Managing commercial litigation risk: Preparing clients for a new era

Claim counts are falling. Costs are not. For agents, that disconnect is quickly becoming one of the most important conversations to have with commercial clients. 

Social inflation, third-party litigation funding and increasingly aggressive plaintiff strategies are reshaping the claims environment across commercial insurance. The result is a liability market where severity, not frequency, drives losses, and where the businesses best positioned to weather this shift started preparing before a claim was ever made. 

Why is the commercial litigation risk environment changing?

There is no single definition of social inflation, but the National Association of Insurance Commissioners describes it as liability claims costs increasing above general economic inflation, often in connection with rising litigation costs and demands for large monetary awards.¹ 

The numbers tell a clear story. According to the Swiss Re Institute, social inflation in the U.S. rose by an average of 5.4% annually from 2017 through 2022, compared with 3.7% economic inflation over the same period. By 2023, the Institute’s Social Inflation Index had climbed to roughly 7 percentage points of liability claims growth.² 

A 2025 analysis from the Insurance Information Institute and the Casualty Actuarial Society put a dollar figure on the trend, estimating that legal system abuse contributed between $231.6 billion and $281.2 billion to increased liability insurance losses over the prior decade.³ 

Behind these figures is a shift in how claims are pursued and valued. Nuclear verdicts over $10 million, once rare outliers, are becoming a more familiar feature of the litigation landscape. And juries, influenced by broader social attitudes toward corporations, are awarding damages that often outpace the actual cost of an injury or loss. 

“We’re seeing plaintiff attorneys build cases the way corporations build brands,” says Steve Kelly, Associate Vice President, Casualty Claims, Commercial E&S/Specialty. “There’s strategy, funding and messaging behind these claims well before they reach a courtroom. That means insurers and their clients need to be just as intentional in how they prepare.” 

For agents, this means the conversation with clients can no longer start when a claim is filed. It has to start well before that. 

How can businesses prepare for commercial litigation risk before a loss occurs?

Businesses that treat claims management as a reactive function are at a structural disadvantage in this environment. By the time a lawsuit is filed, many of the decisions that determine its outcome, such as what evidence exists, how a contract allocates risk and how quickly a business responds, have already been made. 

“The businesses that fare best in this environment are the ones that have already done the work,” says Jason Ragsdale, Associate Vice President, Risk Management, Commercial, E&S and Specialty. “Preparedness isn’t about eliminating risk. It’s about having a plan in place in case something goes wrong.” 

That shift in mindset, from reactive to proactive, is where agents can add the most value. Business customers often don’t realize how much influence they have over the eventual cost of a claim until an agent walks them through it. 

What steps can agents take to help clients manage commercial litigation risk?

Helping clients prepare for a more litigious environment doesn’t require a complete overhaul of their operations. It requires a handful of deliberate practices, applied consistently. 

Engage early on claims and risk management

The earlier a business engages both its insurer and its risk management resources, the more options it has. Early engagement allows carriers to help investigate incidents while facts are fresh, retain qualified defense counsel and identify potential exposures before they escalate into claims. 

Encourage clients to loop in their carrier’s claims and risk management teams immediately after an incident rather than waiting to see whether it develops into something more serious. 

Strengthen documentation practices

Thorough documentation is one of the simplest and most effective tools a business has against litigation abuse. Strong documentation practices include: 

• Maintaining detailed incident reports for any accident, injury or property loss 

• Keeping maintenance and inspection records for equipment and facilities 

• Retaining training records that demonstrate employee safety education 

• Preserving communications related to safety concerns and corrective actions 

• Developing, communicating and consistently applying policies and codes of conduct 

When a claim does arise, this kind of documentation can make the difference between a quick, defensible resolution and a prolonged, costly dispute. 

Review contracts and risk transfer strategies

Contracts are a frequently overlooked line of defense. Indemnification clauses, additional insured requirements and certificate of insurance tracking all affect how liability is allocated when something goes wrong. Encourage clients to have contracts reviewed regularly, particularly when working with subcontractors or vendors, to make sure risk transfer provisions are current and enforceable. 

Use technology to reduce exposure

Technology has become an increasingly practical tool for reducing risk. Telematics, wearable safety devices and workplace monitoring systems can help identify hazards before they cause harm, while also generating the kind of data-driven records that support a business’s position if a claim is filed. For clients hesitant about the upfront cost, framing this technology as a defense against escalating claim severity, rather than just a safety upgrade, can help make the case. 

Build an incident-response plan

A written incident-response plan removes guesswork in the critical hours after a loss. It should outline who’s responsible for reporting an incident, how evidence should be preserved, who has authority to speak with outside parties and when to involve legal counsel or the carrier’s claims team. Clients that have practiced this plan in advance tend to respond faster and more consistently than those improvising in real time. 

Tailor the approach by industry

Litigation risk doesn’t look the same across industries, and neither should the response. A trucking company faces different exposures than a healthcare facility or a manufacturer, and the documentation, technology and contract considerations that matter most will vary accordingly. Agents who understand these industry-specific nuances, or who lean on carrier resources that do, are better equipped to guide clients toward the protections most relevant to their operations. 

Questions agents can ask clients today

A short conversation can reveal a lot about how prepared a client actually is. Consider asking: 

• How quickly does your team report incidents internally and to your carrier? 

• What documentation do you currently keep for safety inspections and training? 

• When was the last time your vendor and subcontractor contracts were reviewed for indemnification language? 

• Do you have a written incident-response plan, and has your team practiced it? 

• Are you using any technology to monitor safety or operational risk? 

• Who on your team is responsible for managing a claim from start to finish? 

These questions don’t just uncover gaps. They open the door to a broader conversation about how a client’s business is positioned for the current claims environment, and where an agent can help close the distance. 

Turning preparation into protection

Social inflation and litigation abuse aren’t trends that are going to reverse course on their own. The Insurance Information Institute, the Casualty Actuarial Society and the Swiss Re Institute all point to a claims environment that’s becoming more expensive to navigate, even as the number of claims declines. 

For independent agents, that reality creates an opening. Clients who understand what’s driving rising severity, and who take practical steps to document, contract and plan around it, are in a far stronger position when a claim does arise. Agents who bring that guidance to the table aren’t just placing coverage. They’re helping clients prevent additional loss to litigation.  

Nationwide’s Commercial Risk Management and Client Solutions page offers industry-specific resources, safety guidance and consulting services designed to help clients protect against the exposures most likely to produce severe losses. It’s a practical starting point for turning this conversation into action with your clients.