Weathering the Verdict

Umbrella and Excess Insurance

The marketplace for umbrella or excess liability coverage above the underlying primary limits (usually $1M) of a commercial general liability, auto liability, and employers liability portion of workers compensation coverage has been trending in the wrong direction for the last several years. Unfortunately for our insureds, those trends do not seem to be slowing.

For many years, large single limits were readily available from multiple standard markets in the umbrella space. These single limit policies, often up to $10 million, created enormous cost advantages for insureds building their umbrella/excess towers. Over the last few years, these large single limit policies are no longer available for insureds that present more than a normal amount of risk, such as construction or insureds with large fleets.

What Is Driving This Change?

A huge part of the problem is the rise of so-called “nuclear jury verdicts” specifically in Texas and around the United States. “Nuclear jury verdicts” are verdicts that run in excess of $10 Million, but unfortunately, Texas can point to examples that now run beyond NINE FIGURES!

Just last year, a Bexar County jury awarded $831 Million to the family of a man who was left partially paralyzed after a motorcycle crash. The crash was the result of hitting debris left in the road after driver who had a blood alcohol concentration of .23 percent had crashed into a guardrail. The jury apportioned 45% of responsibility to the bar where the driver had been drinking, 45% to the owner of that bar and 10% to the drunk driver. $300 Million of the judgment was exemplary damages. Leticia J. Mendez v. River Road Entertainment District Corporation et al. — Bexar County. Case No. 2022CI12617

Regardless of the liability of the defendants, these amounts bear no relation to the reality of the damages involved.

A Harris County jury awarded $640 million dollars to the family of a worker killed on a construction site. The worker was working on an HVAC crew and was killed an HVAC unit that was being lifted in place by a crane company fell on him due to high winds. $480 million of the verdict were punitive damages. Milena Loree v. TNT Crane & Rigging Inc. — Harris County

A Travis County jury awarded $113M to victims of drunk driving accident. Caitlin E. Carpenter et al. v. Wings LLC, et al. — Travis County

The Impact of Nuclear Jury Verdicts

The fact that these parties were injured and were entitled to just and fair compensation for their injuries cannot be denied. HOWEVER, these jury awards go far beyond any just compensatory or economic damages. Indeed, even if punitive damages were justified in these cases, the sheer size of the awards are so high nothing approaching those amounts will every be collected.

How Anchoring Influences Jury Awards

Often plaintiff attorneys are successful at obtaining these high verdict amounts by inappropriate “anchoring” jury awards to targets that have nothing to do with the damages at issue in the case. For example, in a 2023 case involving an large tractor trailer, the attorney asked jurors to award two cents for every one of the 650 million miles the defendants trucks drove during the year. That bit of “anchoring” resulted in a $39 million verdict that had nothing to do with the plaintiff’s damages!

What Are Phantom Damages?

Even what attorneys claim as actual medical damages can be “phantom damages” when courts calculate a plaintiff’s medical expenses using a healthcare provider’s list price for medical services (sometimes called a “chargemaster rate”) instead of the amount the healthcare provider ordinarily accepts as payment. The difference is the phantom amount and it is never paid, but it is used to inflate the damages owed to the plaintiffs.

Legislative Efforts to Address Phantom Damages

The Texas legislature has made an attempt to limit these phantom damages in the 2025 Session, but it failed to pass the House.

The Future of the Umbrella and Excess Insurance Market

Until Texas can find a way to get a handle on these NUCLEAR verdicts, we will continue to see limited availability in the the umbrella and excess markets. Unfortunately, that means price increases!