The construction industry plays a vital role in infrastructure development and ensuring the safety of buildings and structures. However, it also faces its own set of challenges, including the risk of litigation. With the rise of nuclear verdicts and social inflation in the insurance industry, it is crucial for construction organizations to understand how they can manage these risks effectively.
Nuclear verdicts, which are jury awards exceeding $10 million, have become increasingly common and substantial in recent years, posing significant implications for the construction industry. Social inflation further exacerbates this issue, as societal attitudes and changes in the legal environment contribute to larger claim sizes. These factors can jeopardize the financial stability of construction companies, impacting their ability to deliver quality projects and invest in necessary resources.
The escalating costs of construction litigation add another layer of complexity to this issue. As nuclear verdicts become more prevalent, insurance companies are forced to pay larger sums, leading to higher premiums for construction firms.
To mitigate the risks associated with nuclear verdicts in the construction industry, various reforms have been proposed:
- Caps on damages: Implementing caps on non-economic damages, such as pain and suffering, can help limit the size of jury awards.
- Regulation of litigation funding: Increased transparency and regulation of litigation funding can prevent frivolous lawsuits.
- Pretrial screening panels: Establishing panels to review the merits of construction litigation claims before they proceed to trial can reduce the burden on the legal system.
- Alternative dispute resolution: Encouraging mediation and arbitration can help resolve disputes more efficiently and cost-effectively.
To protect your construction organization from nuclear verdicts, consider implementing the following strategies:
- Effective communication and collaboration: Maintain open communication and collaboration with insurers and brokers to optimize insurance coverage and develop strategies for resolution. Early intervention tactics, such as mediation and settlement negotiations, can help resolve claims quickly and prevent costly legal battles.
- Thorough record-keeping: Maintain comprehensive documentation of business activities, transactions, and communications. This serves as valuable evidence in the event of litigation and helps defend against claims.
- Vigilant monitoring and response: Stay vigilant and monitor for potential litigation threats, such as increased regulatory scrutiny or competitor actions. Being proactive in identifying and addressing potential risks can help construction organizations mitigate the impact of nuclear verdicts.
- Collaborate with insurance providers: Partner with insurance providers specializing in risk management for the construction industry, such as Marsh McLennan Agency. We can offer customized risk management solutions and provide valuable insights into industry trends, helping construction organizations enhance safety and mitigate the risk of litigation and nuclear verdicts.
We have a team of risk management and construction industry specialists who can assist in managing all aspects of construction risks.
