Are Your Casualty Limits Adequate? Don’t Chance It

During economic slowdowns, including the global coronavirus pandemic, many insurance buyers are tempted to pare the size of their programs. With the property and casualty insurance marketplace hardening across virtually all lines, the cost of maintaining existing levels of coverage is going up. Deciding to buy less liability coverage, however, may be a big mistake.

Every insured faces a similar challenge during tough periods: they can only buy what they can afford, and that’s true of insurance. With operations slowing down, businesses have less margin to offset rate increases in primary and excess liability. They might rationalize the decision to reduce policy limits as a reflection of lower perceived exposure: “My business is making less, and I’ve had to reduce staff, so my liability exposure must be lower too.” But trends in claims and litigation mean a $1 million umbrella or excess liability policy no longer offers as much protection as it once did. Scaling back liability limits is response to a perceived immediate decline in exposure is shortsighted, and the fact is, many organizations have long-tail exposures that increase their liability over time. Claims inflation and greater litigiousness suggest that skimping on liability limits could cause long-term financial pain.

A key reason for rising insurance costs in umbrella and excess liability is losses. Insurers are paying more and larger claims and have to adjust rates accordingly. Two factors are inflating the cost of insurance claims – and liability exposure. These are price inflation, which occurs normally with the supply and demand of goods and services, and social inflation, which appears to be a long-term phenomenon. Social inflation comprises changing public attitudes about litigation, new theories of liability, large or “nuclear” verdicts, legislative actions that alter statutes of limitations, third-party litigation funding, and other developments.

Price inflation is tracked closely through the Consumer Price Index, which the Bureau of Labor Statistics compiles monthly. For example, in July 2020, the CPI for urban consumers (CPI-U) increased 0.6% from a month earlier. In the 12 months prior to July, the CPI-U rose 1.0%.1 The Insurance Research Council found incurred liability insurance losses have far outpaced the CPI-U between 2014 and 2018.2

Incurred Liability Losses Outpace CPI2 Annualized losses, compared with Consumer Price Index-Urban Consumers


Large jury verdicts are a significant source of social inflation in liability claims because they tend to influence public opinion on litigation and tend to elevate the amount of money plaintiffs are willing to accept to settle lawsuits. So-called nuclear verdicts are still occurring in jurisdictions around the United States, and companies in many industries remain attractive targets for plaintiff lawsuits.

One industry that has seen a major share of such large verdicts is trucking. Since 2012, U.S. trucking companies have faced several jury verdicts exceeding $100 million, with a 2016 case setting a record $280 million award. The American Trucking Research Institute (ATRI) has tracked verdicts and observed a sharp increase over time. For example, 2006, ATRI was aware of only four trucking cases with verdicts over $1 million. For 2013, ATRI cataloged 70. In 2018, ATRI tracked about 35 verdicts exceeding $1 million against trucking firms.

Geography matters for liability exposures, too. The ATRI Litigation Database of 600 cases between 2006 and 2020 shows a propensity for certain states to side with plaintiffs. In ATRI’s analysis, courts in nine states – Connecticut, Georgia, Kansas, Nebraska, New York, North Carolina, Oregon, Virginia and Wyoming ¬– found for plaintiffs in trucking litigation 100% of the time studied.3

Plaintiffs have pursued defendants with “deep pockets” for as long as courts have heard lawsuits, but other, more recent factors are contributing to increased verdicts. Among these are plaintiff lawyers’ tactic of the “reptilian brain theory.” This theory suggests that presenting cases in certain ways can trigger the oldest structures in jurors’ brains, which govern survival instincts and fears, and prompt juries to award more to plaintiffs.4 Another factor is the economic slowdown during the coronavirus pandemic, in which millions of workers have lost their jobs. Finally, it is difficult for most people to understand how to assess compensation for an injury or loss. Juries therefore might simply lean toward larger awards.

Percent of Plaintiff Verdicts by State3 600 cases in ATRI Litigation Database 2006-2020

One acknowledgment of rising liability exposure nationally is a legislative proposal to increase motor carriers’ minimum liability insurance requirements to $2 million from $750,000. The legislative was inserted in June into the INVEST in America Act, a sweeping transportation reform bill.5


Claims inflation is eroding coverage limits. Even though many excess general liability policies offer defense coverage outside the limits, the fact is, a $1 million policy no longer goes as far to settle or pay for ordinary claims as it once did. A few years ago, for example, a simple third-party liability claim, such as a slip and fall, or minor auto damage might have cost $5,000. Today, the same circumstances could add up to a claim of $40,000 or more. Litigated claims are even more expensive, and resolving one can quickly consume an insured’s limits. Therefore, cutting back on excess liability limits does not help insureds cope with rising claim frequency and severity.


With losses up, insurance companies are cutting back capacity for more classes of risk and raising rates across the board. More policies have exclusions, particularly for any claims involving communicable diseases. As an example, markets that reduce their capacity for certain excess liability risks to $5 million from $10 million also are seeking 40% to 60% rate increases. Fewer insurers are willing to offer coverage at lower attachment points. A commercial umbrella carrier might have previously attach at $5 million may now only attach at $10 million or much higher. Some carriers are even moving from lead positions to excess of $25 million attachment points.


Renewals are not necessarily challenging in the current marketplace if insureds present essentially the same level of risk and retain their incumbent carriers. The problem is, more insurers are looking to reduce their appetites for certain classes, regardless of loss history, and some are deciding to walk away from accounts where they might have been the incumbent for several years.

Where an incumbent insurer is not looking to walk away, the length of its relationships matters. Many insurers evaluate insureds by the number of years they have written the account. Persuading an insurer to return to a risk can be difficult if an insured opted to cut its limits. In addition to loss of goodwill, fractured relationships can result in higher pricing and differences in terms, conditions and limits offered.

Retail agents can add value by checking every contract for required insurance limits, to make certain that insureds have the right amount of coverage to fulfill their business agreements. In addition, retailers should explain to insureds what nuclear verdicts are and how those can happen.

Helping insureds understand their exposures and the value of updating insurance programs accordingly is a critical role for retailers, especially in hard market cycles.

Lastly, retailers and insureds will need time to shop for coverage if an incumbent insurer opts to leave their account. Lining up expert resources a minimum of 60 to 90 days before policy expiration is a good idea.


Knowing limits purchasing trends of peer companies is one the few ways insureds can see how others are responding to recent litigation and claims settlements, especially private companies. Buyers should view insurance as an important financial security measure. One “nuclear” verdict could put a firm out of business.

This is where CRC Group’s commitment and investment in data and analytics provides valuable results for agents. CRC’s formidable size and the quality of data, allows the team to generate high-quality benchmarking data using reliable and meaningful peer information that retailers can share with their clients to assist in the decision-making process.

Click here to find out how one retail agent used CRC Group’s benchmarking tools to develop a wining renewal strategy.


Claims inflation and litigation trends mean a standard $1 million umbrella liability policy won’t go as far as it once did. Insureds need help understanding their liability exposures and how to structure their insurance programs to mitigate risks. With the market hardening and some insurers declining to renew certain classes of business, retailers should work with a wholesale specialist well before an insured’s policy expiration date. An expert wholesale partner also can assist retailers in finding the best available coverage for rising liability exposures.

For more information, contact your CRC Group producer.


  • Philip Cook is a broker based in CRC’s Birmingham, Alabama office and member of the Casualty Practice Advisory Committee.
  • Marv Rubin is a broker based in CRC’s Redondo Beach, California office, specializing in Casualty business.


  1. Consumer Price Index – July 2020, Bureau of Labor Statistics, U.S. Department of Labor, August 12, 2020;
  2. “Social Inflation: Evidence and Impact on Property-Casualty Insurance,” Insurance Research Council, June 2020;
  3. “Understanding the Impact of Nuclear Verdicts on the Trucking Industry,” American Transportation Research Institute, June 2020;
  4. “Plaintiffs’ bar embraces Reptile strategy and defense bar responds,” Lexology, October 4, 2013;
  5. “House Panel Approves Amendment to Raise Minimum Liability Insurance for Carriers to $2 Million,” Transport Topics, June 25, 2020;