Understanding how litigation trends
filter directly into liability underwriting decisions
To stay not just competitive but indeed relevant, producers
need to understand that liability coverage requires legal literacy.
By Michael Wayne
For commercial producers, liability insurance placement is no longer just about limits and exclusions. Mid-2025 saw the 23rd consecutive quarter of liability insurance rate increases. This was driven by claims severity in part but also by shifts in litigation behavior and legal system pressures.
Clients feel the effects in renewal pricing, retentions, and even the willingness of some carriers to participate. To serve as true advisors, producers need to track how litigation trends filter directly into underwriting decisions. Here are the five shifts you need to be aware of right now:
“Nuclear verdicts” are spreading beyond the usual jurisdictions. Once largely confined to certain plaintiff-friendly venues, so-called nuclear verdicts are now showing up across multiple states and industries. These jury awards that vastly exceed historical norms are causing carriers to recalibrate their expected loss curves. They are doing so to reflect the possibility of $50 million-plus judgments in trucking, construction, and premises liability cases.
Producers can expect excess/umbrella layers to tighten, with higher attachment points. They can also anticipate underwriters scrutinizing venue data and client operations in states like Florida, Texas, and California. Above all else, producers need to prepare clients for both higher premiums and stricter defense-counsel panel requirements.
Litigation funding is fueling case frequency and severity. Third-party litigation finance firms continue to pour capital into plaintiff lawsuits, which is effectively turning legal claims into investment vehicles. In turn, this makes it easier for plaintiffs to sustain longer cases, hire expensive expert witnesses, and resist early settlement. The result is a pipeline of tougher, higher-value claims that carriers must price for.
On the producer side, this means that clients with higher liability exposure (transportation, healthcare, retail) may face more frequent and prolonged litigation. Additionally, carriers may respond by raising deductibles, mandating loss-control programs, or excluding certain high-risk activities.
From an action standpoint, producers should counsel clients on the ROI of enhanced documentation, incident reporting, and settlement strategy to avoid litigation escalation.
Social inflation is being baked into underwriting assumptions. “Social inflation,” the rising cost of claims due to societal and legal trends rather than underlying economic inflation, remains a major driver. Juror attitudes, aggressive plaintiff tactics, and broad interpretations of liability continue to inflate claim values.
Insurers are working this inflation into pricing models with the assumption that every claim could spiral far above historical medians. Unfortunately, even clients with clean loss histories will see liability rates increase simply because of systemic forces.
Producers must act accordingly, and renewal conversations must shift from “why is my rate going up?” to “how do we mitigate volatility?” Producers must work to add value by benchmarking client liability costs against peers and showing how proactive risk-management efforts position clients favorably with underwriters.
Policy language and exclusions are tightening in response to legal creativity. As plaintiff attorneys push novel theories such as expanded duty-of-care claims and climate-related liability, insurers are responding with narrower policy wording. Exclusions for communicable disease, PFAS (“forever chemicals”), and certain cyber-related bodily injury are already standard. Undoubtedly, more carve-outs are coming.
It’s no longer enough to assume an umbrella “follows form.” Each exclusion must be reviewed for client-specific exposures. For clients in emerging risk categories (e.g., manufacturers using new chemicals, contractors in energy transition projects), the only way to avoid gaps may be using manuscript endorsements.
Producers must be ready to educate clients on what is not covered and present alternative risk-financing tools where markets retreat.
Defense-cost dynamics are altering total cost of risk. Beyond indemnity payments, defense costs are soaring. Carriers are increasingly imposing defense-inside-limits provisions, meaning attorney fees erode the policy limits available for indemnity. This is especially impactful in complex liability cases where defense can exceed millions before settlement discussions even begin.
Producers must educate clients about the difference between defense-inside vs. outside-limits provisions at both primary and excess layers. They must also push carriers for clarity in policy wording—does the umbrella layer follow defense-cost structure, for example. When limits are insufficient, producers should consider separate coverage or captives to fund defense costs.
To stay not just competitive but indeed relevant, producers need to understand that liability coverage requires legal literacy. The days of the liability market reacting to yesterday’s claims data are gone. Instead, the liability market is proactively pricing tomorrow’s litigation landscape.
For producers, the ability to gauge the five shifts highlighted here and translate them into client strategy is a differentiator. The following are also invaluable:
- Explain rate hikes through the lens of litigation trends
- Show clients how proactive risk controls improve their underwriter story
- Structure programs that account for nuclear verdict potential, defense-inside-limits risks, and tightening exclusions
Producers who stay ahead of the courtroom as much as the underwriting room will position themselves as advisors who ensure clients remain protected in an era where legal trends are true catastrophe drivers.
The author
Michael Wayne is a freelance insurance writer.
