USA - Nationwide: An Insurance: Dispute Resolution: Insurer Overview
Celebrating America 250 and the Key Role Insurance Has Played in America
America’s 250th birthday serves as an appropriate occasion to celebrate America’s unique imprimatur on insurance and insurance coverage law and litigation. See S. Seaman, P. Hernandez, and P. Lewis. America 250: The History Of Insurance & Coverage Law & Litigation In The United States (Xlibris 2026).
Chief among America’s contributions is the “duty to defend” (see Duty To Defend: A Fifty-State Survey (Hinshaw & Culbertson LLP 2025)); bad faith and extracontractual liability; and litigation American-style, replete with social inflation, nuclear verdicts, and increasing defence and settlement costs. See S. Seaman & J. Schulze, Allocation Of Losses In Complex Insurance Coverage Claims (13th Ed. Thomson Reuters 2025) at Chapter 19.
The Policy Transformation From the Biden Administration to Trump 2.0
The transition from the Biden administration to Trump 2.0 impacted insurers significantly in 2025, with Trump 2.0 abandoning the “all of government” approach to ESG and DEI in favour of a “drill baby drill” and “merits-based” hiring approach. Tariffs introduced some uncertainty and trade and political risk insurance continued to gain traction in the USA. See S. Seaman & P. Hernandez “2025 Key Insurance Decisions, Trends, & Developments & A Look Ahead To 2026”, Mealey’s Emerging Insurance Disputes, Vol. 31, # 1 (Jan. 9, 2026).
The Growing Impact of Artificial Intelligence
AI presents major opportunities and exposures for companies and their insurers. Insurers are using AI with greater frequency in connection with underwriting, pricing, risk management, fraud detection, customer service, claims processing and adjusting, and other business functions. AI provides the possibility for insurers to transition from reactive damage control models to predictive and preventative modelling. It also enables insurers to address the talent gaps presented by baby boomer retirements. The use of AI presents numerous risks such as algorithmic bias and discrimination, data privacy and security vulnerabilities, inaccurate pricing, and claims adjustment as well as regulatory compliance challenges.
Insurers are facing a wide range and ever-growing universe of AI-related claims and claim types, some of a traditional variety and others unique to AI. Insurers are including AI exclusions, sub-limits, and endorsements to control AI-related risks in a variety of policy types to address and limit “silent A-I” exposures. The challenges are like those presented by “silent cyber” claims, but at an accelerated pace with prospects of increased claims frequency and severity. Insurers are channelling AI risks into separate coverages.
AI is becoming a more common subject of discovery and an increasingly important subject in coverage and bad faith litigation. Insurers are well-served by documenting the role and impact of AI; having human involvement and judgement interjected throughout the process; and carefully selecting and monitoring vendors.
Trends and Developments for Some Leading Claim Types
Cybersecurity and privacy
Underlying cyber claim frequency remained stable while severity dropped by 50% year-over-year, reflecting improved incident response, widespread adoption of multi-factor authentication, and the increased use of real-time monitoring tools. Business email compromise and funds transfer fraud accounted for 60% of cyber claims in 2025, with ransomware continuing to represent the most costly and disruptive attack type.
In 2025, the number of coverage disputes under cyber-specific policies has increased as courts continue to grapple with “silent cyber” claims. As of May 2026, 22 states have enacted comprehensive consumer data privacy statutes.
Drugs, guns, and insurrections
The trend of coverage decisions favouring insurers in the context of opioids continued, with coverage for thousands of claims brought by government subdivisions, hospitals, and benefit plans ruled not covered under general liability policies on the grounds that they seek economic loss, rather than “bodily injury” or “property damage” and as not constituting an “occurrence”. The Second Circuit ruled that insurers had no duty to defend or indemnify a firearms retailer in “ghost gun” cases on the grounds that the claims did arise from an “occurrence”. The Second Circuit also affirmed a ruling that Venezuelan President Maduro’s actions against the American-recognised government of Juan Guaidó constituted an “insurrection” within the meaning of a marine cargo reinsurance policy as the Maduro regime’s actions were violent and constituted an uprising to overthrow the recognised government.
Silica, asbestos, and environmental
Traditional environmental claims and asbestos claims continue apace. Silica-related claims and litigation have resurged due to the popularity of engineered stone for kitchen and bath countertops and a USD52 million verdict award by a Los Angeles jury. Lower courts have been divided on whether silica exclusions bar coverage at the pleading stage.
Weather-related claims
Climate change continued to drive insurance instability in 2025, particularly in California, Florida, Texas, and Louisiana, where extreme weather events such as wildfires, hurricanes, and flooding led to rising premiums and large insurer withdrawals and insolvencies. Between 2018 and 2023, insurers cancelled or non-renewed two million policies in these states. California regulators began allowing insurers greater flexibility in setting premiums. Tort reform in Florida included steps to address insurer insolvencies and the state’s insurer of last resort has retracted in size.
The Palisades and Eaton fires in Los Angeles destroyed over 16,000 structures and reportedly caused USD45 billion in losses. A California appellate court ruled that minor infiltration of wildfire debris and smoke into a home that does not alter the property in any lasting or persistent manner and did not constitute covered property damage under a homeowner’s policy. A federal court decision likened smoke to asbestos while differentiating smoke from viruses for insurance coverage purposes. The Eighth Circuit determined that soot damage – like asbestos damage and unlike a virus – is both “directly material, perceptible, or tangible” and “permanent, absent some intervention”.
PFAS/forever chemicals
PFAS losses loom large, with cases pending in courts throughout the USA targeting manufacturers, distributors, and downstream users of PFAS-containing products. There have been numerous coverage decisions. Court rulings on pollution exclusions in the context of PFAS claims, like rulings in the context of other environmental claims, have been mixed. More insurers are adding PFAS-specific exclusions to their policies. S. Seaman & G. Lauerman, “2025 Updated Primer On PFAS/Forever Chemical Claims Regulation, Litigation & Insurance Coverage Issues”, Mealey’s Emerging Toxic Torts, Vol. 34, #18 (Dec. 16, 2025).
D&O and securities
The SEC is moving toward changing the mandatory periodic reporting requirements for public companies from quarterly to bi-annually. Efforts to avoid securities class action litigation by adopting bylaws requiring securities law claims to be submitted to arbitration are gaining traction. DExits have continued. S. Seaman & P. Hernandez, “D&O Liability & Coverage: 2025 Trends, Developments & Decisions”, Mealey’s Emerging Insurance Disputes, Vol. 30, #24 (Dec. 15, 2025).
Numerous important court decisions impacting D&O have been rendered over the past 18 months. The US Supreme Court ruled the SEC may seek disgorgement as a remedy even if it cannot prove investors suffered a financial loss. The Ninth Circuit adopted the “materiality” test for determining when intra-quarter reporting is required in the context of initial public offerings.
Related claims issues under claims-made D&O insurance policies continue to be subject to varying decisions driven by claim-specific facts, policy definitions of “claims” and “related claim” provisions, the test applied by the court in determining whether the claims are related, and whether insureds or insurers are benefited by the determination. The Delaware Supreme Court adopted the “meaningful linkage” standard in finding claims to be related. A federal court in Virginia ruled that two claims were not related, applying the more restrictive “common nexus” test. A federal court in Montana found claims were related because they were based on the same general business practice and course of conduct.
New York’s high court rejected the application of New York law to disputes between stockholders and companies incorporated in foreign countries. The Delaware Supreme Court ruled that payment of defence costs by a non-insured did not count towards the insured’s self-insured retention and that the insured’s payment of the self-insured retention was a condition precedent to the insurer’s obligation to cover losses. In another action, the Delaware Supreme Court affirmed the dismissal against some D&O insurers based on the Prior Acts Exclusion but remanded the case for further proceedings on the “no action” clause.
The Fourth Circuit applied the bump-up exclusion to bar coverage for a settlement, while Delaware decisions have refused to apply bump-up exclusions in other cases. The New Jersey Supreme Court affirmed enforcement of a “capacity” exclusion. The Larger Loss Rule continues to carry the day in Delaware allocation disputes.
Conclusion
Insurance will continue to play a central role in addressing the full range of challenges that ricochet throughout the economy. In 2026, these will include supply chain vulnerabilities, mental and physical health, workforce shifts, climate change, affordability, and technological advances. All the claim types discussed above likely will be subject to additional rulings in 2026. Emerging claims areas include IT outages, glyphosate-related claims, chemical hair straighteners, cannabis, and processed-food claims.