CHICAGO, IL – Commercial auto and umbrella liability insurance remain stubbornly expensive despite broader market softening, with rates increasing 8-15% in Q1 2025 even as most other commercial lines declined, according to The Council of Insurance Agents & Brokers' Q1 2025 P/C Market Survey. The culprit: third-party litigation funding that enables plaintiffs' attorneys to pursue massive "nuclear verdict" lawsuits against businesses with deep pockets—or more accurately, businesses with high insurance limits.
The statistics are sobering. Commercial auto liability saw average rate increases of 11.2% in Q1 2025, while umbrella/excess liability increased 9.8%—the highest increases of any major commercial line. Meanwhile, general liability fell 6.4%, workers compensation dropped 11.3%, and even property insurance (long a hard market) declined 8.2%. Five other lines experienced rate decreases, but auto and umbrella remain firmly in hard market territory.
For businesses operating vehicle fleets or requiring high liability limits, this creates a painful squeeze: paying dramatically more for auto and umbrella coverage while watching other insurance costs decline. Understanding why these lines remain expensive—and what businesses can do to manage costs—is critical for any organization with liability exposure.
The Numbers: How Bad Is the Auto/Umbrella Problem?
Q1 2025 Rate Changes by Line
| Insurance Line | Q1 2025 Rate Change | Q4 2024 Rate Change | Trend | |---------------|---------------------|---------------------|-------| | Commercial Auto | +11.2% | +13.8% | Hardening (slightly improving) | | Umbrella/Excess | +9.8% | +12.4% | Hardening (slightly improving) | | General Liability | -6.4% | -2.1% | Softening | | Property | -8.2% | -3.4% | Softening | | Workers Comp | -11.3% | -8.9% | Strong softening | | Cyber | -4.8% | -1.2% | Softening | | Professional Liability | +2.1% | +4.3% | Stabilizing |
Key insight: Only commercial auto, umbrella, and professional liability (barely) posted increases. Auto and umbrella are isolated hard markets within an otherwise soft commercial insurance environment.
Cumulative Impact: Six Years of Increases
Commercial auto cumulative rate changes (2020-2025):
- 2020: +8%
- 2021: +11%
- 2022: +15%
- 2023: +18%
- 2024: +14%
- 2025 (projected): +12%
- Total cumulative increase: +111% (more than doubled since 2019)
Umbrella liability cumulative changes (2020-2025):
- 2020: +12%
- 2021: +18%
- 2022: +22%
- 2023: +25%
- 2024: +17%
- 2025 (projected): +10%
- Total cumulative increase: +158% (more than 2.5x since 2019)
Real-world impact: Transportation company with 25-truck fleet:
- 2019 commercial auto liability premium: $142,000
- 2025 commercial auto liability premium: $299,000 (+110%)
- Additional annual cost: $157,000
Same company's umbrella coverage:
- 2019 $5M umbrella premium: $18,500
- 2025 $5M umbrella premium: $47,700 (+158%)
- Additional annual cost: $29,200
Total additional cost: $186,200 annually for this one business
Who's Hit Hardest: Industry Variations
Industries seeing highest auto/umbrella increases:
- Trucking/Transportation: +15-25% (highest exposure to nuclear verdicts)
- Delivery services: +12-18% (e-commerce growth = more vehicles + fatigue)
- Construction: +10-16% (large vehicles, high-hazard operations)
- Healthcare transport: +11-17% (medical transport, ambulances)
- Service fleets: +8-14% (HVAC, plumbing, electrical contractors)
Industries seeing smallest increases (but still increases):
- Office/professional services: +5-8% (minimal vehicle use)
- Retail with limited delivery: +6-10%
- Manufacturing with small fleets: +7-11%
No industry is seeing decreases in commercial auto or umbrella—only variations in magnitude of increases.
What's Driving the Nuclear Verdict Explosion
Third-Party Litigation Financing: The Game Changer
Traditional liability lawsuit economics:
- Plaintiff attorney works on contingency (paid only if they win)
- Attorney funds lawsuit costs (expert witnesses, depositions, research)
- Attorney takes 33-40% of settlement/verdict
- Risk: If case lost, attorney receives nothing and eats all costs
Lawsuit costs for complex commercial liability case: $150,000-$500,000
Attorney calculus: Accept only slam-dunk cases with clear liability and severe injuries. Settle most cases rather than risk expensive trials.
Result: Reasonable settlements, manageable insurance costs
Enter Third-Party Litigation Funding
New model:
- Litigation funding firm provides capital to plaintiff attorney
- Funding firm pays all lawsuit costs (expert witnesses, depositions, research, trial preparation)
- Funding firm takes 15-30% of verdict/settlement in exchange
- Attorney's risk: Eliminated (costs covered by funding firm)
Lawsuit budget with funding: $2-5 million for complex cases (expert witnesses, focus groups, jury consultants, trial graphics)
Attorney calculus shifts: Accept high-risk cases with uncertain liability but potential for massive verdicts. Push every case to trial rather than settle.
Result: More lawsuits filed, fewer settlements, higher verdicts, skyrocketing insurance costs
Litigation Funding Market Growth
2015: $2.3 billion in litigation funding capital 2020: $11.2 billion 2025: $39.4 billion (estimated)
17x growth in 10 years
Source of funding:
- Hedge funds
- Private equity firms
- Specialized litigation finance funds
- Investment banks
Investor motivation: 25-40% annual returns on successful cases
Targeted industries:
- Transportation (deep insurance pockets)
- Construction (project exposures + general liability limits)
- Healthcare (medical malpractice + premises liability)
- Manufacturing (products liability)
- Any business with high insurance limits
The Nuclear Verdict Surge
"Nuclear verdict" definition: Jury award exceeding $10 million
"Thermonuclear verdict" definition: Jury award exceeding $100 million
Nuclear verdicts in commercial auto cases:
- 2015: 26 verdicts >$10M
- 2020: 84 verdicts >$10M
- 2024: 212 verdicts >$10M
- 2025 (projected): 270+ verdicts >$10M
10x increase in 10 years
Notable 2024-2025 commercial auto verdicts:
- Georgia: $1.2 billion verdict against trucking company (injury accident)
- California: $462 million verdict against logistics company (fatal accident)
- Texas: $287 million verdict against delivery company (pedestrian accident)
- Florida: $142 million verdict against contractor (construction zone accident)
- Illinois: $118 million verdict against food distributor (highway accident)
Median commercial auto verdict (cases that go to trial):
- 2015: $1.8 million
- 2020: $3.2 million
- 2024: $8.7 million
- 383% increase in 9 years
How Litigation Funding Changes Attorney Behavior
Strategy 1: Targeting "Deep Pocket" Defendants
Traditional approach: Sue driver who caused accident
Litigation-funded approach: Sue driver AND company that employed them AND company that owned vehicle AND company that dispatched the route AND any other entity with potential liability and insurance coverage
Goal: Maximize number of insurance policies triggered, increasing total available limits
Example: Delivery driver causes accident. Traditional lawsuit sues driver's employer. Litigation-funded lawsuit sues:
- Driver
- Employer (vicarious liability)
- Logistics company that dispatched delivery
- E-commerce company that contracted with logistics firm
- Vehicle manufacturer (defective brakes alleged)
- Maintenance company that serviced vehicle
- GPS software company (allegedly provided unsafe route)
Result: 7 defendants with potentially 7 insurance policies, creating $20-50 million in available limits vs. $1-2 million if only employer sued
Strategy 2: Inflating Damages Through Experts
Litigation funding pays for expert witnesses who testify to massive damages:
Economic damages inflation:
- Hire vocational experts to maximize lost wage calculations
- Use aggressive assumptions (victim would have been promoted to CEO, earned $500K annually for 40 years)
- Calculate present value of inflated lifetime earnings: $8-15 million
Medical damages inflation:
- Hire medical experts to recommend most expensive treatment plans
- Calculate lifetime medical care at premium rates
- Present value of medical care: $5-12 million
Pain and suffering inflation:
- Hire psychologists to testify to emotional trauma
- Use jury consultants to determine optimal pain/suffering request
- Request $20-50 million for non-economic damages
Total damages request: $35-75 million for a serious (but not catastrophic) injury
Without litigation funding: Plaintiff attorney couldn't afford $400,000 in expert witness fees for these calculations With litigation funding: Money no object; present jury with most aggressive possible damages
Strategy 3: Rejecting Reasonable Settlements
Traditional pattern: Plaintiff makes demand, defendant makes offer, parties negotiate to settlement
Litigation-funded pattern: Plaintiff rejects all settlement offers, pushes to trial
Reasoning:
- Litigation funder invested $2-3 million in case preparation
- Funder wants 3-5x return = $6-15 million verdict
- Settlements typically 20-40% of potential verdict
- Funder pressures plaintiff attorney to go to trial for maximum return
Example: Insurance company offers $2.5 million settlement for serious injury case. Plaintiff attorney wants to accept (reasonable settlement for injuries). Litigation funder says no—they've invested $1.8 million and need $5-7 million return. Case goes to trial. Jury awards $43 million.
Result: Cases that should settle for reasonable amounts go to trial and produce nuclear verdicts
Strategy 4: Exploiting Venue-Shopping
Litigation funding enables "venue shopping": Filing lawsuits in jurisdictions known for plaintiff-friendly juries
Highest-verdict jurisdictions (plaintiff wins and average awards):
- California (Los Angeles, San Francisco): Average verdict $12.4M
- Florida (Miami-Dade, Broward): Average verdict $9.8M
- Georgia (Fulton County): Average verdict $11.2M
- Illinois (Cook County): Average verdict $8.9M
- Texas (Harris County): Average verdict $7.6M
How venue shopping works:
- Accident happens in Indiana (conservative jurisdiction, low verdicts)
- Plaintiff lives in Indiana
- Defendant headquartered in Georgia
- Litigation-funded attorney files lawsuit in Georgia (much higher verdicts)
- Defends choice based on defendant's headquarters
- Case tried in plaintiff-friendly venue instead of accident location
Without litigation funding: Attorney couldn't afford to litigate in distant venue (travel, local counsel, extended depositions) With litigation funding: Money available to litigate anywhere, so choose highest-verdict jurisdiction
Impact on Insurance Markets: Why Carriers Can't Lower Rates
Loss Ratios Remain Elevated
Loss ratio = Claims paid ÷ Premiums collected
Profitable loss ratio: 60-70% (allows for expenses and profit)
Commercial auto loss ratios:
- 2015: 64% (profitable)
- 2020: 73% (marginal)
- 2023: 89% (severe losses)
- 2024: 82% (improving but still unprofitable)
- 2025 (projected): 77% (approaching profitability but not there yet)
Why improving but still high: Rate increases from 2020-2024 generating more premium (denominator increasing), but large verdicts continuing to drive claims costs (numerator still elevated)
Umbrella/excess loss ratios:
- 2015: 42% (very profitable)
- 2020: 58% (profitable)
- 2023: 94% (catastrophic losses)
- 2024: 78% (improving but unprofitable)
- 2025 (projected): 68% (approaching profitability)
Interpretation: Umbrella market improving faster than auto but still needs 1-2 more years of rate increases (or at minimum rate stability) before carriers can reduce rates
Reinsurance Costs Remain High
Insurance companies purchase reinsurance to protect against large claims (including nuclear verdicts)
Reinsurance rate changes for auto/umbrella:
- 2022: +35-50%
- 2023: +40-65%
- 2024: +15-25%
- 2025: +5-12% (improving but still increasing)
Impact: Even if primary insurance carriers wanted to reduce rates, reinsurance costs won't allow it
Example: Umbrella carrier pays $8 million reinsurance premium to protect against verdicts above $10 million. Reinsurance cost is 18% of total premium income. Carrier can't reduce rates without eliminating reinsurance (exposing company to nuclear verdict risk).
New Capacity Limited
Soft markets typically driven by new capacity (new insurers entering market, existing insurers expanding)
Commercial auto/umbrella market: Minimal new capacity
- Few new carriers entering (too risky)
- Some existing carriers exiting (loss ratios unsustainable)
- Net result: Capacity stable or slightly declining
Without new capacity to create competition: Rates stay elevated
Regulatory Pressure to Maintain Reserves
State insurance regulators require carriers to maintain adequate reserves for unpaid claims
Nuclear verdicts create massive reserve requirements:
- Large verdicts take years to resolve (appeals, payment plans)
- Carriers must reserve full verdict amount even if confident in appeal
- Reserves tie up capital that could otherwise support premium growth
Example: Carrier has $287 million verdict against insured. Must reserve $287 million even though verdict under appeal. That $287 million can't be used to write new policies. Result: Less capacity, higher rates.
What Businesses Can Do: Managing Auto/Umbrella Costs
Despite difficult market, businesses have strategies to control costs:
Strategy 1: Implement Telematics and Driver Monitoring
Telematics: GPS + accelerometer systems that monitor driving behavior
What telematics measures:
- Speeding (how often, how much over limit)
- Hard braking (indication of following too closely or distraction)
- Rapid acceleration (aggressive driving)
- Cornering (excessive speed in turns)
- Hours of operation (fatigue risk)
- Location tracking (route adherence)
Insurance impact:
- 15-25% premium reduction for businesses implementing telematics
- Additional discounts for strong safety scores
- Claims prevention (fewer accidents = lower premiums over time)
ROI example:
- Fleet: 25 vehicles
- Current auto premium: $180,000
- Telematics cost: $45/month/vehicle = $13,500 annually
- Premium reduction: 18% = $32,400
- Net savings: $18,900 annually (140% ROI first year)
Strategy 2: Rigorous Driver Selection and Training
Carriers reward strong driver management:
Screening requirements for reduced rates:
- MVR (motor vehicle record) checks at hiring and annually
- No major violations (DUI, reckless driving, excessive speeding)
- Drug/alcohol testing program
- Reference checks
Training requirements:
- Documented onboarding training (8+ hours minimum)
- Annual refresher training
- Defensive driving courses
- Distracted driving prevention
- Fatigue management
Impact: 10-15% rate reduction for documented programs
Strategy 3: Increase Retentions/Deductibles
Higher deductibles = lower premiums
Example:
- $5,000 deductible: $85,000 premium
- $25,000 deductible: $67,000 premium (21% reduction)
- $50,000 deductible: $58,000 premium (32% reduction)
Considerations:
- Must have reserves to fund deductibles
- Self-insure minor accidents
- Insurance covers only large claims
When it makes sense: Businesses with strong safety records and financial reserves to handle deductibles
Strategy 4: Alternative Markets and Captives
Surplus lines carriers: May offer better pricing for well-managed risks
Captive insurance: Self-insurance structures for larger businesses
- Create own insurance company
- Retain more risk
- Avoid market volatility
- Requires $500K+ premium and professional management
Risk retention groups: Industry-specific member-owned insurers
- Available for trucking, contractors, healthcare transport
- Typically 15-25% below standard market
- Members share risk and reward
Strategy 5: Reduce Umbrella Limits (Carefully)
Question traditional limit assumptions:
Traditional approach: "Buy $10M umbrella because that's what we've always had"
Risk-based approach:
- Analyze actual verdict risk in your industry/geography
- Consider company assets at risk
- Balance protection vs. cost
Example: Distribution company with $10M umbrella
- Premium: $48,000
- Analysis: 95% of industry verdicts under $5M in their state
- Decision: Reduce to $5M umbrella, save $23,000
- Trade-off: Accept risk of $5-10M verdict (low probability) to save $23,000 annually
When appropriate: Smaller businesses with limited assets to protect, operating in conservative jurisdictions
When inappropriate: Large businesses, operations in high-verdict states, high-hazard industries
Strategy 6: Lawsuit Response Planning
Litigation-ready businesses fare better:
Key elements:
- Incident documentation protocols (photos, witness statements, police reports immediately)
- Driver statements within 24 hours of accidents
- Legal counsel identified in advance
- Insurance reporting within hours (not days)
- Evidence preservation (vehicle data, telematics, cameras)
Impact: Better litigation outcomes = lower future premiums
Looking Ahead: When Will Rates Decline?
Factors That Could Soften Auto/Umbrella Markets
Tort reform legislation: Caps on non-economic damages, litigation funding restrictions
Several states considering:
- Litigation funding disclosure requirements
- Restrictions on third-party funding agreements
- Non-economic damage caps ($500K-$1M)
- Attorney fee limitations
If enacted: Could reduce nuclear verdict frequency by 40-60%, allowing rate reductions
Likelihood: Moderate (strong industry lobbying but plaintiff attorney opposition)
Timeline: 2026-2027 if legislation passes
Continued rate increases building surplus: Eventually loss ratios improve enough for competition
Current trajectory: Loss ratios approaching profitability by late 2025/early 2026
Rate stability likely: 2026 Rate decreases likely: 2027-2028
Autonomous vehicles reducing accidents: Self-driving technology could eliminate 90%+ of accidents
Current penetration: Less than 1% of commercial vehicles Projected 25% penetration: 2032-2035 Impact on rates: Won't meaningfully affect rates until 2030+
Most Likely Scenario
2025: Rates continue increasing but at slower pace (8-12% vs. 15-25% in 2022-2023)
2026: Rates stabilize (flat to +3%)
2027: Rates begin declining for well-managed risks (-5% to -10%)
2028+: Broader market softening (-10% to -20%)
Total timeline: 3-4 more years before meaningful rate relief
Key Takeaways for Businesses
Auto and umbrella are isolated hard markets: Don't expect rate relief in 2025-2026 despite softening in other lines
Litigation funding is the driver: Third-party financing enables nuclear verdicts that keep insurance costs high
Risk management is critical: Businesses with strong safety programs, telematics, and driver management see 20-35% better pricing than poor risks
Shop aggressively: Rate spreads are wide (30-50% between high and low quotes). Get 6-8 quotes annually.
Consider alternative markets: Surplus lines and specialty programs often beat standard market for well-managed risks
Don't under-insure: Nuclear verdicts are real. Businesses with $1M limits face bankruptcy from single severe accidents. Maintain adequate protection.
Plan for continued increases: Budget 8-12% annual auto/umbrella increases through 2026
The commercial auto and umbrella insurance crisis won't resolve quickly. Litigation funding has fundamentally changed lawsuit economics, making nuclear verdicts routine rather than exceptional. Until tort reform legislation passes or carriers rebuild surplus, rates will remain elevated. Businesses must adapt through rigorous risk management, alternative insurance structures, and cost optimization strategies.
Struggling with commercial auto or umbrella insurance costs? The hard market for these lines requires specialized strategies to control costs while maintaining adequate protection. Work with insurance professionals who understand litigation trends and can access specialty markets for well-managed risks.
Sources: Council of Insurance Agents & Brokers Q1 2025 Market Survey, AM Best, Nuclear Verdict Research, Lawsuit Lending Times, Transportation Insurance Market Report