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the Elephant in the (court) room - an unfiltered conversation about nuclear verdicts

So here's the elephant in the room that nobody in insurance is talking about - nuclear verdicts aren't really about what happens in the courtroom.

They're about what happens long before you get there.

They're about what the jury thought of you before they even got called for jury duty.

It's as much of a cultural issue as it is a legal issue.

What follows is an unfiltered conversation I had recently with the CFO of a mid-western mutual company. (These are mostly my own opinions. But, I would argue, they need to get some sunlight!) He'd just returned from another nuclear verdict conference, frustrated by hearing the same defense strategies that his company didn't actually need. His mutual hadn't seen a nuclear verdict in 50 years, while nationals all around them were getting destroyed. He wanted to talk about why.

This isn't polished. It's not a white paper. It's just us discussing what might be the most overlooked advantage in insurance today.

The verdict gets decided at the coffee shop, the church parking lot, the Little League field. It's about whether that jury sees you as "us" or "them."

And this is where it gets crazy - regional and mutual insurers are sitting on this massive advantage without even realizing it. They're already "us." They're already woven into the community fabric. But instead of leveraging this, they're copying the nationals' playbook, trying to be sophisticated like the big carriers.

Think about it - when a national carrier gets hit with a nuclear verdict, they respond by hiring better defense firms, creating new claims protocols, maybe pulling out of certain coverage lines. All reactive. All accepting that they'll always be seen as the outsider extracting wealth from the community. They're the Yankees coming to small-town America. They can try to be nicer Yankees, smarter Yankees, but they're still the Yankees.

But a regional or mutual? You’re the Home Team.

What if instead of allocating $2 million to defend one future bad faith claim, you budgeted $200,000 a year for ten years being genuinely present in the community? Having your claims people give talks at the Rotary about how insurance actually works. Your CFO doesn't just serve on the hospital board - they're in the trenches during the capital campaign. Your underwriters judge the high school science fair. Janet teaches driver's ed every semester, and those kids grow up understanding insurance isn't some evil empire.

Every employee becomes a walking verdict prevention system. Sarah from church who works at the mutual. Mike who coaches soccer and explains at halftime how insurance pools work. The nationals literally cannot replicate this. They can sponsor the Little League, but they can't have thirty employees coaching teams because their employees don't live there.

And here's the information layer nobody talks about - in small communities, the real verdict about your company gets decided at the coffee shop at 6 AM where the contractors meet. At the beauty salon where three generations get their hair done. In the church parking lot after service. Every claim story gets told and retold maybe fifty times in these places.

When Bob's claim gets denied, he tells the guys at coffee. His wife tells her book club. Their kid mentions it to the teacher. The story spreads: "That mutual doesn't pay claims."

But imagine if your adjuster was one of the guys at that coffee shop. When Bob starts complaining, your guy says, "Bob, that doesn't sound right. Let me look into it when I get to the office." The story changes completely. Now it's about Mike helping Bob out.

The nationals can't access these information networks. By the time they hear about a problem, it's five retellings deep and completely distorted. But regionals have people in every one of these nodes.

Meanwhile, what's the industry telling regionals to do? AM Best and all the consultants are saying: adopt "best practices," hire sophisticated defense firms, use algorithmic claim scoring. They're treating every carrier like they have the same problem.

But regionals don't have the nationals' problem! The whole nuclear verdict mitigation industry is built for companies that have already lost the culture war.

And here's the tragedy - by acting like nationals, mutuals BECOME like nationals in the jury's eyes. Suddenly they're not the local favorite anymore. They're the company that hired that big city law firm to fight someone everyone went to high school with. They're using computer models instead of Bob who's been adjusting claims here for 30 years.

Every time a regional adopts a "best practice" designed for nationals, they should ask: "Does this make us seem more local or less local?"

The verdict prevention strategy for regionals should be about being so woven into the community fabric that a nuclear verdict against you feels like a verdict against the community itself. You're not "the insurance company" - you're where Tom works, who saved the church $30,000 on their claim. Where Janet spent Saturdays helping veterans even though that's not your type of insurance.

This is what nationals fundamentally cannot buy their way into. When your people are genuinely embedded as neighbors who happen to work at the mutual - that's verdict immunity you can only build by being genuinely, authentically, consistently local.

Look, we know this seems counterintuitive. Everyone at the conferences, all the consultants, AM Best - they're all saying to be more sophisticated, more like the nationals. But sophistication isn't your advantage.

Being genuinely, authentically, sometimes a bit messily local is your advantage.

In Part Two, next week we'll get back to our Boardroom Briefings style. But for now, just sit with these thoughts. Let us know if you agree or disagree.

The Bottom Line

The nuclear verdict era isn't coming - it's here. Here’s the formal preview for next week:

Part Two: The Elephant in the (Court) Room When Nuclear Verdicts Happen

• The big National insurance company from "Hartford" needs million dollar defense strategies - everyone's favorite local Mutual Company doesn't!
• Your adjusters living in town and coaching little league is better verdict prevention than anything the Nationals can buy.
• Doubling down on your local charities, sponsorships and community involvement might be your best nuclear verdict immunity!

National carriers need nuclear verdict insurance because they'll always be vulnerable. They're permanently "them" in the us-versus-them equation.

But you? You don't need to play defense in a game you've already won. You just need to stop importing the Nationals' problems and start weaponizing the advantage you've always had.

Your community presence is the most powerful verdict prevention system ever created!

Thank you for reading today's edition!

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Stay Covered,

Mark "FLIP"
​Co-Founder & Managing Partner
LION Specialty

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