulsby, SVP and chief actuary of The Doctors Company, pointed out that the price index for legal services has not come down even after general inflation cooled across the board.
Whereas the all-items CPI dropped from 8% in 2022 to 2.9% in 2024, the legal services index trended upwards, nearing 8% in 2024, according to the US Bureau of Statistics.
“It is something that we continue to be surprised by,” he said.
“That'll be an interesting thing to watch going forward to see if the [allocated loss adjustment expense] trends continue to accelerate and can even catch up, or pass some of the inflation.”