Author: Joe Dalton
Key insights:
- Emerging legal trends are reshaping product liability risks for manufacturers in North America.
- Litigation strategies and evolving jury perspectives are influencing verdict outcomes.
- Developments in the US have implications that extend across the border into Canada.
- Canadian manufacturers are advised to consider adopting proactive strategies to address these shifting liability exposures.
Nuclear (settlements exceeding US$10 million) and thermonuclear (settlements over US$100 million) liability verdicts are reshaping the risk landscape for manufacturers across North America.
Driven by increasingly aggressive litigation strategies and a legal environment that allows damages to escalate unchecked, these verdicts are creating a more volatile and punitive exposure profile — one that directly threatens manufacturers' financial stability, insurability and long-term resilience.
In the United States alone, the median nuclear liability verdict reached US$44 million in 2023, more than doubling since 2020.1 Defective product incidents account for a disproportionate share of this severity, representing 40% of total claim value while comprising less than a quarter of all nuclear verdicts.2 Certain jurisdictions — including New York, Pennsylvania, Missouri, Texas and Washington — have emerged as concentration points for these outcomes, further amplifying uncertainty.
For Canadian manufacturers with a presence in the US, whether through subsidiaries, distribution channels or cross border supply chains, these trends significantly elevate enterprise-wide risk.
Operating in (or selling product into) US jurisdictions expose Canadian firms to litigation environments where verdict severity, litigation strategies and jury dynamics differ markedly from those at home. As a result, a single adverse verdict can have cascading consequences, affecting global insurance programs, financial performance and long-term strategic flexibility. This means that liability exposure must be addressed not only through compliance and insurance purchasing, but through a more integrated, enterprise‑level risk strategy designed to withstand heightened legal scrutiny and market volatility, particularly as nuclear and thermonuclear verdicts become an increasingly structural feature of the US liability landscape.
Why nuclear and thermonuclear verdicts are increasing
The increase in nuclear and thermonuclear liability verdicts reflects a fundamental shift in how liability cases are being argued, evaluated and ultimately decided. Litigation strategies have evolved to emphasize emotion over technical complexity, while gaps in tort reform have allowed damages to escalate with limited constraints. Jurors are increasingly receptive to narratives centred on safety, accountability and corporate responsibility, particularly in cases involving manufacturers and product related risks.
Furthermore, in recent years liability insurance claim costs in the US have risen at a pace outstripping both economic growth and inflation. This is largely driven by what the insurance industry refers to as "social inflation", stemming from changing societal attitudes and behaviours resulting in a more frequent and aggressive use of the legal system. Together, these forces have created an environment in which verdict outcomes are less predictable and loss severity is amplified.
Reptile Theory and its impact on litigation for manufacturers
Reptile Theory has become an increasingly prominent strategy in high stakes litigation, including nuclear liability cases, and has played a meaningful role in the rise of outsized verdicts. This approach fundamentally reshapes how liability cases are argued and decided by shifting the focus away from technical facts and regulatory compliance toward emotionally charged narratives centred on safety, fear and perceived preventability. In doing so, Reptile Theory increases the likelihood that juries will view their verdict not merely as compensation for harm, but as a mechanism to protect themselves and their communities, often resulting in significantly higher awards. For manufacturers, the approach typically focuses on public safety and accountability.
How Reptile Theory works
- Focus on safety: The attorney frames the case around safety and the defendant's (the manufacturer's) failure to protect the public or prevent harm.
- Appeal to fear: The argument is structured to make jurors feel that the manufacturer's actions or negligence pose a threat to their own safety or the safety of their loved ones.
- Community protection: Jurors are encouraged to see their verdict as a way to send a message to the defendant and others in the manufacturing industry, effectively "protecting" the community from future harm.
- Simplification: The strategy avoids complex legal arguments and focuses on simple, emotionally charged narratives that resonate with jurors on a primal level.
As Reptile Theory continues to gain traction, it has contributed to a litigation environment in which loss severity is less predictable and less tied to historical benchmarks. For manufacturers, this underscores the need to understand not only the legal merits of a claim, but how operational decisions, documentation and safety practices may be interpreted and leveraged in emotionally driven courtroom narratives.
A lack of tort reform drives the growth of nuclear verdicts
The absence of meaningful tort reform has been a key driver behind the growth of nuclear liability verdicts. Tort reform is intended to curb excessive litigation, place reasonable limits on damages and promote greater predictability within the civil justice system. In its absence, liability cases are more easily shaped by emotional arguments and expansive damage theories, increasing both the frequency and severity of large verdicts. Targeted reforms can help restore balance — ensuring injured parties receive fair compensation while reducing the disproportionate and unpredictable liability exposure facing manufacturers and operators.
The state of Florida implemented significant tort reforms in 2023, which resulted in the state dropping from the first in the US in nuclear verdicts to seventh in 2024,3 evidence that reforms can result in a significant decrease in these verdicts.
How are these verdicts impacting the Canadian insurance marketplace?
While nuclear liability verdicts are most frequently rendered in US courts, their effects extend well beyond US borders and are increasingly influencing the Canadian insurance marketplace. As verdict severity escalates and loss outcomes become more volatile, insurers and reinsurers are reassessing how US liability exposures affect overall portfolio performance, capital requirements, and long-term sustainability. For Canadian manufacturers, particularly those with US operations, customers, or distribution channels, this has resulted in heightened sensitivity to liability risk, driving changes in pricing, underwriting discipline and market capacity.
- Increased claims payouts: Nuclear liability verdicts often result in massive compensation awards, including economic, non-economic, and punitive damages, which can strain insurers' financial resources and lead to higher reinsurance costs.
- Rising premiums: To offset the financial impact of large verdicts, insurers may increase premiums for businesses in high-risk industries, potentially making coverage less affordable and creating gaps in insurance.
- Stricter underwriting standards: Insurers may adopt more rigorous risk assessments and become selective in offering coverage, focusing on businesses with strong safety and compliance practices.
- Market volatility and solvency risks: Large nuclear verdicts can lead to market instability, increased reserves, and even threaten the solvency of smaller insurers, potentially resulting in market consolidation.
Responding to verdict volatility: A risk strategy for Canadian manufacturers
As the Canadian insurance marketplace adjusts to these pressures, manufacturers are increasingly challenged to demonstrate not only that risks are insured, but that they're actively understood, managed and defensible. In this environment, insurers are looking beyond traditional loss history to assess how organizations identify emerging liability threats, mitigate severity drivers and align risk controls with evolving legal realities.
This shift places greater emphasis on integrated risk advisory, informed program design and the ability to translate operational practices into underwriting confidence — capabilities that become critical as verdict volatility continues to influence capacity, pricing and terms across the Canadian market.
The strategy:
- Implement rigorous quality control and testing
- Adhere to industry standards and regulations
- Develop robust contracts
- Engage in crisis management planning
- Review their insurance limits and coverages with their broker
In conclusion, manufacturing clients should discuss nuclear liability verdicts with their broker to ensure they fully understand the potential risks and financial exposures associated with their operations, particularly in industries where safety and compliance are critical.
With the rise of nuclear verdicts, which often result in massive compensation awards, manufacturers face significant threats to their financial stability, reputation and operational continuity. A broker can help identify tailored insurance solutions, such as product liability and excess tower structures, and provide guidance on risk management and risk transfer strategies to mitigate exposure.
Reach out today
Gallagher partners with Canadian manufacturers to address today's evolving risk landscape through a cross‑border lens and deep industry expertise. We translate US litigation trends into actionable insights, strengthen underwriting confidence by aligning operational controls with insurer expectations and design insurance programs built for today's severity‑driven environment. The result is a more defensible, resilient organization — positioned to grow with confidence.
Connect with our team to build a risk management strategy that protects what matters most while supporting innovation and long‑term success.