The Rising Threat of Nuclear Verdicts in Real Estate: What Developers and Owners Need to Know

In today’s litigation landscape, multi-million-dollar jury awards are no longer outliers—they’re becoming routine. These “nuclear verdicts,” defined as jury awards exceeding $10 million, are sending shockwaves through the real estate sector, leaving property owners, developers and insurers grappling with escalating liabilities, rising premiums and heightened legal exposure.

One stark example occurred recently in Texas, where a jury awarded a staggering $860 million to the family of a woman killed when a crane collapsed onto an apartment building, finding the real estate developer responsible for negligence. The payout far exceeded standard insurance coverage limits. According to the Dallas Express, the real estate developer was required to pay the victim’s mother $50 million for loss of companionship, $140 million for mental anguish, $50,012,006 for future mental anguish, and another $100 million, and her father $3 million for loss of companionship, $7 million for mental anguish, $4 million for future mental anguish, and an additional $6 million.

The Reshaping of Real Estate Liability

Social inflation is the expanding scope and size of insurance claims due to factors such as public sentiment, legal system changes and the increasing influence of third-party litigation financing (TPLF). Across market sectors, TPLF is anticipated to reach $31 billion by 2028.

TPLF is private investment, like hedge funds and private equity, in litigation, sometimes up to $100 million in backing given to plaintiffs’ attorneys to pursue high-stakes cases without financial strain. This can encourage prolonged litigation and contribute to higher award amounts.

In the construction and real estate sector, this funding model often supports large-scale construction defect lawsuits, which are ripe for nuclear verdict outcomes due to their complex nature, multiple defendants, and potential for extensive damages.

Partly driving up the costs of nuclear verdicts is that plaintiffs often choose jurisdictions for their lawsuits known for high awards, including large urban counties like Los Angeles, Chicago’s Cook County, or Philadelphia. If your business has a registered agent in one of these areas, it may inadvertently increase your exposure to a nuclear verdict. Opting to place your registered agent in an area with less lawsuits can offer a layer of protection.

Insurance Pressures: Carriers Respond to Skyrocketing Verdicts

Insurers are taking notice and taking action. As a result of the nuclear verdict increase, many carriers are:

• Raising premiums, with rate hikes of 15%–35% in high-risk zones
• Reducing policy limits or creating tighter underwriting requirements
• Excluding certain construction-related claims, requiring higher deductibles, leaving the state or reducing the number of insureds.

For property owners, contractors and real estate developers, this hardening insurance market means higher costs and more scrutiny during policy renewals. Simply put, being insured is no longer enough—you must prove that your property is proactively managing its risk.

Four Ways to Mitigate Legal Risks

Avoiding litigation altogether is the best way to mitigate the risk of a potentially catastrophic jury award. Using technology and strategy as risk shields is the next best step. Here are four essential actions for owners, developers and real estate stakeholders:

1. Integrate Quality Control from the Start

• Mandate high construction standards from all contractors and subcontractors.
• Conduct third-party inspections throughout the build process to catch issues early.

2. Foster Post-occupancy Best Practices

• Keep open lines of communication between tenants, facility managers, and the association.
• Provide educational resources on how individual behavior can impact community-wide liability.
• Maintain a strict inspection and maintenance calendar for both individual units and common areas.
• Promptly document and address any signs of structural issues or water intrusion.

3. Implement Dispute Resolution Mechanisms

• Consider moving your registered agent to a state with fewer lawsuits.
• Establish clear protocols for mediation or arbitration to resolve issues before they escalate to court.
• Leverage telematics for liability defense and utilize contract guidelines and restrictions to support early resolution efforts and avoid drawn-out lawsuits.

4. Analyze Your Risk Profile with Data

• Conduct internal audits to assess historical claims and their outcomes and allocate resources accordingly.
• Detect high-risk claims early by using predictive analytics/AI.
• Work with your insurance broker to identify exposure areas, adjust coverage accordingly, and contractually transfer liability to vendors and tenants.  

Final Thoughts

The commercial property sector sits at the intersection of public perception, legal complexity, and evolving litigation dynamics. As nuclear verdicts continue to rise, proactive risk management and legal foresight are no longer optional—they’re critical to protecting your business, your capital, and your long-term viability.