The Cost of the CVS Premises Liability Verdict

premises liability insurance

Underwriters requiring ample security measures by insureds to protect retail customers.

CVS hit with $43M liability verdict.

Was anyone surprised when CVS Pharmacies announced it would close 900 stores following the upheld verdict in a $43 million premises liability case? Maybe, but not because of the monetary judgment. That’s apparently quite often a cost of doing business for large corporations.

In this 2012 case, a robber shot James Carmichael as he sat in his car in an Atlanta CVS parking lot. The jury found that the pharmacy chain was aware of the dangers because other robberies and assaults had occurred there. The store should have installed brighter lighting and hired security guards. The Court of Appeals of Georgia upheld the original verdict based on management’s knowledge that robberies were an issue and a shooting practically predictable. For a minimal cost, CVS could have improved security on its premises.

Retailers often respond to verdicts with repairs or changes

Unfortunately, plaintiff attorneys know astonishingly high-dollar judgments and settlements have little, if anything, to do with the announced CVS store closings. In fact, they’re unlikely to cause insurers or huge retail corporations to make any improvements to premises. “I’ve never seen these guys change their ways because of a big verdict,” said Trent Speckhals, an Atlanta attorney who has won cases against chain drug stores. 

Following premises liability claims, such as trips on uneven floors or collapsed shelving, many retailers simply make low-cost repairs. But after judgments on claims related to crimes, which could require more extensive investments, corporations have been slow to react.

Insurance industry pays attention to nuclear verdicts

However, the insurance industry is paying attention.

“We have seen several nuclear verdicts across the U.S. on premises liability cases involving criminal acts,,” said Mark Friedlander of the Insurance Information Institute. Inadequate security seems to be what often catches the attention of juries. According to Friedlander, some commercial insurers are clarifying their underwriting standards to make sure business insureds have adequate security measures in place. Customers need protected from incidents like the one that led to the CVS verdict. 

Substantial change typically comes only after judgments like the one in the 1978 Ford Motor Co. case in which a Pinto’s gas tank exploded. That judgment translates to $530 million in today’s dollars. Change also eventually occurs after repeated verdicts over the same issue. For example, hotels have been sued over the safety issues surrounding guest rooms with doors offering direct access via the parking lot. It’s become apparent hotels and motels offer guests greater safety when only entering and exiting via the lobby doors.

Increasing security not easy to do

However, increasing security is not always that simple or effective. Expecting security guards to spend hours outside in a parking lot, particularly in inclement weather, isn’t realistic. Many types of businesses, mostly notably banks, steer clear of posting security guards outdoors. 

CVS has made no comment about the impact the Atlanta verdict had on its operations or insurance costs. It also made no comment about any plans to improve security. CVS apparently has multiple layers of insurance, and could be partly self-insured.

Verdicts above $10 million are increasing. Verisk, which compiles insurance data from around the country, reported that the average size of jury awards climbed almost 1,000% from 2010 to 2018, to about $22 million. There was a 300% increase in verdicts of $20 million or higher in 2019 compared to those from 2001 to 2010.

“Insurance companies are 100% concerned about this and are very aware of these nuclear verdicts,” said defense attorney David Henry.

Retailers may flee from urban areas

More and more insurers are considering increasing their levels of reinsurance, auditing properties for security measures, and incentivizing businesses to ramp up safety when large premises liability or negligence verdicts seem more likely. The results might ultimately mean more expense, higher premiums, or a switch to self-insurance for some businesses. Any or all of those could be a death knell for small businesses in urban areas.

Obviously, retailers and their insurers can’t possibly protect customers from every possible scenario or react to every verdict. In the CVS case, some people felt Carmichael, armed at t he time, knew the risks involved in the CVS parking lot. But the gun jammed when attempting to shoot his assailant.

Need to purchase Umbrella Insurance

These nuclear verdicts are not just a concern for large retail chains, but also for smaller retail establishments. Therefore, carrying Umbrella Liability insurance is a must, especially since the cost is so low. The first layer of $1,000,000 is typically only 20% of the General Liability charge (subject to a minimum premium). Additional layers are even less expensive. For more information or a quote, call 

Source: William Rabb, “Insurers Taking Note of Big Verdicts, But Trial Lawyers Say Don’t Count on Changes.”, 12/01/2021.

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