Clyde & Co - US Predictions 2025

Clyde & Co’s industry and legal US predictions for 2025 address how businesses and jurisdictions will navigate the next 12 months ahead. Key areas of focus include artificial intelligence (AI), social inflation, autonomous vehicles (AVs), climate litigation, PFAS-related claims and disputes, and property insurance, especially after the impact of the 2024 hurricane season.

Prediction 1: Artificial Intelligence (AI)

Concerns regarding the potential for discrimination drive more cautious approach to AI underwriting

"As use cases for AI continue to expand across industries, insurance carriers will likely employ a more cautious approach to underwriting AI-related risks in 2025.

Media conversation around AI typically centers on physical risks and potential harm to humans, concerns that are undoubtedly legitimate. But from an insurance standpoint, the industry is increasingly focused on the risk of discrimination when AI is used to provide services. The concern arises from the potential for the code forming the basis of the AI to have inherent bias. This potential for discrimination directly impacts insurance policies such as health insurance, employment practices liability, management liability, directors and officers coverage.

The healthcare services sector should be particularly vigilant to the risk of AI favoring one demographic over another. Another risk area is whether healthcare professionals will substitute their judgment for that of AI. Scrutiny of AI is therefore crucial to ensuring fairness and equity in healthcare delivery. Similarly, as we move into 2025, it is important for organizations to consider how AI impacts employment practices such as hiring, firing, retention, and development programs. We must critically assess whether these processes are administered equitably across all employees.

There is a growing concern that AI algorithms could harbor biases that influence decisions on employment actions and promotions. Ensuring fairness in AI’s role within these areas will be a key focus. Insurance will continue to play a key role in the increasing mass adoption of AI systems, with a continued lack of a federal AI regulatory framework creating a gap in guidance."

Partner: Marc Voses

Prediction 2: Social Inflation

Social inflation to be impacted by conservative shifts and new legislation

"In the coming year, we’ll be carefully watching for a potential shift in social inflation. The US presidential election results perhaps reflected a more conservative national mindset that could reshape many aspects of social inflation, particularly through jury perspectives.

In recent years, jury pools have become desensitized and grown accustomed to nuclear verdicts, where large nine-figure and billiondollar awards have become the new norm. However, the emerging conservative approach, focusing on reducing spending and waste, may temper these hefty verdicts, leading to more restrained and realistic award amounts.

On the administrative front, we should anticipate the proposal of new state and federal legislation that will likely make pursuing personal injury claims more challenging and promote basic tort reform, directly affecting social inflation.

For example, currently, states vary widely in their policies on the discoverability and admissibility of litigation financing agreements, creating a patchwork of regulations. This landscape may become more uniform as new laws are introduced. Furthermore, the insurance industry is already showing signs of adopting a tougher stance on litigation. Insurers are increasingly refusing to succumb to outrageous demands and are more willing to go to trial, showing less concern about the risks of bad faith accusations and outsized nuclear verdicts.

It will be interesting to see how these trends evolve under the influence of the new administration and the shift in public sentiment towards conservatism."

Partner: Fred Fein

Prediction 3: Autonomous Vehicles (AVs)

Anticipate key federal legislation that will address accountability and standardized testing protocols for autonomous vehicles

"In 2025, the landscape of claims and lawsuits related to autonomous vehicle (AV) incidents is likely to evolve with the increasing presence of AVs on the roads. Level 3 AVs, which require human oversight, have been commonly observed and we are already seeing bodily injury lawsuits across the country.

These are related to product liability, negligence, breach of warranty and other causes of actions against the manufacturers and the “drivers” of these vehicles. There is an expected shift towards more Level 4 AVs, where no human driver is needed in the vehicle within situationally controlled areas. This shift underscores the importance of monitoring the types of AV technology in use as it directly influences the nature and frequency of incidents. Currently, the regulatory approach to AVs is managed through a state-bystate approval system, which has been widely criticized for its complexity and inconsistency.

However, the potential introduction of a unified federal framework by the incoming administration could significantly alter this landscape. This prospective federal legislation is anticipated to streamline the regulatory process and fast-track the deployment of AVs across the nation. A critical component of the federal framework will be defining how accountability is assigned following an AV incident. It is crucial to determine whether accountability will be shared among various parties such as insurers, AV manufacturers, and software developers. Clarifying this aspect of the law will be essential for managing liability and ensuring that all parties involved adhere to their responsibilities.

Another significant element is whether the framework will standardize the testing of AVs, especially Level 5 AVs which are fully autonomous and do not require human intervention in any driving scenario. Currently, the allowance for testing these vehicles varies by state, creating a patchwork of regulations that can hinder the advancement and integration of this technology. A unified approach could facilitate consistent testing protocols and safety standards nationwide, accelerating the development and public acceptance of Level 5 AVs.

Overall, these considerations will be crucial in shaping the future of autonomous vehicle technology and its integration into public roadways. The potential for increased claims and lawsuits, particularly product liability cases stemming from AV failures, highlights the need for robust and clear regulatory frameworks to manage these emerging challenges effectively."

Partners: Doug Horelick and Nanci Schanerman

Prediction 4: Climate Litigation

Climate litigation to be shaped by stricter regulations, increased legal scrutiny of corporate sustainability practices, and rising public demand for accountability

"By 2025, climate litigation is likely to intensify on multiple fronts, influenced by evolving legal frameworks and shifting societal expectations. Globally, international climate agreements like the Paris Climate Accord will push for more accountability.

Major lawsuits may emerge targeting countries or multinational corporations failing to meet emissions reduction targets, as seen in recent cases such as the Urgenda case in the Netherlands or the ongoing complaints against fossil fuel companies for contributing to climate change. Nationally, countries may adopt more ambitious environmental laws, leading to an increase in lawsuits aimed at enforcing those laws. In the US, lawsuits like the one against the government for inaction on climate change or against companies for misleading the public will likely grow, especially in regions where climate policy is more aggressive. Litigation in the US will expand as states like California continue to push for stronger regulations on emissions, while other states may resist.

This divergence will result in a patchwork of legal landscapes and a rise in both state-level actions and federal regulatory challenges. Greenwashing claims may also become more prevalent. This will likely be fueled by a more informed public and greater scrutiny of corporate environmental claims. Directors and officers may face increased scrutiny and potentially be held liable for making misleading environmental claims to investors, consumers, or regulators. False claims may expose organizations to lawsuits from shareholders, consumers, and regulatory bodies.

Regarding anti-ESG sentiment, companies should be cautious but persistent in their climate initiatives. Even in an environment of political pushback, credible climate action, backed by solid reporting and third-party audits, will be essential for long-term corporate reputation and risk management. 

Finally, the potential return of a climate-skeptic administration under President Trump could derail federal climate policies, but it might spur more localized legal actions from states, cities, and activist groups, further driving the demand for climate-related lawsuits."

Partner: David Ktshozyan

Prediction 5: PFAS Litigation

PFAS litigation to intensify, driven by water supplier claims, insurance coverage lawsuits, and disputes over scientific causation

"As manufacturers and other companies face escalating financial pressure from substantial water supplier claims, which have been a central focus of major PFAS multidistrict litigation (MDL), we are likely to witness an increase in PFAS-related insurance coverage disputes in the coming year.

While these disputes will primarily stem from water supplier claims, bodily injury claims brought by firefighters exposed to PFAS-containing firefighting foam (AFFF) and individuals who consumed contaminated water are expected to gain greater attention.

Bodily injury claims are poised to become a more significant focus as the litigation landscape evolves. The success of these claims will depend heavily on the strength of scientific evidence linking PFAS exposure to specific health conditions like cancer. Defendants and their insurers remain skeptical, questioning whether the alleged health issues are directly caused by PFAS or other factors.

As manufacturers face potentially enormous settlement costs, the scrutiny of scientific evidence will play a pivotal role in determining the trajectory of these lawsuits and the broader implications for PFAS litigation in the coming year. On the regulatory front, federal regulations have generally not played a significant driving role in water supplier claims, as water utilities are required to provide contamination-free water regardless of specific federal mandates. However, we’ll be watching for any changes introduced by the incoming administration, as these could impact how manufacturers and other companies manage and regulate their use of PFAS. Such changes could potentially reshape the legal and operational landscape for addressing PFAS-related risks.

PFAS is poised to remain a significant source of claims and litigation for the foreseeable future, drawing parallels to the enduring challenges posed by asbestos. Insurance companies, having gleaned important lessons from the protracted litigation related to asbestos, are now better equipped to withstand the financial repercussions of similar long-tail claims from chemicals like PFAS. Industries such as manufacturing and utilities should also draw on these experiences, emphasizing the need for proactive risk management and strategic planning in both the insurance and legal sectors."

Partner: Jamie Sanders

Prediction 6: Property Insurance

Statutory reforms, tariffs, and labor changes may reshape property insurance by reducing litigation and raising costs and premiums

"In 2025, we can expect a renewed push for statutory reforms in the commercial property insurance space in hurricane-prone states, which were severely impacted by the 2024 Atlantic Hurricane season.

Both Florida and Louisiana recently enacted statutory reforms that are anticipated to shift the legal landscape from being more favorable to insureds toward a more insurer-friendly framework. Specifically, the reforms make recovery of attorneys’ fees more difficult for policyholders who file suit against their insurers for first-party losses. These changes may decrease a policyholder’s incentive to bring suit and lead to a decrease in the number of suits brought against insurers, with policyholder firms focusing their efforts on larger cases and those with a higher likelihood of recovery.

These changes have led to criticism from policyholders and the policyholder’s bar alike, so 2025 may bring renewed efforts to reverse these reforms in states that have enacted them and prevent enactment in states where reform may be on the horizon. In states where similar statutory reforms have not been enacted or whose effective date has not yet passed, we can expect an uptick in property-related lawsuits being filed more quickly in an effort to avoid application of such reforms. 

Plaintiffs’ attorneys, aware of the potential impact on their cases and fees, are unlikely to delay filing and risk being subjected to the more stringent post-reform legal standards. This surge in pre-reform filings could create a temporary increase in litigation volume in those states as attorneys move to preserve their clients’ interests under current, more favorable rules. 

Another factor with implications for property insurance claims, one that should be closely monitored, is the potential effect of tariffs on imports such as on construction materials. Tariffs would likely drive up the cost of building materials, which could, at least temporarily, increase the costs borne by insurers for covered replacement value claims.

In addition, reduction in the available construction labor supply may drive up labor costs for repairs and reconstruction. These higher costs, in turn, could lead to increased insurance premiums as insurers adjust their underwriting to reflect higher costs."

Senior Associate: Eric Benedict