How Legal Trends are Impacting Substance Use Disorder Liability Insurance, Daycares, Social Services and Their Insurance
- Daryl Henry
- Jan 28
- 4 min read
Every year, when I read the Zywave Marketplace Report, I try to connect the macroeconomic insights in the report with the microeconomic realities I observe on the ground. Different coverage lines and industry sectors experience the insurance market in unique ways. This year, as I reviewed several legal trends highlighted in the report, I noticed strong parallels with feedback I've been hearing from various insurance company sources.
The president of Cincinnati Insurance has stated that the three biggest concerns keeping him up at night are:
Weather pattern changes
Regulatory environments
Legal trends
These insurance issues made him conclude that they need to limit growth in the state of Georgia.
One example of these trends’ impact is the Alliance for Nonprofits’ decision to stop insuring foster care agencies at the start of this year. ANI cited untenable legal trends as the driving factor to stop insuring those organizations. In today’s environment, strong housekeeping practices are no longer enough to defend against litigation. Attorneys are now urging juries to "punish" organizations when something goes wrong.
Other examples include:
A Diminished availability for Substance Use Disorder Liability Insurance
A significantly tightened Child Care insurance market.
What’s the common thread among these organizations? Legal trends are increasingly unfriendly to them, leading insurance companies to adopt a cautious approach or exit these markets altogether.
Trend 1: Nuclear Lawsuits — Lawsuits Are Getting Larger
A "nuclear verdict" refers to a plaintiff's damage award exceeding $10 million. The term is often applied to verdicts far larger than anyone anticipated. According to Travelers Insurance:
“A nuclear verdict is defined as a verdict in favor of the plaintiff with a damage award that surpasses $10 million, but the term is also used to describe an outcome significantly larger than what anyone expected.” (Source)
Public sentiment has fueled this trend. There is growing distrust of insurance companies and large corporations. Courtrooms have become avenues for the public to punish these entities, especially when vulnerable individuals are harmed.
Health and human services organizations are particularly vulnerable because they work with at-risk populations. When something goes wrong, it often results in catastrophic outcomes, such as:
Child abuse cases
Overdose deaths
Fatal multi-car accidents
Examples of Nuclear Lawsuits
A review of recent cases underscores the scale of these verdicts:
$129M for the LA Family of a Child Struck and Killed by a Car During a School Club Outing (Negligence | Wrongful Death) – November 2024
$46M for a CA Minor After Sexual Abuse (Sexual Abuse, Assault & Molestation) – October 2024
$9M for a FL Tennis Professional Abused by Her Coach (Negligence | Sexual Abuse) – May 2024
$38M for a NH Man Abused at a Teen Detention Center (Sexual Abuse | Negligence) – May 2024
$28M for a GA Man Killed in a Crash (Wrongful Death) – April 2024
Trend 2: Third-Party Litigation Funding
Third-party litigation funding (TPLF) allows external investors to fund lawsuits in exchange for a share of the settlement or award. According to the U.S. Chamber of Commerce:
“TPLF involves funders providing money to a plaintiff or their counsel in exchange for a cut of the proceeds. These agreements outline the funder’s identity, investment amount, payment schedule, and sometimes strategic control over the litigation.” (Source)
TPLF arrangements fall into two categories:
Consumer funding – Targeted at individuals needing financial support, often for personal injury claims.
Commercial funding – Involves large-scale tort and commercial cases, often with the potential for outsized returns.
Implications for Social Services
This funding model enables individuals who previously couldn’t afford legal representation to pursue litigation. Investment firms are likely to target high-return cases—such as those involving social service organizations—further increasing the risk of nuclear lawsuits.
Trend 3: Judicial Hellholes
Certain jurisdictions are labeled as "judicial hellholes" due to their plaintiff-friendly environments. If sued in these areas, defendants are more likely to lose, and damages tend to be higher.
Top 10 Judicial Hellholes (2024-2025)
Philadelphia Court of Common Pleas and Pennsylvania Supreme Court
New York County
South Carolina Asbestos Litigation
Georgia
California
Cook County, Illinois
St. Louis, Missouri
Michigan Supreme Court
King County, Washington
Louisiana (Source)
Implications for Social Services
Operating in these jurisdictions makes obtaining liability insurance—especially umbrella liability—extremely challenging. When insurance is available, it often comes with prohibitive costs. Insurers are fully aware of the heightened risks and structure their policies accordingly.
Final Thoughts
Legal trends such as nuclear lawsuits, third-party litigation funding, and the concentration of judicial hellholes are reshaping the landscape for social services. The common denominator is increased risk for organizations that serve vulnerable populations. As a result, insurance companies are retreating from certain sectors or significantly raising premiums, making it increasingly difficult for these organizations to secure coverage. Social service providers must remain vigilant. They need to work their renewal processes diligently. Start early. Have open and honest conversations with underwriters. Adopt risk management practices for the highest risk categories like vehicle safety, abuse prevention, and quality control. When the market gets tighter, it becomes more important to impress the insurance companies that are still available.
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