Attorney says retailers should settle more claims before they turn into lawsuits

Whether it’s worker compensation, customer slip-and-falls or allegations of harm from “forever chemicals,” a top claims consultant says retailers need to settle more claims before they escalate into litigation with the risk of “nuclear” verdicts.

“A lot of our retail clients are a little bit afraid of providing a little bit higher settlement,” said Luke Harrison, managing director and U.S. national practice leader for claims consulting at Marsh McLennan. “It’s something that feels non-traditional to them, but when you look at what the cost differential is between a litigated and non-litigation claim, it really makes a lot of sense.”

Harrison spoke during a session on managing legal risk during the first day of the March 4-6 NRF Retail Law Summit. In other sessions, attorneys from Skadden warned that securities litigation is on the rise, lawyers from Venable outlined a “patchwork” of new state-level privacy laws taking effect across the nation, and the head of the Consumer Product Safety Commission said the end of exemptions from tariffs and inspection for small purchases from China will make safety enforcement easier.

Harrison often sees “process failures that are occurring early in the life cycle of a claim” and says retailers should adopt an “early settlement philosophy” instead — even if it means making larger initial offers.

“Your claims team thinks that they’re trying to save money for the organization and makes a $5,000 low-ball offer” even though the injured party has $20,000 in medical bills, he said, citing an example. “That type of action is going to lead a … claimant to go back and seek representation because they aren’t feeling that they’re being treated fairly.”

Retailers face a “triple whammy” where the number of claims resulting in litigation has risen between 20% and 40% over the past decade, the cost of the losses suffered by claimants are up between 130% and 160%, and the average time to resolve a case that goes to litigation has reached 400 days, Harrison said.

In addition, “social inflation” — “a change in societal attitudes toward corporate accountability or expectations for justice” — has driven up jury awards, with 27 cases involving “nuclear verdicts” of $100 million or more recorded in 2023. Super-large verdicts totaled $14.5 billion, a 15-year high.

Harrison said retailers face particular exposure from a new wave of lawsuits over PFAS, a group of “forever” chemicals used in consumer products from clothing to cookware to carpet and linked to cancer and other health problems.

With the cost of claims and litigation going up, companies are seeing large increases in amounts that must be set aside for potential settlements or verdicts, even to the point of impacting corporate earnings. “When insurance matters begin impacting a large retailer’s share price or market capitalization, it’s really time to roll up your sleeves,” Harrison said.

He said reducing “litigation propensity” by settling claims early rather than going to court “is the most impactful” thing retailers can do. Retailers should also seek to reduce the number of claims open at any given time to reduce reserves that must be set aside to cover them. They should also develop a strategy to reduce the amount spent defending claims, including avoiding costly litigation when possible.