A recent report has highlighted an increase in commercial litigation, with a specific focus on construction defect lawsuits that are likely to rise in 2025. This uptick could significantly extend the duration of general liability claims for insurers covering contractors and builders.

The “Commercial Litigation Outlook 2025,” released by law firm Seyfarth Shaw, offers an annual analysis of legal trends across multiple sectors, including Gen AI, privacy, healthcare, cannabis, intellectual property, securities, consumer protection, class actions, real estate, and antitrust.

Within the report's real estate section, Seyfarth Shaw predicts an increase in disputes over defective construction in 2025.

While the report refers to construction defect litigation as "evergreen," it also points to several factors that could contribute to its rise. One of the notable triggers is the emphasis on immigration policy under the Trump administration.

“Construction defect litigation rises in years following shortages of skilled labor—and that’s been in short supply in the construction industry for most of the last decade,” the report explains. It further notes that 30-40% of U.S. construction workers are immigrants, “with an undetermined number who are undocumented.” The National Association of Home Builders offers similar statistics on its website.

The labor shortage has remained a pressing issue, with approximately half a million construction workers missing from the workforce since 2023, according to the report.

The report also highlights the significant demand for rebuilding efforts in regions impacted by recent hurricanes and wildfires as another factor driving potential litigation. For example, California’s urgent need to replace housing has led to relaxed or even eliminated rebuilding requirements, potentially raising the risk of construction defects.

Seyfarth Shaw notes that defect claims typically take one to three years to surface, meaning that many claims may appear in 2025 and beyond.

The report also touches on how the current administration’s policies are influencing the legal landscape, including shifting some legal matters to state courts.

“Federal ESG litigation has, for the moment, had its day,” the firm states in a press release. “SEC greenhouse emissions rules announced just a year ago will probably gather dust, meaning individual states are set to become the favored fora for ESG-related allegations, such as corporate greenwashing.”

The report also anticipates a rise in consumer fraud class actions tied to harmful substances like PFAS and heavy metals, noting that state-specific regulations may further fuel litigation.

“Businesses selling consumer products in California should be aware of the state’s specific regulation of PFAS-containing products, including new requirements effective in 2025,” the report cautions. “Current laws already prohibit or require labeling and disclosures for certain PFAS-containing items, such as children’s products and cookware. Starting in 2025, these regulations will expand to cover more products, including textiles, clothing, and cosmetics.” The report underscores the importance for businesses to comply with evolving state and federal PFAS regulations.

The report touches on potential consumer actions regarding harmful substances in products and the rise of greenwashing lawsuits against companies touting ESG standards. However, it does not address the trajectory of PFAS-contaminated drinking water litigation. Recent media coverage indicates that the Trump administration is planning a major overhaul of environmental policies, with states likely to take charge in setting PFAS contamination limits.

In line with these concerns, industry experts previously expressed worries that federal rules on PFAS contamination might lead to increased litigation over contaminated water.

Seyfarth Shaw also points to two emerging trends in commercial litigation that could impact insurers: privacy lawsuits and challenges related to Generative AI.

“With the proliferation of Internet of Things (IoT) devices, telematics, and advanced tracking technologies, plaintiffs’ attorneys are leveraging both new and longstanding privacy statutes to address emerging privacy risks,” the report notes. Additionally, heightened regulatory scrutiny could affect insurers using IoT and telematics.

“Privacy litigation is expected to grow in volume and scope in 2025, with corporations facing unprecedented challenges in managing sensitive data,” the report warns.

The report also addresses the role of Generative AI in lawsuits, noting that the technology is increasingly used in both prosecuting and defending cases. The Trump administration has “removed guardrails” established under the Biden administration and now sees AI as central to the U.S. economy and national security.

Of particular concern to D&O insurers, the report observes that business bankruptcies increased in 2024. With “record high consumer debt, lingering inflation, labor shortages, and high interest rates,” the report suggests that bankruptcy numbers will likely continue to rise.

Originally reported by Claims Journal.