By William Nibbelin, Senior Research Actuary, Triple-I
Motor vehicle tort cases in federal and state courts generated $42.8 billion in “excess value” from 2014 to 2023, according to new analysis by Triple-I.
“Excess value” may sound like a good thing, but it’s not. It represents an additional cost of motor vehicle civil litigation – above and beyond what it would have been if prior trends in court filings had continued. From 1995 to 2007, filings declined, and from 2007 to 2014 they were flat.
The report illustrates the impact of litigation inflation on insurance premiums for all drivers. It also underscores the challenges related to accurately quantifying and comparing state-by-state experience.
Lawsuits push premium up
As Triple-I has previously reported, litigation trends are a major force driving up auto insurance premiums. As claims costs rise – whether due to rising repair costs, litigation, or other factors – premiums must increase to ensure that insurers have enough policyholder surplus to pay future, higher claims.
Policyholder surplus is not a nice-to-have extra. It is the money state regulators require insurers to maintain so they will be able to keep their promises to pay policyholders. In addition, credit rating agencies expect insurers to keep even larger surpluses than the states mandate to enable the insurers to borrow at more favorable interest rates when needed.
Interestingly, motor vehicle tort settlement amounts appear to have decreased on average between 2014 and 2023. While actual settlement amounts are not reported, the “amount in controversy” – legalese for the amount demanded by the plaintiff – serves as a proxy for filings disposed as settlements. The average amount in controversy decreased from $748,000 in the first of the three decades under consideration to $674,000 in the third.
However, the increased volume of cases during the period drove the overall excess value to $984.6 million at the federal level alone.
State courts present a challenge
The report estimates that state courts handled approximately 5.0 million motor vehicle tort cases from 2014 to 2023, generating an excess value of $41.8 billion – dwarfing the federal court impact. This analysis, however, is challenged by the state-by-state variety of definitions and criteria for data collection.
“Because states maintain different definitions and criteria for data collection, most state civil case data is either unavailable or incomplete,” the report says.
The report concludes that its findings align with previous research by Triple-I and the Casualty Actuarial Society, which quantified increasing inflation on auto liability insurance at $118.9 billion for 2014-2023, representing both litigation and economic inflation.
“As we continue to analyze the evolving landscape of motor vehicle litigation, it’s clear that a deeper, data-driven understanding of both national and state trends is crucial,” said Patrick Schmid, Triple-I’s chief insurance officer. “Only with more transparent and comprehensive data can we craft effective solutions that benefit both policyholders and the broader insurance market. Future research should focus on bridging the gaps in state-level information and exploring the causal factors behind rising litigation and its impacts.”
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