On June 17, 2026, Sedgwick published its Summer 2026 Liability Litigation Observations and Trends report, authored by Chief Claims Officer Max Koonce and Vice President of Liability Practice Steve Ellis. The headline finding: settlement severity in Sedgwick’s bodily injury portfolio grew at an average annual rate of 12.6% from 2021 to 2025, while verdict severity grew at 3.7% over the same period, roughly tracking inflation. A four-to-one differential sustained across five years is not noise; it is a structural feature of how litigated claims are now valued inside retained layers.
Sedgwick names the dynamic directly: “nuclear fallout settlements.” Cases are priced not by what juries find but by what carriers and defense counsel fear juries might do. The data shows that fear is consistently overpriced. In 2025, only 1.25% of bodily injury litigated cases in Sedgwick’s portfolio went to verdict, down sharply from approximately 12% in 2016. Of the cases that did reach a jury, 75.4% came in below the last settlement demand made before trial. In more than three out of four tried cases, the nuclear outcome that drove the settlement negotiation never materialized.
Additional data from the Sedgwick portfolio reinforces the point: 50.3% of settled cases exceeded $500,000, while only 31.5% of verdicted cases cleared that threshold. Settlements cost more than verdicts would have, across the portfolio, consistently.
Who it affects
Self-insured employers and fleet operators carrying commercial auto SIRs in the $250,000 to $1 million range absorb this dynamic directly inside their retentions. Every settlement premium paid to avoid a nuclear risk that did not materialize in 75.4% of tried cases is a direct, unrecoverable efficiency loss from the self-insured layer. Group captives and risk retention groups writing commercial auto liability face the same arithmetic: the retention layer is bearing a fear cost that jury evidence does not validate.
Third-party litigation funding accelerates the problem. The Sedgwick report flags funding as a structural driver of extended claim duration, elevated plaintiff opening demands, and settlement pressure that decouples from litigation merit, particularly in commercial auto where catastrophic injury cases are a preferred funder asset class.
The reserve mechanism
Case reserves within the SIR layer are typically established at amounts reflecting nuclear verdict probability. But with 1.25% of cases going to verdict and 75.4% of those coming in below the last offer, the expected claim ratio embedded in most open auto files systematically overstates the probable close value across the portfolio. The practical effect is reserve inflation on the bulk of open files, where the catastrophic scenario never arrives, paired with potential tail gaps on the rare cases that do reach a jury.
The severity development pattern is equally distorted. At 12.6% annual growth, three years of compounding takes a $300,000 average settlement to roughly $430,000. A development triangle built on pre-2022 experience reflects a severity distribution that understates current settlement levels, meaning tail factor selection anchored to historical completion ratios will be short unless the trend load has been updated explicitly. For a breakdown of how severity development feeds IBNR estimates in fleet programs, see Commercial Auto and Fleet IBNR for Self-Insured Trucking, Delivery, and Transit.
The Q2 2026 verdict data, which put Texas social inflation at 18% and Florida at 17%, established a new severity floor for reserve studies visible in verdict dollars. The Sedgwick report adds the settlement-side dimension: the layer absorbing that trend is the self-insured retention, compounding at 12.6% per year.
What this means for your next review
Ask your actuary whether the expected claim ratio for commercial auto liability within the SIR reflects actual settlement outcomes in comparable closed claims, or verdict databases built from the 1.25% of cases that go to trial. If trend selection for severity is anchored to pre-2022 data without an explicit adjustment for the 12.6% settlement growth rate, the reserve is likely understating the current cost of settling open files. Ask also whether the severity development pattern for open claims within the retention reflects a settlement curve calibrated to current market conditions, and whether tail factor selection for longer-tailed open matters accounts for the compounding growth rate that Sedgwick has now measured across a large portfolio.