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Casualty and Litigation terms
Nuclear verdicts and social inflation.
Duty to defendA liability insurer's obligation to pay for your defense of a lawsuit that could potentially fall within coverage, which is broader than its duty to pay.Duty to indemnifyThe insurer's obligation to pay a covered judgment or settlement against you, decided on the facts established rather than the complaint's allegations.Nuclear verdictA jury verdict of $10 million or more against a business, far above what the economic losses would suggest, that pushes up liability and umbrella costs.Punitive damagesDamages awarded to punish and deter malice, fraud or reckless conduct rather than to compensate; whether insurance may pay them depends on state law.Reservation of rightsAn insurer's written notice that it is handling a claim or defending a suit while keeping the right to deny coverage or recover costs later.Social inflationGrowth in liability claim costs beyond general price inflation, driven by larger verdicts, litigation funding, advertising and shifting jury attitudes.SubrogationAn insurer's right, after paying a claim, to step into the policyholder's position and recover the loss from whoever caused it.