Social inflation describes the rising cost of insurance claims resulting from events, such as increasing litigation, broader definitions of liability, more plaintiff-friendly legal decisions and larger compensatory jury awards. Unlike price inflation, it is caused by sentiments within society and can be associated with emotional factors.
“Several industries and social factors are responsible for the increase in litigation and have formed a sense of corporate mistrust among juries,” said Geoff Dobran, Claims Manager at Safety National. “The opioid crisis associated with the medical industry, wildfires associated with utility companies and sexual molestation litigation associated with public entities are just a few cases that have been largely publicized, which can reasonably affect a jury member’s opinion of a defendant.”
Here are a few of the components contributing to a rise in social inflation trends.
1. Social Pessimism and Jury Sentiment Favoring Plaintiffs
Social pessimism encourages the sentiment that leads to a loss of faith and desire for change, motivating people to shift their trust over things they can control, including verdicts. This attitude can lead juries to be biased toward the plaintiffs’ rights, leading them to believe that businesses should bear a greater responsibility than individuals.
2. Changes in Jury Demographics
Juries are seeing a significant change with more millennials in the jury pool than baby boomers. This group statistically has different expectations of corporate conduct, growing up with varying notions of victimization and vulnerability. One survey reported that 84% of millennial respondents agreed that corporations should take every precaution for safety, “no matter how practical or costly,” with 63% agreeing strongly.
3. Income Inequality
Jury awards are higher in areas with greater levels of income inequality. In one study, income inequality explains up to 40% of the observed nuclear verdict outcomes in a jurisdiction, with each additional percentage in the poverty rate translating to a 6% increase in the median damage award. However, income inequality does not predict the likelihood of plaintiffs winning a case, only the size of the award.
4. Less Attention to Expert-Driven Lengthy Testimony
The average attention span of a healthy adult is anywhere from 10 to 20 minutes, with a reading level equal to that of a seventh or eighth grader. This is not conducive to typical cases when lengthy arguments and extensive medical presentations are part of a defense. Defense strategies have changed to appeal to a younger generation through videos, animations, graphics and virtual reenactments of accidents.
5. Changes in the Value of Money
Jurors are increasingly numb to high-dollar awards with more widespread awareness of massive legislation, lottery payouts, sports salaries and CEO salaries. They are also increasingly exposed to these high-dollar figures through social media, desensitizing them in the process. Advertising strategies from personal injury lawyers that include extreme verdicts are also normalizing litigation.
6. Use of the Reptile Approach
This approach is a trial strategy used to prey on the jury’s fears by arguing that the defendant’s action or inaction increased danger to the community. The plaintiff’s attorney then convinces the jury it has the power to improve the safety of the community by returning a large verdict against the defendant, thus protecting the community from future harm. The goal is to motivate and inflame the jury into protecting the vulnerable.
7. Legal and Political Factors
As a calculated effort, plaintiffs operate a considerable grassroots influence and spend significantly on state-based judgeships versus what the insurance industry invests. Additionally, significant reversal and rollback of tort reform in jurisdictions have increased the size of jury awards. California, for example, will be voting in 2022 to potentially raise the medical malpractice non-economic damages cap. Courts have also expanded their theories of liability, creating new causes of action against certain industries.