Surge in Motor Vehicle Litigation: Trends and Implications for Insurers

Motor vehicle litigation has escalated at a staggering rate, outpacing other federal civil cases by a factor of five over the past decade, as highlighted in a new report by the Insurance Information Institute (Triple-I) and the Casualty Actuarial Society (CAS).

This report sheds light on a crucial trend in the insurance industry: motor vehicle tort filings soared to a record 6,809 in 2024, marking a compound annual growth rate (CAGR) of 5.0% from 2014 to 2024. Meanwhile, the frequency of overall federal civil cases decreased at a rate of 0.9%. The increase in motor vehicle litigation does not directly align with the number of claims filed, indicating other factors are driving this trend. Experts suggest that these could include heightened legal advertising, evolving legal standards, or shifts in consumer behavior.

Implications for Insurance Pricing and Reserving

The settlement behavior in motor vehicle tort cases presents significant implications for insurers. From 2015 to 2024, over half (52.4%) of these cases were settled out of court, with only 7.1% culminating in judgments. This high settlement rate impacts how insurers formulate pricing and reserve strategies, as settlements typically result in lower costs compared to trials. Furthermore, the average compensation awarded to plaintiffs in motor vehicle tort judgments has climbed dramatically to $681,000, well surpassing the averages in other civil cases.

Variations Across Liability Systems

Growth rates in motor vehicle tort filings differ by state, often depending on the liability systems in place. In states with no-fault systems, the CAGR was 4.6%, whereas tort states experienced a 6.2% increase. From 2015 to 2024, federal and state courts collectively dealt with $43.84 billion in excess litigation value in motor vehicle cases. Of this, state courts accounted for $42.77 billion, illustrating the substantial burden on the state judicial system.

Data Limitations and Economic Impact

The analysis is constrained by data availability, with comprehensive state-level motor vehicle tort data accessible in only 11 states. This limitation cautions against far-reaching conclusions but does not diminish the observed economic impacts. According to prior research, inflationary pressures on total auto liability ranged from $143.6 billion to $173.1 billion, and current excess litigation costs comprise 25.3% to 30.5% of that estimate.

Industry Challenges and Calls for Enhanced Data

Sean Kevelighan, CEO of Triple-I, emphasizes the disconnect between rising litigation and static claims frequency, lacing increased costs with implications for auto premiums. The commercial auto insurance sector's continuing struggle is evidenced by a $4.9 billion underwriting loss in 2024, extending a 14-year trend of financial adversity. Morgan Bugbee, CAS vice president, underscores the necessity for detailed court data to refine loss modeling and better assess financial reserves, which are particularly critical in litigation-heavy insurance lines.

Insurers and industry stakeholders must navigate these complexities, leveraging litigation trends to inform strategic decisions. As the sector grapples with financial losses and pricing pressures, comprehensive court data will be instrumental for future risk assessments and underwriting practices.