Construction claim trends in a changing risk landscape
These emerging trends are challenging traditional construction risk management.
By Stephanie Thomas | August 14, 2025
As construction practices evolve to meet new environmental, technological and efficiency demands, so too do the associated risks.
Three emerging areas are giving rise to increasingly complex claims scenarios: solar farms, data centers, and modular construction. Each involves unique exposures, legal ambiguities and implications for underwriting and risk management.
Solar farms: Small damages, giant verdicts
As the renewable energy sector continues to grow worldwide, the construction of solar farms across America’s rural areas has triggered an uptick in high-severity pollution runoff claims. Though these claims often involve limited physical damage caused by silt or sediment runoff onto neighboring residential properties and waterways, they increasingly result in multi-million-dollar jury awards.
Solar farm construction involves clearing and grading large sections of land, often in rural communities. This phase of construction can lead to significant erosion and major sediment run-off into waterways and neighboring residential properties if the stormwater controls and drainage basins are inadequate. What might begin as a modest environmental incident can escalate into a highly litigious and emotionally charged dispute.
A landmark example of this trend is the Lumpkin Solar case, in which a Georgia jury awarded $135.5 million, including $125 million in punitive damages, to a couple whose private pond was contaminated by runoff during the construction of a nearby solar farm. The actual cost to remediate the damage was estimated at less than $1 million, but the verdict reflected deeper social dynamics: a strong jury inclination to penalize corporations thought to be infringing on rural livelihoods.
These high-dollar claims are rarely driven by catastrophic physical losses. Rather, they emerge from a mix of social inflation, the rise of third-party litigation funding and a growing public skepticism toward industrial-scale projects in rural settings — all resulting in nuclear jury verdicts, defined as verdicts in excess of $10 million. Plaintiffs’ attorneys have recognized this dynamic and are actively seeking similar cases, which is accelerating both the frequency and severity of these claims.
Underwriters are closely monitoring this trend to determine appropriate risk management strategies, which could include raising premiums, increasing self-insured retentions and enforcing stricter underwriting guidelines.
To mitigate this exposure, brokers should work closely with policyholders to encourage early reporting of environmental disturbances, even when the damage appears minor. As with any loss, it is critical to accurately identify and document the scope of damages related to the claim event. Many construction professional policies include mitigation provisions that allow issues to be addressed proactively, potentially reducing liability and preserving community goodwill. As solar development continues to scale, insurance providers, brokers and policyholders alike will need to adapt to the evolving risks these projects pose, both on the ground and in the courtroom.
Data centers: Technical failures, major consequences
The rise of cloud computing and artificial intelligence (AI) infrastructure has fueled an aggressive expansion of data center construction across the U.S. These highly specialized and time-sensitive projects require complex mechanical and HVAC systems to manage the heat loads generated by servers and other computing equipment.
Claims typically stem from coordination failures among the many contractors and subcontractors involved in building the data centers. A claim scenario might involve a design-builder subcontracting the HVAC scope to a specialist, who then engages further subcontractors or manufacturers. This fragmentation can lead to miscommunication around system requirements, resulting in improperly sized components or misconfigured backup systems. When systems fail, even briefly, they can trigger shutdowns, data loss or catastrophic delays, resulting in high-dollar insurance claims.
One element aggravating this risk is the aggressive timelines imposed by tech-sector owners. Contractors often feel compelled to meet these demands at all costs, leading to delays in reporting problems out of fear of damaging the client relationship. By the time insurance providers are notified, the issue has often escalated significantly.
Determining liability in these cases is complicated by the custom and proprietary nature of many components used in these data centers. Although certain elements resemble “products,” they are typically designed specifically for the project and manufactured to bespoke specifications. As such, they may fall outside of traditional product liability frameworks.
Although claims data in this space remains limited due to the niche nature of data center construction, when claims do occur, they are often significant. To manage exposure, brokers can encourage clients to report matters early and leverage mitigation coverage where available. Early intervention can reduce damages, preserve client relationships and allow insurance providers to subrogate as needed without entangling the policyholder in prolonged and expensive disputes.
Modular construction: Efficiency meets ambiguity
Modular or prefabricated construction methods are gaining popularity in sectors with repetitive architectural needs, such as health care and hospitality. In these scenarios, fully constructed units, such as entire bathrooms, are manufactured off-site and shipped to the job site for installation. This approach offers significant efficiency gains, but it also introduces new questions about liability and insurance policy response.
Claims in this space can arise when modifications are made to prefabricated units after delivery. As an example, a subcontractor altered the plumbing of a prefabricated bathroom, resulting in a post-installation defect. The central question became whether this was a product liability issue or a construction defect, and which policy should respond, commercial general liability (CGL) or product liability.
Many construction insurance policies contain product liability exclusions. Although individual pre-engineered components such as building framing systems are generally not classified as “products” for insurance purposes, the status of fully prefabricated rooms or functional units remains unclear.
There is also the question of responsibility for systemic modifications. If dozens of prefabricated units are installed and later require uniform changes, it can be unclear whether the contractor or the manufacturer bears the cost and responsibility for correction.
As modular construction gains popularity, brokers and underwriters should remain attuned to this shift and engage proactively with policyholders to clarify responsibilities and ensure adequate coverage is in place.
Stephanie Thomas is assistant vice president, senior claims examiner for Berkley Alliance Managers with experience handling construction professional and pollution liability claims. Formerly, she was an attorney practicing in New York and New Jersey, where her trial work included construction defense litigation.
Thomas is admitted to practice law in New York and New Jersey, and she holds a Construction Risk and Insurance Specialist (CRIS) certification. She can be reached at [email protected]. This article is published with permission from the author and may not be reproduced.
This article is published with permission from the author and may not be reproduced.
Reprinted with permission from the August 14th issue of PropertyCasualty360. Further duplication without permission is prohibited. All rights reserved.