Evolving Skylines: Litigation and Insurance Trends – The Changing Liability Landscape for Real Estate Owners

Real estate owners may encounter new exclusions or other coverage restrictions the next time they try to secure general liability insurance. Several litigation trends are impacting the size of claims, and insurers are responding with restrictions in their coverage terms and risk appetites.

Social Inflation and Nuclear Verdicts Continue to Climb

The increase in litigation costs, called social inflation, and the rise of massive jury awards, called nuclear verdicts, have become a threat to businesses and liability insurers.

The U.S. Chamber of Commerce Institute for Legal Reform reports that other than a brief dip during the COVID-19 pandemic, nuclear verdicts have been increasing. An analysis of 1,288 nuclear verdicts delivered between 2013 and 2022 found that half were between $10 and $20 million, more than one-third were between $20 and $50 million, and 19 were more than $50 million.

Smaller firms are not immune to nuclear verdicts. Swiss Re found that jurors are nearly as likely to recommend large awards against small and medium-sized companies as they are against large companies in cases involving severe injury.

Several factors have been identified as contributing to rising litigation costs:

• Shifting jury attitudes and “reptile theory” legal tactics that trigger an emotional response.
• The rise of third-party litigation funding.
• Increased attorney advertising.
• Tort reform rollbacks and legal changes.

Litigation Trends Bring Increased Real Estate Risks

Beyond the rise in litigation costs and jury awards, real estate owners are also seeing developments in the types of lawsuits that pose significant risks.

• Habitability Lawsuits. Multiple classes, including class action lawsuits, have accused real estate owners and property managers of failing to provide habitable residences. In one case from 2025, Multifamily Dive reports that tenants in Denver were awarded $13.5 million in a class action lawsuit.
• Wrongful Eviction Lawsuits. The Urban Institute says evictions have increased, and some states have passed new “just eviction laws” that restrict when landlords can evict tenants.
• Abuse and Molestation Lawsuits. Accusations of sexual abuse have been in the public spotlight recently, and the real estate industry is uniquely vulnerable. The Department of Justice says it has settled a lawsuit against a rental manager accused of sexually harassing female tenants and prospective tenants, while the BBC says two brothers who became famous for their work in real estate have been convicted of sex trafficking.

Many lawsuits involve multiple parties, including real estate owner as well as property managers or developers. Contracts with clear indemnification and insurance requirements can help real estate owners control their risks, but unclear terms and unverified insurance can lead to contractual risk transfer gaps.

Carriers Introduce Exclusions in Real Estate Insurance

In response to litigation developments, some carriers are making changes to their terms. According to CIAB, even though the property and casualty market has softened, umbrella liability rates were still up by 4.7% in the fourth quarter of 2025. In addition to higher premiums, real estate owners may see the following changes:

• Reduced capacity for abuse and molestation coverage. Standard general liability policies may exclude coverage, and standalone policies may be more expensive.
• Assault and battery exclusions. Insurance Journal says property owners often assume their general liability policies will cover claims related to violence, but exclusions are common.
• Human trafficking exclusions. According to Gen Re, ISO has filed a comprehensive human trafficking exclusion.

The Strategic Takeaway

Average commercial property insurance rates decreased in the second half of 2025, according to CIAB, and that’s good news for real estate owners. Rising litigation costs still pose a threat to the general liability line of coverage. Rates are being closely monitored, and coverage limitations are being implemented given the rising frequency and cost of claims in select venues. Keep an eye out for new exclusions in your policies and verify that you have the coverage you need. Please contact Propel, an Alera Group Company, to ensure you are covered or assist with a second opinion.

Sources:

U.S. Chamber of Commerce Institute for Legal Reform, “Nuclear Verdicts: An Update on Trends, Causes, and Solutions,” Published May 30, 2024. Authors Cary Silverman & Christopher E. Appel, Shook, Hardy & Bacon LLP

Swiss Re “Verdicts on trial: The behavioral science behind America’s skyrocketing legal payouts.” Published September 24, 2025, by Martin Boerlin, Head Casualty Pricing North America, CUO P&C Reinsurance & Surbhi Gupta, Portfolio Actuary.

Multifamily Dive “Denver tenants awarded $13.5M in class action lawsuit.” Published April 8, 2025, by Mary Salmonsen, Reporter.

Urban Institute “Pursuing Housing Justice: Interventions for Impact” Overview.  Published May 24, 2023, by David C. Blount, Katie Elder, Samantha Fu, Kaela Girod, Jessica Perez, and Bill Pitkin.

CIAB “News Release: Q4 2025 Showed Very Soft Market Conditions, According to The Council’s P/C Market Survey.” Published February 18, 2026.

Department of Justice “Justice Department Secures $480,000 Settlement in Sexual Harassment Lawsuit Against Ohio Landlords and Property Managers.” Published December 18, 2025, updated January 14, 2026.

Insurance Journal “Rethinking Assault & Battery Liability in Commercial Real Estate.” Published on August 4, 2025, by Corey Alison.

Gen Re “Is Human Trafficking the Next Big Liability Exposure for Insurers?” Published September 22, 2025, by Matt Burns and Tim Fletcher.

Melody Olson

Melody has spent over 20 years specializing in real estate, construction, and project risk insurance. Melody is known by clients and colleagues for having strong technical expertise, creative problem-solving skills, and relentless client advocacy. More about Melody...

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Brynnan Hyland

With over a decade of industry experience, Brynnan brings a strong underwriting background with a focus on complex risks and program design. By analyzing client risk profiles and tailoring coverage solutions, Brynnan delivers clear guidance and a strategic approach to risk management.

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