Consulting firm Sedgwick released a report on May 31 which found that trial attorneys use a technique called "anchoring" to win larger settlements and verdicts. These large verdicts contribute to social inflation, or insurance costs rising faster than overall economic inflation.
According to the report, anchoring is a "cognitive bias technique" where a plaintiff attorney suggests a large monetary amount which becomes "anchored" in jurors’ minds as a reference point for evaluating damages. One common approach to anchoring is for the attorney to discuss a defendant corporation’s annual net income and then break that income down into a daily amount. For example, a company with an annual income of $1 billion earns $2.7 million each day. If a plaintiff was in a hospital for seven days, the plaintiff’s attorney may suggest that a reasonable compensation amount is $18.9 million, or seven times $2.7 million. This approach to anchoring "has proven to be extremely effective in juries returning multi-million-dollar verdicts in cases that otherwise might have been valued at a more reasonable amount," according to the report.
Anchoring is contributing to the prevalence of nuclear and thermonuclear verdicts, or verdicts larger than $10 million and $100 million, respectively, according to Sedgwick's report. "Unsurprisingly, nuclear and thermonuclear verdicts continue to be significant aspects of social inflation," Sedgwick said in the report. Even as general economic inflation rises, the cost of claims continues to outpace overall inflation.
According to public relations firm Marathon Strategies, New Jersey had 14 jury verdicts larger than $10 million between 2009 and 2023, totaling $1,480,387,446. New Jersey’s total sum of nuclear verdicts was the seventeenth largest in the country during that time period.
There have been multiple nuclear verdicts resulting from personal injury cases in New Jersey so far in 2024, according to the Lawsuit Information Center. There was a $25 million verdict in Middlesex County and a $55 million verdict in Essex County.
Using proprietary technology and industry data, Sedgwick provides insights and business solutions, according to the company’s website.
