How Legal System Abuse Affects Your Insurance Rate

The Bigger Picture

For the past few years, claim costs and frequencies have been at astronomical heights. The type of claim seeing the biggest increase in severity and numbers are liability claims. Currently, what is happening in the litigation landscape has been coined “legal system abuse”.

What is “legal system abuse”?

In the insurance sense, it is unnecessarily increasing the cost and time taken to settle insurance claims. It is when a policyholder, plaintiff attorney or third party uses the legal system for something other than it’s intent: seeking justice. Ultimately, this negatively impacts the entire economy as a whole.

There are many compounding factors to legal system abuse but here are a few:

  • Nuclear jury verdicts: The American people are angry at big corporations. Certain plaintiff attorneys use fear tactics among jurors and propose using their power to send big corporations a message. Some are using their jury service as a way to affect change and gain power back. Though intentions could be good, the result is driving up the costs of goods, services and the availability of insurance for everyone.


  • Inflating claims: This occurs when a policyholder or attorney exaggerates the extent of damage or injury than they are entitled to.


  • Attorneys false advertising: These types of advertisements praise lawsuits and make big monetary promises.


  • Third Party Litigation Funding: AKA “TPLF” is a $26 billion dollar global industry which is expected to expand to $30 billion by 2028. Third Party Funding occurs when hedge funds and financiers invest in lawsuits in exchange for a larger percentage of the settlement reward.

More on Third Party Funding

These monetary incentives can increase the risk of plaintiffs or attorneys holding out for a bigger payout. In turn, this increases litigation time and claim costs. Since 2020, third parties have been getting involved earlier as a way to steer policyholders towards litigation. This is their attempt to take control over the claim. Many times, they even pressure claimants to sign agreements that enables third parties to bill or sue the insurance company without further input from the policyholder. Additionally, there are no requirements  for lawyers to disclose to their clients that they are receiving TPLF funds. Many people do not realize that the settlement typically disproportionately favors parties other than the victim and defeats the purpose of litigation which is to seek justice. The terms of TPLF leaves the majority of the settlement to investors and lawyers rather than the victims.

Legal System Abuse’s impact on insurance

In addition to all the rate increases and coverage restrictions or shut downs due to weather patterns, legal system abuse is having the same effect. Insurance is a shared risk pool. This means that hurricanes happening in FL, wildfires in CA and this increase in unnecessarily high claim payouts affect us all. Insurance carriers are being forced to restrict coverage, increase premiums and/or completely stop writing business. One of the biggest issues for insurance carriers is, unlike weather, the costs for these claims are impossible to forecast. The entire business model of the insurance industry is being able to predict payout and weather trends.



It’s important to stay educated and understand that if the abuse continues, insurance companies won’t be there to provide adequate (or maybe any) coverage for businesses. This creates a domino effect on the entire economy.

What Flood Insurance Actually Covers  (And What It Doesn’t)
By McShea Insurance Agency July 14, 2025
Learn what flood insurance really covers (and doesn’t) for Cape Cod, Nantucket, and Martha’s Vineyard homeowners. Don’t risk costly gaps—get expert guidance from McShea Insurance.
Coastal home on Cape Cod protected by Home Insurance
June 24, 2025
Learn 6 coastal home insurance red flags Cape Cod, Nantucket, and Martha’s Vineyard homeowners should watch for. Get expert help from McShea Insurance.
An aerial view of a hurricane in the ocean
May 28, 2025
by McShea Insurance | Experts in Coastal & High-Risk Property Insurance
A vacuum cleaner is being used to clean a wooden floor.
May 2, 2025
Flooding Can Happen Anywhere: What Every Property Owner Needs to Know When most people think of flooding, they picture rivers overflowing or hurricanes hitting coastal towns. But the reality is that flooding can happen anywhere—even in areas not officially labeled as high-risk flood zones. At McShea Insurance Agency , we want to help you understand that flood risk isn’t limited to those living near water. In fact, 20% to 40% of all flood losses occur in areas classified as low or moderate risk. A sudden downpour or a blocked storm drain can lead to significant water damage. You don’t need a named storm or hurricane for flooding to occur. Just one heavy rainstorm can overwhelm local drainage and leave your property flooded.
A vacuum cleaner is being used to clean a wooden floor.
April 4, 2025
Spring cleaning isn’t just about organizing closets and scrubbing floors. It’s also a crucial time to maintain your home and prevent costly insurance claims . As home insurance claims increase due to severe weather, fire hazards, and water damage , insurers are paying closer attention to proactive maintenance habits . In the future, some companies may even require certain upkeep before offering coverage. At McShea Insurance , we help homeowners protect one of the most valuable things in their life—their home . Taking action now can prevent unexpected damage, lower insurance risks, and ensure you remain eligible for the best coverage available. Here are nine essential steps to include in your spring maintenance routine.
Why You Must Notify Your Insurance Agent Before Putting Your Home in a Trust, LLC, or Estate to Avoi
January 23, 2025
Placing your home in a trust, LLC, or estate offers many benefits. It can protect your assets, simplify estate planning, and provide privacy. However, transferring ownership also impacts your homeowner’s insurance policy. To ensure proper coverage, you must notify your insurance agent immediately.
Unique Holiday Safety Tips
January 23, 2025
The holiday season is a time of joy and celebration, but it’s also a time to prioritize safety. With increased travel, decorating, and festivities, risks can arise if you’re not prepared. Taking a few proactive steps can help protect your home, business, and loved ones.
Dos and Don’ts of Insurance Claims
January 23, 2025
When disaster strikes, filing an insurance claim is often the first step toward getting back on track. Understanding the dos and don’ts of the claims process is essential to ensure that your claim is processed quickly and fairly. Mistakes made during the filing process lead to delays, denials, or even a reduced payouts.
The Best Way to Reduce Cyber Risk
January 23, 2025
Did you know October is National Cyber Risk Awareness Month? In today’s digital age, cyberattacks are a growing threat to households and businesses of any size, with potentially devastating consequences. Cybercriminals are more sophisticated than ever before and the need for people and organizations to proactively protect themselves has never been more critical.
Reputation Insurance For Your Business
January 23, 2025
Business reputational damage involves anything from negative media coverage, social media backlash, data breaches and/or product recalls. Business reputation insurance helps protect a company from financial consequences and manage repercussions that come with reputational damage.
More Posts