Business Liability Claims Litigation Jumped in 2023: Lex Machina

After holding relatively steady for nearly a decade, the number of business liability policy claims cases jumped 28% in 2023, according to a litigation report from Lex Machina.

The report found that 3,596 business liability cases covering third-party claims regarding damages or injuries caused by a business’s employees, products, premises or services were filed last year. That number was 2,799 in 2022 and 2,721 in 2021.

In follow-up correspondence, Ron Porter, Lex Machina’s insurance legal data expert and editor of the report, noted that the business liability (BL) category at Lex Machina is broad. The category includes standard commercial general liability policy claims, as well as claims under workers’ compensation, officers and directors’ liability, commercial excess policies, title insurance and professional liability policies.

“No external factor that I am aware of would account for the increase in filings of BL cases in 2023, given the wide range of coverage included within this policy type tag,” he wrote in an email. He added that “variations that occur in filings in one year may not represent a trend or anything significant other than coincidence.”

When examining the numbers for 2024, he said that the business liability case filings to date are a little over 1,500 — which would project to about a 10% decline from 2023. “So, perhaps a return to pre-2023 levels is in the works,” he wrote in the email.

In separate June reports, broker WTW said commercial lines insurance increased overall by an average of 6.3% during the first quarter, and Gallagher reported that 80% of business owners are worried their business insurance will not cover a specific event or loss.

In total, Lex Machina reported that 17,654 insurance cases were initiated in federal district courts in 2023, marking a 6% decrease from the number of insurance cases in the prior year. Still, the report found that the number of business interruption cases filed increased by nearly 60% year-over-year and surpassed the 10-year-high case count set in 2020. And while the number of filed hurricane-related cases dropped slightly, the yearly total of homeowners policy insurance cases, excluding hurricane-related cases, continued its climb.

The most active defendants by cases in 2023 were State Farm Fire & Casualty Co. (5,833 cases), State Farm Mutual Automobile Co. (2,138 cases) and Allstate Vehicle & Property Insurance Co. (1,368 cases).

“As insurance litigation is particularly diverse and nuanced with a wide variety of underlying claims, it is crucial to be able to hone in on the litigation trends in these different subsets of cases, as we do in this report,” Porter said in a press release. “By doing so, we gain important data-driven insights into the shifts and patterns in the practice area of insurance litigation. Practitioners can use these insights to sharpen their litigation strategy and advise their clients.”