Attorney representation on liability claims is up, and, while still at a low rate, new claim litigation increased in 2023 compared to 2022, driven in part by a rush to file lawsuits in Forida before tort reform measures took effect. These were some of the trends in legal challenges outlined in the fourth installment of Sedgwick’s “Liability Litigation: Observations and Trends 2024.” The report—which analyzes liability claims litigation trends and practices—discusses Florida tort reform, litigation conditions and rates, third-party litigation funding, plaintiffs’ bar tactics, and social and economic inflation.
Florida Tort Reform
“We are just past the first anniversary of HB 837 in Florida, and we expect continued impacts through 2024,” according to the report. “It was no surprise when the plaintiffs’ bar rushed to the courthouse to avoid the impact of HB 837 in March 2023 and shattered the previous record for lawsuits set in May of 2021. Statewide, 280,122 new cases were filed in March of 2023, which represented a 127% increase over the prior record.”
Litigation Conditions
“Attorney representation has been increasing over the last five years,” the report states. “Attorney representation rates for general liability bodily injury (GL BI) claims increased from 14.1% in 2022 to 17.2% in 2023. Rates for auto liability bodily injury (AU BI) claims increased to 47.7% in 2023, up from 2% from 2022.”
Furthermore, “While litigation rates remain very low—at 1.7% for GL BI claims and 3.3% for AU BI claims—the trend continues for attorney representation earlier in the life of the claim. For claims that are eventually litigated, 74.2% of GL BI claims and 85.5% of AU BI claims have attorney representation in place within 14 days of report. This represents increases of 5.8% and 2.6% respectively since 2020.”
Litigation Rate
From an industry perspective, however, “the latest data continue to show an increase in liability litigation. Lex Machina noted in its June 2023 Insurance Litigation Report that insurance cases litigated at the federal level increased by 30% from 2021 to 2022. From a Sedgwick perspective, new claim litigation in 2023 increased to 1.7% for GL BI claims, a slight increase over the 1.3% that was seen in 2022. However, this increase was primarily driven by the large volume of filings in Florida to avoid the March 2023 reform law, without which litigation rates would have likely decreased at a national level.”
Third-Party Litigation Funding
“The Center for Strategic and International Studies reported in 2022 that over $3.2 billion was invested in court cases on behalf of third-party financiers which represents a 16% increase from the prior year,” states the report. “However, in 2023 Reuters reported that number dropped to 2.7 billion, though the decrease appears to have been driven more by economic conditions, including higher interest rates, that made other investments more attractive in the short term. It can be expected that litigation funding will return to popularity when the financial markets change again.”
Plaintiffs’ Bar Tactics
“The plaintiffs’ bar continues to be well organized and is evolving its strategies aimed at inflaming juries to maximize results,” the report states. “They have created podcasts, webinars, seminars, and even developed university-like training institutes going so far as to refer to undergraduate and graduate content.” The report mentions the reptile theory, the edge method, and anchoring, all of which are manipulation tactics to which it states the defense side has been slow to respond. However, “arising out of the need to respond to the reptile/edge method, the Mongoose Method was born. The Mongoose Method, from Courtroom Sciences, Inc., is a defense-oriented training program that ‘looks to balance the scales of justice.’ Its purpose is to educate employees and the business community on how to avoid traps and steer the argument away from emotion and back to the facts of the incident.”
Social/Economic Inflation and Shifting Ideas of Fault
Sedgwick claims that trends over the past three years include that “the cost of claims is going up at a rate that outpaces general economic inflation, which has itself been trending upward. Social inflation continues to drive an increase in the cost of claims both litigated and non-litigated. As noted by the Insurance Information Institute, the impact of social inflation on commercial auto liability was over $4 billion for 2021.”
CLM Member Weighs In
“Sedgwick’s 2024 commentary shows progressive increases, since 2019, in the number of claims litigated, the use of third-party litigation funding, the percentage of claims litigated in federal court and defense costs,” says Sloan L. Abernathy, partner, Deutsch Kerrigan, LLP. “In part, this could be a reflection of the litigation industry responding to the spike in inflation from 2021 to 2022. The bottom line of plaintiff’s attorneys predictably increased, complemented by an increase in the perceived value of injury claims due to more extensive treatment made possible by third-party litigation funding.
“The combined effect has led to claims remaining active longer and ultimately entering litigation, rather than settling out within the applicable limitations period. Additionally, with more extensive treatment and the effect of inflation, there presumably have been more diverse-party tort claims that have satisfied the $75,000 minimum required for federal diversity jurisdiction, thus leading to the proportional increase in claims litigated in federal court. Lastly, the higher volume of litigation naturally has led to an increase in defense costs, in addition to hourly rate increases sought by defense firms to account for the effects of inflation on their firm’s operating costs and general overhead.”