“Social inflation” is not a new term. In fact, it is something we have all heard before. Social inflation occurs when litigation and legal costs go up for insurance carriers.
We have become very litigious as a society, and we often hear about large amounts awarded to an injured party. From American Property Insurance Company: In 2020, an older man was walking to a New Jersey deli for a sandwich and fell on the deli’s paver walkway, injuring his back. The claimant filed suit immediately, claiming a number of relatively minor injuries. In early 2025, the lawsuit culminated in a $2 million jury award to the man due to the deli’s negligence in failing to weed between the pavers, stating that no warning sign of that had been posted.
The current trend in higher litigation costs, which is attributed to the rise in large financial relief for the plaintiff, is directly related to an increase in your insurance premiums.
Carriers are paying out more than ever, and it can take years in court to play out. This is your defense costs, along with the dollar amount awarded, and insurance carriers have to be able to keep up. Generally, most commercial properties like condominiums, cooperatives, rental buildings, retail, offices, etc., have a $1,000,000 primary liability limit. This is very common and used to work out if someone sued for a few hundred thousand. These days, people are asking for millions of dollars, which not only exhausts your $1,000,000 primary limit but reaches the Umbrella policy as well.
Ding, ding, ding – a direct link to why the Umbrella market crumbled back in 2020, and we are still feeling these effects. Since carriers cannot foresee how a liability claim will transpire, there is only so much they can do. Whether juries believe insurance carriers have deep pockets or they just favor the injured party, the amounts awarded are high and a major factor in increased premiums.
In this litigious society, we suggest maintaining an Umbrella for excess liability. Albeit, rising costs in Umbrella premiums don’t make it easy, we are happy to review and suggest an Umbrella limit that is sufficient to your particular needs.
As always, if you have any questions, please reach out to me anytime.
