Insurance Daily News

Class Action Exposure: A Guide for Claims Managers

In 2025, corporations faced record-breaking financial pressure from class action litigation, paying out more than $70 billion to resolve these cases. With federal courts processing over 13,000 new filings that year—averaging 36 per day—claims managers are under increasing pressure to refine their approach to exposure, reserving, and coverage coordination.

Class actions are triggered by a variety of issues, including product defects, wage-and-hour disputes, systemic claims-handling problems, and statutory violations like those under the Biometric Information Privacy Act or the Telephone Consumer Protection Act. Data breaches have also become a major driver, with filings in this category growing more than 25% over 2024 and rising by over 200% since 2022. Recent high-profile settlements highlight the scale of these risks: AT&T settled data breach litigation for $177 million in 2026, while 23andMe finalized a $46.7 million settlement. According to Duane Morris, the top 10 data breach settlements alone reached $515.79 million in 2025, with the top 10 TCPA settlements totaling $69.1 million.

For claims departments, the primary defense strategy is early detection. Identifying potential class-wide issues—such as standardized policy language or pattern-and-practice allegations—before a formal complaint is filed allows teams to preserve evidence and begin sizing exposure. Once a case reaches the certification stage under Federal Rule of Civil Procedure 23, the stakes rise significantly. Courts granted over 68% of certification motions in 2025. Claims managers are essential here, working with defense counsel to highlight variations in state laws or individual fact patterns that argue against class treatment.

The certification stage remains volatile. While a 6th U.S. Circuit Court of Appeals panel reversed the certification of a Tennessee class in the Clippinger v. State Farm case in April 2026, other insurers have faced significant payouts. Progressive settled for $43 million involving roughly 151,485 Georgia policyholders, and State Farm paid $15.6 million following a jury ruling affecting approximately 37,000 class members. Because the threat of certification often forces defendants to settle even weak claims to avoid trial, legal teams are increasingly utilizing pre-certification tools, such as motions to strike class allegations, as endorsed by the 5th U.S. Circuit Court of Appeals in Elson v. Black.

Resolving these cases requires careful reserve management, as settlement structures vary widely. Whether utilizing cash funds, claims-made caps, coupon settlements, or injunctive relief, each method impacts financial reserves differently. Furthermore, judicial approval processes under Rule 23(e) and associated administrative costs—such as notice distribution and claims processing—must be integrated into overall reserve estimates.

For the insurance industry, the rising frequency and cost of class actions suggest that traditional reserving models may need adjustment to account for the increasing sophistication of the plaintiffs' bar. Claims managers who prioritize early identification and aggressive defense at the certification stage may find themselves better positioned to mitigate the substantial financial volatility inherent in modern class action litigation.

Why it matters

The record-breaking $70 billion in 2025 class action settlements highlights a critical need for insurers to refine early detection and strategic defense capabilities to manage escalating reserve requirements.

FAQ

What were the total class action settlement figures in 2025?
Corporations paid more than $70 billion to settle class actions in 2025.

How much have data breach filings increased since 2022?
Data breach filings have grown by more than 200% since 2022.

What are the four threshold requirements for class certification?
The requirements are numerosity, commonality, typicality, and adequacy of representation.

Source: Claims Journal. See the original source for full details.