Litigation environment is challenging excess liability claim costs

The market for excess liability capacity across all business and industrial segments, including the coverages and limits needed by construction firms, has been “firm to hard” for several years.

Underwriters have been reducing capacity and increasing rates based on steadily rising claim costs. And while inflationary pressures have played a role in escalating costs, the increasing severity of large jury verdicts continues to be one of the biggest challenges for insurers trying to predict claim volatility. It is a trend likely to persist until meaningful reforms can provide customers and insurers with the ability to more effectively defend against lawsuit abuse.

The rise of ‘nuclear verdicts’

Within the contemporary U.S. civil litigation environment, so called “nuclear verdicts” – those of $10 million and higher – have become more common, driven in many cases by the phenomenon of social inflation, i.e., the tendency of jurors seeking to “punish” defendants who are perceived to have deep pockets. The size of some awards can be astonishing. A 2019 crane collapsed onto a Dallas apartment building that caused one fatality resulted in a civil court judgement of $860 million awarded to the victim’s family in 2023.1

To help avoid legal system abuse and nuclear verdicts, adoption and implementation of a safety mindset and practices that are enforced by insureds will provide a better basis for avoiding the social concerns driving enhanced jury awards. Investments in telematics, such as wearable safety technologies (smart helmets, vests, glasses, etc.), as well as on-site and outward-facing video cameras, can help enhance the safety of the worksite environment. Video records provided by jobsite cameras may also provide documentation to help reduce the potential for large verdicts and identify claims where contributory negligence may be a factor.

The rise of third-party litigation funding (TPLF) schemes has further complicated the U.S. liability picture. TPLF is a financial arrangement in which organizations, such as hedge funds or private equity firms, fund the often substantial costs of pressing a plaintiff’s claim despite the investors having no legal stake in the litigation. In return for bearing the financial risk, investors may receive a significant share of the judgement if the case is successful. From 2024 to 2028, it is estimated that the costs of TPLF to the property and casualty insurance industry could be as high as $25 billion, with indirect costs approaching $50 billion.2

As a result of the current U.S. litigation environment, brokers are being challenged to access the capacity needed for large construction projects.

The prevalence of trial lawyer advertising is amplifying the frequency and impact of legal system abuse, as spokespersons promise huge awards to plaintiffs at no cost unless they win the case. The American Tort Reform Association has reported that $2.5 billion was spent in 2024 on local TV, radio, print and billboard ads by plaintiffs’ attorneys.3 The lack of “loser pays” provisions that exist in some other developed countries makes abuse of the legal system essentially risk free for plaintiffs, an environment that has created challenges for insurers handling reverse-flow business in the U.S.

As a result of the current U.S. litigation environment, brokers are being challenged to access the capacity needed for large construction projects. Structuring large excess towers now requires significantly more insurance providers than before. Excess underwriters are applying more scrutiny and deploying capacity more carefully, especially at lower attachment points.

Insurers are also raising attachment points on higher-hazard classes of business as well as sourcing more capacity from overseas markets, such as Bermuda and London. These conditions are likely to continue for the foreseeable future as rates try to keep up with loss trends.

What are the implications for the construction industry in the current environment? Our view is that rising costs due to growing labor shortages and more aggressive timelines often associated with large and megaprojects could potentially impact both quality and safety, resulting in increasing liability risks as well as the potential to slow construction and affect long-term project outcomes. In this environment, general contractors need to manage subcontractors effectively, ensuring adherence to safety and quality assurance protocols to mitigate risks.

Building a viable defense

While the liability litigation environment is unlikely to change in the short term, there are concrete steps that construction businesses can take to build a defensive posture against the risks of large and nuclear verdicts:4

  • Comprehensive fleet safety – Construction businesses tend to be especially vulnerable to litigation related to fleet vehicles and drivers. To help defend against negligence claims, companies should have robust fleet safety programs and driver training protocols. It is also recommended that firms engage in regular monitoring of motor vehicle reports (MVRs) to ensure that drivers remain free of serious violations, such as DUIs, unrelated to work assignments and about which the employer may be unaware.
  • Contractual reviews and file documentation – Key to the prudent management of subcontractors, thorough construction contract reviews will help to mitigate risks and clarify responsibilities, which will help prevent disputes during the construction process. And maintaining comprehensive documentation of any incident will help defend against the plaintiff attorney’s attempts to manipulate jurors’ perceptions due to a lack of that documentation in court.
  • Advanced technology – The application of advanced technology in the construction sphere is constantly improving worker safety, efficiency and effective project management. Telematics for fleet vehicles, wearables for workers, drones and other tools are transforming the construction workplace. The application of new tools supported by artificial intelligence (AI), both for construction businesses and the insurers helping protect them, promises additional gains in safety, productivity and risk reduction.

Conclusion

In a construction industry challenged by inflation, labor shortages and rising claim costs, good communication and ongoing collaboration with the risk engineering and safety resources provided by the insurance provider can help a business cultivate transparency, mutual trust and resilience. Factors that can be invaluable if an incident results in potentially costly litigation as well as giving the customer greater assurance that the limits needed can be accessed in the excess liability marketplace.

References:

  1. Osibamowo, Toluwani. “Dallas jury awards more than $860 million to family of woman who died in 2019 crane collapse.” KERA News. 26 April 2023.
  2. Hahn, Tonya. “Navigating the Challenges of Nuclear Verdicts & Reptile Theory in Construction.” Construction Business Owner. 29 May 2025.
  3. “Legal Services Advertising in the United States – 2020-2024.” American Tort Reform Association (ATRA). 5 March 2025.
  4. Hahn, Tonya. “Navigating the Challenges of Nuclear Verdicts & Reptile Theory in Construction.” Construction Business Owner. 29 May 2025.

The information in this publication was compiled from sources believed to be reliable for informational purposes only. All sample policies and procedures herein should serve as a guideline, which you can use to create your own policies and procedures. We trust that you will customize these samples to reflect your own operations and believe that these samples may serve as a helpful platform for this endeavor. Any and all information contained herein is not intended to constitute advice (particularly not legal advice). Accordingly, persons requiring advice should consult independent advisors when developing programs and policies. We do not guarantee the accuracy of this information or any results and further assume no liability in connection with this publication and sample policies and procedures, including any information, methods or safety suggestions contained herein. We undertake no obligation to publicly update or revise any of this information, whether to reflect new information, future developments, events or circumstances or otherwise. Moreover, Zurich reminds you that this cannot be assumed to contain every acceptable safety and compliance procedure or that additional procedures might not be appropriate under the circumstances. The subject matter of this publication is not tied to any specific insurance product nor will adopting these policies and procedures ensure coverage under any insurance policy. Insurance coverages underwritten by individual member companies of Zurich in North America, including Zurich American Insurance Company. Certain coverages not available in all states. Some coverages may be written on a nonadmitted basis through licensed surplus lines brokers. Risk engineering services are provided by The Zurich Services Corporation.