So there is an interesting article in Massachusetts Lawyers Weekly on the rise of so-called “nuclear” verdicts in Massachusetts, or in other words, what we used to just call – with much less hyperbole – runaway jury verdicts. (By the way, can we do away with the marketing campaign to label large verdicts nuclear; runaway did the job better and everyone knew instinctively what a runaway jury was, which cannot be said for using nuclear as an adjective in this context). The article discusses a recent $1 billion punitive damages award, as well as a $33 million tort recovery, in Massachusetts. There is a lot that can be said about this topic, from a lot of different angles.

For instance, if the legislature has made a political decision to allow for punitive damages in certain circumstances, then is it really fair or proper to focus the criticism of a given large award of punitive damages on the jury that granted it, or the jury system itself, as these types of pejorative labels – like nuclear or runaway – seem to be intended to do? It would seem to me instead that the real issue is whether punitive damages should even be part of the cause of action, and if so, whether they should be capped: in Massachusetts, anyway, these are all issues for the legislative process, and possibly for judges remitting or overruling as excessive, such awards. At the heart of it, punitive damage awards in this jurisdiction, and their alleged growth (I haven’t seen any hard data, but I would agree from my own experience that, impressionistically, both the frequency and amount of punitive damages awards have increased substantially over the years) is at least as much under the control of the political system and the judiciary as it is attributable to the conduct of juries.

This isn’t just an ivory tower thought, by the way. Like many trial lawyers and judges, I do not share in the skepticism of juries held by some. I find that most of the time, they get the decision right, and that they often bring surprising insight to a dispute (as anyone can attest who has ever tried a case where jurors are allowed to submit questions for the court to pose to witnesses). United States District Court Judge Young, of the District of Massachusetts, (and in most lawyers’ experience, a firm believer in trials as a means of resolving cases) recently commented on the value of the jury, explaining:

Since the origins of our legal tradition in the Middle Ages, judges have been chary of displacing the verdict of a jury. Elizabeth Kamali, Felony and the Guilty Mind in Medieval England, 258-262 (Cambridge Univ. Press 2019).

This is as it should be, for judges appropriately recognize that a jury’s verdict is an expression of direct popular rule – direct democracy at its finest and most robust. Utterly non-partisan, guided only by the legal framework, it is this nation’s greatest contribution to the world’s jurisprudence.

We did not invent it but it is here — in the United States of America — that it has come into full flower. It ought come as no surprise that nearly all of the civil jury trials on the planet take place here — in the United States. United States v. Luisi, 568 F. Supp. 2d 106, 110 (D. Mass. 2008) (quoting Hon. William G. Young, Vanishing Trials, Vanishing Juries, Vanishing Constitution, 40 Suffolk U.L. Rev. 67, 68 (2006) (“Nearly all civil jury trials and ninety percent of criminal jury trials on the planet take place in the United States.”). Any attempt to marginalize the role of the jury in American life is as direct an assault on our democracy as an attempt to impair our right to vote. See Andrews-Clarke v. Travelers Ins. Co., 984 F. Supp. 49, 63 n. 74 (D. Mass. 1997).

Make no mistake. Where a jury sits there burns the lamp of liberty. Every single jury trial, every one — whether in state or federal court — is both a test and a celebration of a free people governing themselves.

Several years ago, I tried a pierce the corporate veil case against a company officer in a jurisdiction characterized by some aspects of the business community as a so-called “judicial hellhole,” where my local counsel, in fact, told me they consider it a win if the jury doesn’t award punitive damages. In my case, we did defeat the punitive damages claim, but the jury found for the plaintiff on the underlying claim. In doing so, they exactly followed the judge’s jury instructions, from which the judge had omitted, over our objection, certain legal instructions that should have resulted in the exact opposite verdict, had they been included in the jury charge and the jury been faithful to the charge. The jury found against the officer, but the appeals court, as we expected, reversed, based on the failure to properly charge the jury and, in fact, entered judgement for my client, the defendant.

The runaway jury or judicial hellhole aspect of this case wasn’t about the jury – the jury faithfully followed their instructions and ruled accordingly. The appeals court then corrected for the errors that gave rise to the mistaken seven figure verdict, but the original seven figure verdict wasn’t due to some failing on the part of the jury system – it was due to the errors of the judge.

I am not criticizing the judge – I understood his reasoning, and mistakes in instructions are a normal part of the trial process. My point is simply that much of the question of the propriety of unusually large jury verdicts needs to be directed not to the jury system itself, but to the legislative and judicial decisions that confine and control it.

There’s also the interesting question, particularly with regard to the increasing amount of compensatory (as opposed to punitive) damages awarded in this jurisdiction by juries (again, I have not seen hard data, but this trend seems clear), as to its cause. Many attribute the general phenomenon of rising jury awards to so-called social inflation. I think there is a very interesting social science research study waiting to be done in Massachusetts on whether general attitudes in the population as a whole (which could then be extrapolated to juries, given that it is the jury pool) about the value of injuries, deaths and other harms have changed over the years in response to the general and highly public increase in wealth in New England over the time period during which jury verdicts appear to have been increasing. Personally, I suspect that jurors began putting much higher values on injuries, pain and suffering, deaths and other losses when it became obvious to them that the traditional valuations of such losses historically assigned by juries in the Commonwealth were disproportionately low when compared to New England’s ever more expensive mansions, beach houses, vacation homes, restaurant menus, upscale gyms and sports cars.  In other words, I believe it began to appear to jurors that traditional valuations of such losses resulted in verdicts that seemed way too low compared to the money being spent on everything else around them.

To give this thought some context, the first serious wrongful death case I worked on 25 or so years ago settled just before trial, based on the calculation of lost future earnings, for the primary policy limits of $500,000, an amount which today wouldn’t buy a Boston condo, and is probably not much more than the sticker price of the Rolls Royce SUV that I saw while driving on Boston’s North Shore last weekend. (I also saw two Bentley convertibles, which is something I only took note of because Bentleys are what Thomas Shelby eventually works his way up to owning in Peaky Blinders). Somehow I doubt that a jury today, even if the lost wages still only totaled about $500,000, would consider that fair compensation in comparison to the cost of everything else in the world and to the wealth reflected around them.

But that’s not really what I want to talk about today, and instead I am more interested in the relationship between that article on spiraling jury verdicts and another article on a new decision by Judge Young on insurer bad faith under Massachusetts law. For any of you who don’t know, under Massachusetts law, an insurer has an obligation to make reasonable efforts to settle a tort action once liability of its insured for the loss has become reasonably clear, and the failure to do so can result in an award against the insurer of double or treble the amount of the verdict originally awarded against the insured in the tort case itself. To make this concrete, if you take the wrongful death case I discussed above, and change it to a trial that resulted in a $500,000 verdict against the tortfeasor, a court could award double or treble that amount against the insurer if the insurer failed to make reasonable, good faith efforts to settle before the verdict was awarded. Thus, in that case, the plaintiff would have collected the $500,000 award for the wrongful death, and then another million dollars or $1.5 million for bad faith by the insurer.

You can quickly see how this would play out in a world of so-called nuclear or runaway verdicts – suddenly, a large verdict isn’t just a large verdict against the tortfeasor, but is also now the potential basis for an award of two or three times it again against the insurer, if the insurer is seen to have not made appropriate efforts to settle the claim. Thus, to use a recent example from my own practice, a $5 million verdict against a tortfeasor is suddenly also potentially worth another ten or fifteen million dollars from the insurer if the insurer is found to have acted in bad faith in negotiating a settlement of the loss.

This scenario is particularly problematic in the type of case considered by Judge Young. In that case, Vermont Mutual Insurance Company v. Toland, the court addressed the obligations and bad faith exposure of insurers after a jury has returned a verdict against an insured, when the verdict is still open to being challenged on appeal. In these types of cases, the plaintiff in the underlying tort action alleges that the jury verdict rendered the insured’s liability reasonably clear, and from that point forward the insurer was obligated to negotiate a reasonable settlement. What routinely happens in these types of cases is that the post-verdict settlement offers end up being compared to the amount of the verdict as the primary piece of evidence in deciding whether or not the insurer was acting in bad faith after the verdict. In Toland, the insurer argued that the reasoning underlying its post-verdict settlement offer rendered the insurer’s offer reasonable, but the Court found the insurer’s settlement evaluation wanting, and held that the settlement offer made after the verdict was too small in comparison to the jury verdict to satisfy the insurer’s obligation to negotiate settlement.

Now consider the impact of this dynamic in the context of the nuclear or runaway verdict. Making the relationship between the amount of the verdict and the amount of the settlement offer after the verdict central to the decision of whether the insurer acted in bad faith makes it effectively impossible to negotiate settlement after a so-called nuclear verdict has been entered. How, exactly, does an insurer make a reasonable settlement offer against a billion dollar verdict, without the risk that the amount of the offer will later be seen by a court as too small in comparison to the verdict and thus as, essentially, prima facie evidence of bad faith settlement conduct? Even with just a good old fashioned runaway verdict, say in the tens of millions, the dynamic is much the same, in that any offer other than a very large one would risk being seen as in bad faith simply because of the large delta between it and the jury verdict.

It may be past time to recognize that, as jury verdicts have increased over the years in the Commonwealth (whether nuclear or not), so too has the accompanying potential financial exposure to insurers from being found in bad faith for settlement conduct. Because, under Massachusetts law, the insurer’s potential exposure for bad faith moves in lockstep with the size of the verdict against the insured, the increase in the size of verdicts is simultaneously escalating the amount of potential bad faith awards against insurers, arguably beyond reasonable measure. The rationale for allowing claims against insurers for bad faith liability in Massachusetts is to encourage the settlement of valid claims and to discourage insurer misconduct; at some point, the potential bad faith exposure to insurers far exceeds any amount needed to achieve these goals, and the escalation in tort verdicts may already have us at that point. If so, then it may be time for the legislature or the courts to rethink how closely tied awards against insurers for bad faith settlement conduct in Massachusetts should continue to be to the dollar amount of the verdict against the insured.

Photo of Stephen Rosenberg Stephen Rosenberg

Stephen has chaired the ERISA and insurance coverage/bad faith litigation practices at two Boston firms, and has practiced extensively in commercial litigation for nearly 30 years. As head of the Wagner Law Group’s ERISA litigation practice, he represents plan sponsors, plan fiduciaries, financial…

Stephen has chaired the ERISA and insurance coverage/bad faith litigation practices at two Boston firms, and has practiced extensively in commercial litigation for nearly 30 years. As head of the Wagner Law Group’s ERISA litigation practice, he represents plan sponsors, plan fiduciaries, financial advisors, plan participants, company executives, third-party administrators, employers and others in a broad range of ERISA disputes, including breach of fiduciary duty, denial of benefit, Employee Stock Ownership Plan and deferred compensation matters.