Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Companies were hit with more than $40bn in damages payments stemming from US lawsuits last year, data from LexisNexis showed, as jury awards against tech groups Microsoft, Amazon and Micron fuelled a phenomenon becoming known as “nuclear verdicts”.
The price tag for trial awards is growing, data shows. The average award against a corporate defendant in cases brought in the US rose to a record $65.7mn last year, up from $41.7mn in 2023, LexisNexis said.
The trend has alarmed executives at big companies and the insurers that foot their bills. Swiss Re, for example, set aside more than $3bn in reserves in 2024 to cover US liability insurance claims.
But while big mass-tort consumer class actions grab headlines, the new skyrocketing jury awards are being driven by courtroom brawls pitting one corporation against another — particularly in the arena of intellectual property disputes. Such battles produced record payouts last year, with plaintiffs winning at trial awarded $665mn for trade secrets violations and $3.8bn for patent infringement.
John Dacey, chief financial officer of Zurich-based Swiss Re, on Thursday said “the terrible experience we and everyone else in the market has had” had deterred them from writing US corporate liability policies. He added, “we don’t see an end in sight”.
The reinsurer published a report blaming the trend on “negative societal attitudes with anti-corporate sentiments”.
Warren Buffett referred to the trend in a shareholder letter last weekend, saying it was “our job to contest ‘runaway’ verdicts [and] spurious litigation”. His holding company, Berkshire Hathaway, owns several insurance companies with exposure to rising jury awards.
In one case, an Arkansas jury sided with London Luxury, a textile supplier, and ordered Walmart to pay $101mn after finding the retail giant had breached an agreement to buy 7bn nitrile gloves in the early months of the Covid-19 pandemic.
London Luxury counsel Brendon DeMay said the verdict was a win against big companies that think they can “push around their suppliers”.
IPA Technologies, the owner of patents for voice-recognition software used in Apple’s digital assistant Siri, won $242mn from Microsoft, after a court found the tech group had infringed its claim.
In another case, jurors in Waco, Texas, ordered Amazon to pay $122mn to AlmondNet, finding that the ecommerce group’s advertising infringed two of the advertising technology company’s patents.
Mass tort cases generated big payouts as well. Bayer, the parent company of Monsanto, has been hit with multibillion-dollar jury verdicts for people who said they developed cancer from the weedkiller Roundup.
Bayer said it appealed against the verdicts, even after they were reduced in size (verdicts are often reduced in post-trial motions or on appeal). Bayer declined to say whether insurance would cover the verdicts.
Business trade associations, including the Chamber of Commerce, have sought to pin blame for the rise in lawsuits on litigation funders, groups that have invested billions to turn legal payouts from an occasional windfall into an investible asset class. Commercial litigation funders counter that while their financing makes it easier to bring cases against big businesses, it has little effect on verdict size.
Others argue that the broader rise in large verdicts is a spillover effect of deregulation and inadequate enforcement of consumer protection laws. Americans have taken to the courts because of political gridlock, said Jonathan Wagner, a securities lawyer at Kramer Levin.
“It is very difficult, in a divided country, for the government to enact legislation,” he said. That leaves public matters, including healthcare standards, to be “legislated through litigation”, Wagner said.
In the 1990s, a flood of claims from asbestos and pollution in the US — stemming from a public health crisis and environmental degradation — almost resulted in the collapse of the Lloyd’s of London insurance market. As a result, insurers told the Financial Times, some groups steered clear of US liability policies, which can include exposure to harms that may not materialise for decades.
Munich Re on Wednesday said the reinsurance group had cut its exposure to most US business liability.
However, Munich Re is still growing its exposure to some “subsegments” over shorter time horizons, “so that you’re not exposed to a very long-term trend”, chief executive Joachim Wenning added.
