Tracking Social Inflation’s Growing Impact on Insurance

Posted August 22, 2025

Author – Tom Schneider, Account Executive – Horst Insurance

Introduction: A Hidden Economic Force

While economic inflation dominates headlines, insurers and risk managers are battling a different beast—social inflation. This lesser-known but increasingly disruptive phenomenon refers to the rising costs of insurance claims due to societal trends, including litigation aggressiveness, jury sentiment, nuclear verdicts, and shifting legal standards. As insurers try to stay ahead of the curve, the Mid-Atlantic states—New York, New Jersey, Maryland, and Pennsylvania—are emerging as hotbeds of social inflationary activity.

This article explores how social inflation is taking shape across these four states, the sectors most impacted, and what insurers can do to respond.

 

Social Inflation: A Brief Overview

Social inflation is not about prices—it’s about people. It arises when jurors award larger settlements, when attorneys push aggressive liability theories, and when societal expectations shift about who should bear financial responsibility for harm. It is driven by:

• Litigation funding by third parties
• Media influence on public sentiment
• Erosion of tort reforms
• Increased mistrust of corporations

Insurers struggle to predict and price for these changes, making some liability lines—especially commercial auto, general liability, and medical malpractice—volatile and unpredictable.

1. Regional Spotlight: Mid-Atlantic States
2. New York: Verdict Capital

New York, long known for its litigious culture, is now a nucleus for nuclear verdicts—those exceeding $10 million. Recent years have seen:

• Increased courtroom hostility toward insurers and large companies
• A spike in class action suits tied to labor law violations (particularly under Labor Law 240)
• Bronx and Kings County emerging as jurisdictions with extreme jury awards

Case in Point: In 2024, a jury in Brooklyn awarded $45 million in a trucking accident case—despite evidence the driver followed protocol. The emotional appeal to jurors outweighed the technical merits.

Impact: Commercial auto premiums have increased by over 20% since 2022, and umbrella liability rates have nearly doubled in certain ZIP codes.

 

New Jersey: Litigation Funding Hotbed

New Jersey is experiencing a wave of litigation funding arrangements, where hedge funds or private equity firms bankroll lawsuits in exchange for a cut of the winnings. This trend:

• Encourages prolonged litigation
• Removes financial pressure for plaintiffs to settle
• Increases defense costs and overall claim severity

Additionally, consumer protection lawsuits and environmental liability claims have surged, particularly around PFAS (“forever chemicals”) contamination.

Insurer Response: Carriers are starting to file for rate adjustments specifically tied to third-party litigation trends, a rare but telling move.

 

Maryland: Quiet but Rising

Maryland has historically flown under the radar, but signs of social inflation are emerging in:

• Medical malpractice cases with escalating non-economic damages
• Construction liability suits tied to growing urban development in Baltimore and Montgomery County
• Judicial shifts: Judges appear increasingly willing to admit emotionally charged testimony and unorthodox legal theories

Legislative Risk: Efforts to remove caps on non-economic damages in tort claims are gaining traction, which could supercharge social inflation effects if passed.