The liability battle is being won or lost before trial

Four interconnected forces are creating a compressed liability lifecycle

For decades, liability severity was largely thought to be determined through litigation. Claims professionals had time to investigate, engage with claimants, develop strategy, and negotiate resolution. Today, that model is rapidly changing.

According to Sedgwick’s latest liability litigation analysis, severity is increasingly being created long before a case reaches trial and often before litigation strategy is fully formed. Claim outcomes are being shaped earlier in the lifecycle as timelines compress, expectations rise, and critical decisions are made under increasing pressure. 

This shift has created a striking paradox. Trials are becoming increasingly rare, yet trial risk has never been more influential. In 2025, only 1.25% of litigated bodily injury claims proceeded to verdict. However, Nuclear Verdicts® continue to have an outsized impact on the broader claims environment, influencing settlement behavior and claim valuation far beyond the relatively small number of cases that reach a courtroom. 

In many respects, liability claims are now negotiated under the shadow of trial. The perception of what could happen before a jury often shapes expectations long before a trial becomes a realistic possibility. Plaintiff attorneys increasingly anchor demands to perceived verdict potential, elevating settlement expectations throughout the claim lifecycle. 

The data underscores this reality. Over the last five years, verdict severity increased at an average annual rate of approximately 3.7%, roughly in line with inflation. Settlement severity, however, increased by more than three times that rate, averaging 12.6% annually. The findings suggest that severity escalation is being driven less by actual courtroom outcomes and more by how claims are positioned, perceived, and negotiated earlier in the process.

At the center of this shift are four interconnected forces that are creating a compressed liability lifecycle.

Earlier attorney representation

Attorney representation is becoming the norm earlier in the claims process. Sedgwick’s data shows that approximately 70% of claimants who ultimately retain counsel and file suit have attorney representation within two weeks of first notice of loss. 

As representation occurs sooner, opportunities for direct engagement, expectation-setting, and early resolution become increasingly limited. What was once a months-long window to influence claim trajectory is now often measured in days. 

Third-party litigation funding

The continued growth of third-party litigation funding is another factor reshaping claim outcomes. While funding remains concentrated within specific claim types and jurisdictions, funded claims often remain open significantly longer and incur substantially higher costs than non-funded claims. 

Importantly, litigation funding acts less as an independent driver of severity and more as a force multiplier. By extending claim duration, reducing pressure to settle, and reinforcing higher demand expectations, funding amplifies the severity of claims that are already predisposed to complex and costly outcomes. 

Social inflation

Social inflation continues to influence liability outcomes, but its impact is appearing earlier than ever. Plaintiff narratives are becoming more sophisticated, anti-corporate sentiment remains prevalent, and larger damages expectations are increasingly embedded in demand letters and pre-suit negotiations.

Economic pressures, including medical cost inflation and broader cost-of-living increases, further reinforce these trends. Together, they create an environment where claim values are being elevated long before liability and damages can be fully evaluated. 

Procedural pressures

Plaintiff-side tactics are also accelerating the pace of litigation. Earlier lawsuit filings and increased use of time-limited demands are compressing decision-making timelines and forcing organizations to respond before facts, liability, and damages have been fully developed. 

These procedural pressures reduce opportunities for meaningful pre-suit engagement and shift leverage earlier in the claim lifecycle, making early decisions increasingly consequential. 

Why this convergence matters

Each of these forces is significant on its own. Together, they are fundamentally reshaping how liability claims develop.

Earlier attorney representation shortens engagement windows. Litigation funding extends claim duration and hardens settlement positions. Social inflation elevates expectations. Procedural pressures accelerate timelines. The combined effect is a faster-moving, higher-stakes environment in which severity is increasingly determined during the earliest stages of a claim rather than through the litigation process itself. 

For insurers, TPAs, and corporate risk managers, the implications are clear. Traditional models built around extended investigation periods, incremental evaluation, and reactive negotiation are becoming less effective. Organizations that wait until litigation is underway to formulate strategy may find that critical opportunities to influence outcomes have already passed. 

Success in today’s environment requires earlier intervention, stronger claimant engagement, disciplined negotiation strategies, and greater use of analytics to identify severity drivers before positions become entrenched. The organizations best positioned to control outcomes will be those that recognize the realities of the compressed liability lifecycle and act before severity takes hold. 

For a deeper analysis of these trends, including litigation funding data, venue risk insights, tort reform developments, and recommendations for claims organizations, read Sedgwick’s full 2026 Liability Litigation Observations and Trends report.