The technology gap between plaintiffs' attorneys and insurance defense teams is widening as injury lawyers deploy generative AI to identify high-value claims, coordinate litigation tactics and pressure insurers before early investigations are complete. The imbalance is compressing the liability claims lifecycle and driving up settlement costs, according to defense attorneys and claims executives.
The compressed liability lifecycle
Steve Ellis, vice president of liability practice at Sedgwick, described the trend as a "compressed liability lifecycle." Earlier attorney involvement and faster lawsuit filings leave insurers with less time to assess claims before litigation begins. Sedgwick's data shows that among bodily injury claimants who retain counsel and file suit, 70% have attorney representation within the first two weeks of first notice of loss.
The average time from first notice of loss to lawsuit filing has fallen sharply, from roughly 550 days in 2016 to around 120 days today. That shrinking window forces carriers to bring defense counsel in sooner, raising costs earlier in the claim's life.
Third-party funding amplifies the pressure
Ellis also pointed to the growing use of time-limited demands and third-party litigation funding. External capital is disproportionately directed toward complex claims with the potential for large recoveries, allowing plaintiffs to sustain litigation longer. Since 2022, the use of third-party funding in auto liability claims has grown at an average annual rate of 44%. Funded litigated auto bodily injury claims run 9.6 times longer, and total incurred costs are 361% higher than non-funded claims.
The combination is difficult for insurers: less time to investigate at the start, but potentially longer and more expensive litigation once a case is underway. Only about 1.25% of litigated bodily injury cases reached a verdict in 2025, down from roughly 12% in 2016. Yet settlement severity has climbed 12.6% annually over the past five years, compared to a 3.7% annual rise in verdict severity.
AI moves into discovery
Ashley Fetyko, a senior partner at insurance defense firm Tyson & Mendes, said defense teams are seeing plaintiffs' attorneys use generative AI to produce large volumes of discovery requests. "We're definitely seeing that beyond just the case generation stage, but even in discovery," she said. The tactic can lengthen litigation and increase legal expenses. In some cases, the attorney signing the filings may not be fully familiar with the AI-generated content. Fetyko has also encountered similar AI-generated language across unrelated cases.
Defense tools focus on efficiency, not outcomes
"The plaintiff's bar tends to be much more agile in adapting to new tools, new environments, and even just new arguments and new approaches," Fetyko said. "On the flip side, the defense, particularly insurance defense, is very slow to change."
Insurers do use some AI. Ellis said Sedgwick employs predictive analytics to identify more serious claims earlier and to evaluate jurisdictions, judges and opposing counsel. But the two sides apply the technology toward different objectives. "The plaintiffs' bar uses it to maximize its outcome," Ellis said. "On the defense side, we use it primarily to improve efficiency."
The next step, he argued, is using AI to help control indemnity costs and respond to plaintiffs' litigation strategies. Funding remains a barrier. Defense firms must invest in systems, data and technical expertise to keep pace. Ellis expects that constraint to contribute to consolidation among insurance defense firms, with larger national firms better positioned to finance the necessary AI tools.
Fetyko said the industry needs a more collaborative approach, similar to how plaintiffs' firms share tactics. She also noted that AI could free claims professionals and attorneys from routine tasks, giving them more time to communicate directly with claimants, opposing counsel and jurors. "The AI tools that are available for the plaintiff's bar are available for us too," she said. "I'm concerned if the defense doesn't begin to make the hard choice to change and to adapt. I think that we're getting there."
Why this matters for insurance professionals
The compressed liability lifecycle and the growing sophistication of plaintiffs' AI use demand a shift in how insurers and defense firms deploy technology. Using AI only for administrative efficiency will not close the gap. To protect against rising settlement costs and longer litigation, claims organizations must invest in AI that can accelerate early claim assessment, analyze opposing tactics, and support data-driven decisions on settlement versus trial. Defense firms that fail to adapt risk losing ground to more tech-savvy plaintiffs' attorneys, with consolidation likely to follow.
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