The State of Liability Litigation: An Update on Social Inflation, Nuclear Verdicts, and More

Social inflation and nuclear verdicts are driving up costs, while evolving risks are keeping business leaders and risk managers on their toes. Let’s take a look at what’s happening in the realm of liability litigation.

Social Inflation and Nuclear Verdicts

The Council of Insurance Agents & Brokers (CIAB) says rates for umbrella liability insurance were up by an average of 8.7% in the fourth quarter of 2024 and by 8.6% in the third quarter. While these hikes are steep (especially compared to the more moderate increases of most other lines), they are not nearly as high as the 22.9% price hike of the third quarter of 2020.

According to CIAB, industry experts agree that social inflation is largely to blame. Costs have increased, litigation is more likely to drag on, and nuclear verdicts of $10 million or more have become more common. The Institute for Legal Reform reports that nuclear verdicts have become larger, especially in product liability, auto accident, and other trials involving allegations of negligence. In 2013, the median product liability nuclear verdict was $24 million. In 2022, it had grown to $36 million.

Companies of all sizes can be targeted as the follow examples show:

• Reuters reports that a Missouri jury ordered Johnson & Johnson to pay $4.69 billion to 22 women who said the companies talc products caused ovarian cancer.
• FreightWaves reports that a small Florida-based trucking company was hit with a $141.5 million nuclear verdict.

Furthermore, a lawsuit doesn’t need to involve death or severe bodily injury to go nuclear. For instance, The National Law Review says a San Diego jury was awarded an $11.2 million verdict in a workplace discrimination lawsuit.

A variety of factors may be contributing to the increase in jury awards and overall litigation costs, including anger against big companies viewed as uncaring and the use of reptile theory tactics that play on instinctive fears as well as increased attorney involvement and third-party litigation funding. According to Research Nester, the litigation funding investment market is currently valued at $17.5 billion and is expected to reach $67.2 billion by 2037.

Evolving Risks and Litigation Trends

Litigation costs are rising, and the exposures triggering these lawsuits continue to emerge and evolve. Currently, key exposures include:

• PFAS Litigation. PFAS (also called forever chemicals) have been linked to serious health problems, which has triggered a wave of litigation that Time says could eventually eclipse the litigation against Big Tobacco. Recently, the City of Savannah filed a lawsuit against several PFAS manufacturers and users of PFAS. The National Law Review says the lawsuit is significant for manufacturers, as it suggests that companies could be sued for PFAS pollution even if they didn’t intentionally use PFAS in products or processes.
• Product Liability. Supply Chain Brain says the growing complexity of global supply chains is contributing to a recent increase in product recalls, which have impacted everything from food to electric vehicles and software. Product recalls are often expensive on their own, but they may also lead to even more expensive product liability lawsuits.
• ESG and DEI Culture Wars. In recent years, many companies have adopted ESG and DEI policies. Now, many companies appear to be abandoning these policies amid political backlash. ESG Dive says Meta cut its DEI team, Microsoft cut several diversity roles, and Amazon said it would be halting some DEI programs. As companies navigate the culture wars, they face litigation risks from both sides. Reuters says the U.S. Supreme Court may issue a ruling that makes it easier for people from majority backgrounds to pursue reverse discrimination claims.
• AI Risks. The recent explosion of AI tools is also leading to new risks. In addition to risks associated with data privacy, AI-fueled discrimination, misinformation caused by AI hallucinations, and unintentional copyright infringement stemming from AI-generated content that has been trained on copyrighted material, companies are facing scrutiny over claims related to AI usage. Reuters says “AI washing” is becoming a new buzzword in class action litigation.

Could a Lawsuit Against Your Company Go Nuclear?

With litigation costs increasing, all businesses must be hyper-vigilant about the risks of a nuclear verdict. While strong risk management can help prevent claims and the potential for nuclear verdicts, it’s also important to ensure that your primary and excess liability policies’ coverage limits are adequate. Heffernan Insurance Brokers can help you review your coverage needs. Learn more.