Shalin Johnson
Business Insurance & Risk Consultant | Sales & Client/Carrier Relationship Management
Social inflation in manufacturing is creating real pressure for manufacturers. Rising nuclear verdicts and litigation costs are contributing to higher general liability, umbrella, and excess coverage pricing. A single large claim can influence how underwriters evaluate risk at renewal and beyond.
Put simply, social inflation means claim severity is rising faster than general inflation because of factors such as higher jury awards, evolving litigation strategies, broader views of liability, and changing public attitudes toward corporate responsibility. Groups such as the National Association of Insurance Commissioners (NAIC) and the Casualty Actuarial Society continue to flag social inflation and legal system abuse as ongoing issues in the liability market.
Rising settlement costs
There are several reasons settlement costs continue to rise. One major factor is that more claims are making their way to trial or into higher-value settlement discussions. Large verdicts, especially those that receive significant media attention, can shape expectations beyond a single case and add pressure across the market.
Recent legal and academic commentary suggests this is not a passing trend. In a 2025 Cornell Law School Third-Party Litigation Funding paper, the authors note that litigation funding and related structural pressures can prolong disputes and influence litigation behavior, making resolution more difficult in some cases.
For manufacturers, the issue is not only the final verdict. A large verdict can influence how underwriters view a broader class of business and may affect future pricing, terms, and available capacity.
Greater scrutiny of insurance contracts
As settlement costs and verdicts rise, underwriters are reviewing their manufacturing client's contracts more closely. That includes risk transfer, indemnity language, hold-harmless provisions, additional insured requirements, and waivers of subrogation.
For manufacturers, supply agreements and subcontractor agreements matter more than ever. Underwriters want to see that responsibility is allocated appropriately, especially when outside vendors or service providers are part of the chain of production or distribution.
Clear contract language and consistent review can help reduce coverage gaps before they become claims.
Reexamining business partnerships
Manufacturers need to take a closer look at the business relationships surrounding their products and operations. That includes suppliers, contract manufacturers, distributors, and other third parties.
When litigation pressure is higher, a claim can quickly grow into a broader dispute involving multiple parties. That is why manufacturers are reviewing not only who they work with, but also how those relationships are documented, monitored, and insured.
A well-managed partner network can help reduce avoidable exposure. Regular reviews of vendor insurance, quality expectations, and traceability can help manufacturers better understand where risk may arise in the supply chain.
Preparing for continued litigation pressure
It can be helpful to plan for the “what ifs” before a loss occurs. A Marsh McLennan Agency manufacturing consultant can help you review your current approach and identify areas for review.
For manufacturers, key steps may include:
- Reviewing contract language with vendors and subcontractors
- Confirming that insurance limits align with actual exposure
- Improving claims response procedures
- Strengthening product traceability and incident documentation
- Benchmarking coverage regularly against current market conditions
No policy can eliminate loss or litigation risk, but preparation can improve your response when an issue arises. As social inflation in manufacturing continues to affect the market, manufacturers that strengthen contracts, review partnerships, and improve claims readiness may be better prepared to respond to challenges.
If you’d like help reviewing your approach, connect with a manufacturing consultant at Marsh McLennan Agency for a risk assessment. We can help you evaluate priorities, identify potential gaps, and plan next steps.
