2025 Insurance Year in Review

Time 16 Minute Read
February 9, 2026
Legal Update

If recent years have taught insurance practitioners anything, it is that the most consequential coverage disputes rarely turn on novelty alone. In 2025, courts continued to resolve high‑stakes insurance disputes by returning to first principles—examining when claims are related, how losses and occurrences are defined and aggregated, and how policy language allocates risk across time and conduct. D&O coverage and other core insurance law issues again occupied center stage, while decisions in property, cyber, and liability disputes reinforced a familiar theme: policy interpretation remains the decisive factor in determining whether coverage is available in an increasingly complex claims environment. As the decisions discussed below demonstrate, 2025 confirmed that even as risks evolve, coverage disputes remain grounded in careful, policy‑specific analysis.

Artificial Intelligence

2025 made clear that policyholders and insurers alike cannot look away from the growing role of artificial intelligence in the claims landscape. AI loomed large over the coverage landscape, as reflected in a number of recently filed policy forms and actions challenging AI‑related disclosures, marketing practices, and product design—which we have previously discussed on the Hunton Insurance Recovery Blog.


The insurance industry is responding to emerging AI risks by introducing broad exclusions—most notably Berkley’s “Absolute” AI exclusion—which purport to bar coverage for virtually any claim “arising out of” or related to the use, deployment, or even statements about artificial intelligence. While this development signals a shift toward limiting insurer exposure, it has also spurred the creation of new, affirmative AI-specific insurance products designed to fill the resulting coverage gaps. The scope of these exclusions, however, is complicated by vague and evolving definitions of “Artificial Intelligence,” raising uncertainty for policyholders and increasing the risk of disputes over what claims may actually be excluded.

Policyholders should closely scrutinize any AI-related exclusion or application question in their policies, and seek expert advice as needed, since broad and ambiguous exclusions may leave companies unexpectedly exposed or embroiled in coverage litigation as the definition and reach of “AI” continues to evolve.


As mentioned, while AI technologies proliferate and their associated risks grow more complex, insurers are introducing dedicated, affirmative AI insurance products to address exposures not contemplated by legacy cyber, D&O, or E&O policies. New offerings like Armilla’s AI liability policy (underwritten at Lloyd’s) and Google Cloud’s partnership with Beazley, Chubb, and Munich Re, provide targeted protections for risks such as AI hallucinations, model failures, or losses from malfunctioning AI tools—delivering greater certainty for policyholders navigating the evolving AI risk landscape.

These developments highlight that policyholders may want to consider supplementing their existing insurance programs with affirmative AI-specific coverage to close potential gaps and ensure protection against emerging AI-related risks that may be excluded or ambiguous under traditional policies.

As the risks associated with the use of AI continue to crystallize, as we have discussed in prior blog posts, policyholders can expect insurers to accelerate the development and implementation of AI‑specific exclusions and limitations, while simultaneously introducing new, AI‑focused insurance products designed to fill gaps in traditional lines of coverage. We will continue to monitor this space closely.

Directors & Officers

The most consequential D&O coverage disputes in 2025 turned on whether multiple matters constituted a single claim or a series of related claims. Courts applied fact‑intensive standards to determine whether different enforcement actions and civil suits shared a meaningful nexus, with those determinations often dictating which policy period applied—and whether coverage was triggered at all. These decisions underscore the significant stakes associated with interrelated‑claims analysis in modern D&O programs and the importance of understanding the law in the jurisdiction you are in.


In Alexion, the Delaware Supreme Court adopted a “meaningful linkage” standard for related-claims analysis under D&O policies, holding that claims are related only if they are materially connected by the same underlying wrongful acts. Applying that standard, the court found an SEC subpoena and a later securities class action were related, limiting coverage to the earlier policy period and a single policy limit.

The Alexion decision is significant because it provides further guidance to Delaware policyholders on how to navigate those disputes in the future. While the Alexion decision favored insurers by limiting the company’s recovery to only one set of policies, the ruling does not uniformly insure to the benefit of D&O insurers because the issue of “relatedness” cuts both ways and can benefit both policyholders and insurers depending on the nature of the claims. As Geoffrey Fehling, Hunton partner and lead of the firm’s D&O insurance and executive protection practice, stated last year, “the main takeaway from [this case] is, in Delaware or elsewhere, these related claims decisions can lead to what are seemingly inconsistent, or at least not clear guiding principles that will allow policyholders or insurers to definitively predict future claim outcomes because it’s fact-specific: It cuts both ways.” This turn of the tables played out only weeks after Alexion, when the Delaware Superior Court decided National Amusements, Inc. v. Endurance American Specialty Insurance Co., Case No. N22C-06-018-SKR CCLD (Del. Super. Ct. Feb. 17, 2025) , which is discussed in a prior blog post titled Delaware Provides Further Guidance for Navigating Interrelated Claims.


The Eastern District of Virginia held that two lawsuits against Avertest—though alleging similar negligent drug testing practices—were not related claims under claims-made liability policies. Applying a narrow “common nexus of facts” standard, the court found differences in plaintiffs, facts, timeframes, and legal claims meant the suits did not arise from the same occurrence, allowing coverage under a separate policy period.

The decision highlights that courts may require a concrete factual link, not just similar business practices or allegations, for claims to be deemed related—making it crucial for insureds to carefully analyze policy language and factual distinctions when tendering claims for coverage.


A Montana federal court held that two class actions against Boyne USA, alleging mandatory rental management programs in different states and years, were related under D&O policy language because both arose from the same general conduct. Applying a very broad “single course of conduct” standard, the court found the claims constituted a single claim, limiting coverage to one $5 million policy period.

The decision articulates a standard distinct from those employed in Virginia and Delaware and thus highlights the material impact that differing state standards for “related claims” can have on insurance coverage, emphasizing the need for policyholders to closely evaluate governing law and policy wording when assessing potential coverage for multiple claims.

Cyber

The trend in cyber insurance in 2025 was that litigation has shifted from insurer-policyholder disputes to attempts by insurers to recover losses from third-party vendors whose technology failures led to data breach or cyber incidents. The theme tracks the growing, but procedurally complex, cyber recovery ecosystem.


This ransomware litigation demonstrates the difficulty insurers and policyholders face in recovering cyber incident costs from vendors when contracts lack specific, enforceable security provisions. Courts dismissed claims against Blackbaud due to vague vendor agreements, prompting insurers to demand more detailed cybersecurity obligations and indemnity clauses in contracts during cyber insurance renewals.

The ruling underscores the importance of clear, robust cybersecurity provisions and indemnity clauses in vendor contracts, as these terms directly affect a policyholder’s ability to recover losses and secure favorable insurance terms. It highlights that proactive contract management is essential for not only mitigating cyber risk, but also for maximizing post-breach recoupment.

Another lawsuit, Ace American Insurance Company v. Congruity 360, Trustwave Holdings, Case No. 2:25-cv-15657 (D.N.J. Sep. 15, 2025), raises similar subrogation and vendor risks issues. We will continue to track developments in that case.

Property Insurance

In property insurance disputes, courts attempted to reconcile COVID-era rulings on “physical loss or damage” in the context of claims arising from wildfires and environmental contamination and pollution. Outcomes continue to be driven by specific policy language and jurisdictional precedent and rules of interpretation.


Two 2025 California cases reached opposite outcomes on whether wildfire smoke and debris contamination triggered property insurance coverage for “direct physical loss or damage.” In Bottega, a restaurant recovered after demonstrating that smoke and soot rendered the premises unfit for use, while in Gharibian, homeowners were denied coverage when the court found that soot and ash could be cleaned and did not cause lasting, physical alteration. The split highlights how COVID-19 coverage litigation has raised the bar for non-structural property claims, prompting courts to look for so-called tangible, persistent damage. The uncertainty of this standard continues to leave policyholders facing inconsistent and sometimes restrictive interpretations.

These cases are important because they illustrate how some courts are increasingly looking beyond the superficial for evidence of lasting physical change to the property, and why it therefore is essential to consider carefully the selection of forum. The evidentiary emphasis also reinforces the importance of proactive claim documentation and policy review.


The Alaska Supreme Court held that a total pollution exclusion in a homeowners policy did not bar coverage for carbon monoxide poisoning caused by an improperly installed water heater. The court found the exclusion was intended to bar claims for traditional environmental pollution and that policyholders could reasonably expect coverage for household carbon monoxide incidents, emphasizing that exclusions must be interpreted narrowly and in context.

This decision reinforces that even broad pollution exclusions may not preclude coverage for common, non-environmental household hazards—highlighting the importance of insurers considering reasonable expectations, policy language as a whole, and the factual context of each claim. Even more broadly, however, it reinforces several principles policyholders should consider in navigating pollution exclusions in homeowners and many other insurance policies: (1) whether an exclusion applies depends on multiple factors, including the facts and policy language, (2) consider the reasonable expectations of an insured to determine whether a policy exclusion applies, (3) policy exclusions should not be interpreted in isolation, the policy should be read as a whole and in a manner that affords meaning to all parts of the policy, and (4) whether an exclusion bars coverage is a case-specific inquiry.


California’s FAIR Plan, which stands for Fair Access to Insurance Requirements, is a state-mandated insurance program originally designed to be California’s insurer of last resort. It has increasingly become the default plan for those in California who do not qualify for policies with private insurers. A California court struck down key limitations in the FAIR Plan fire policy that required “permanent” physical loss and “visible” smoke damage, holding these definitions unlawfully narrowed coverage below the statutory standard. Relying on recent California Supreme Court precedent, the court found that property need only be demonstrably altered—damage need not be permanent or perceptible to the unaided senses—to trigger coverage.

The decision reinforces that California policyholders can claim coverage for fire and smoke damage based on scientific evidence, not just visible or permanent loss, and signals that insurers cannot contractually redefine core insurance concepts to limit statutory protections.


The Eighth Circuit held that microscopic soot and water damage following a fire constituted “direct physical loss or damage” under a commercial property insurance policy, rejecting the insurer’s arguments that only visible or tangible damage was covered. The decision distinguished microscopic contaminants like soot from viruses, reaffirming broad coverage principles for property damage.

This ruling is significant because it limited the reach of insurer-friendly COVID-19 rulings, confirming that policyholders can recover for non-visible, yet physically present, contaminants—reinforcing the broad scope of property insurance and providing a valuable precedent for future coverage disputes.

Insurance Fundamentals

Policy Interpretation and Drafting

Courts have underscored that careful policy drafting—and choosing the right policy for your business—remains paramount. This was evident in decisions addressing what qualifies as covered “loss” under D&O policies, including interpretations hinging on seemingly small language differences, such as the placement of the word “the,” which can alter an entire policy’s scope. These interpretation cases are likely to grow in importance as settlements become more creative and non‑traditional.

The Delaware Superior Court held in AMC Entertainment Holdings that AMC’s $99.3 million stock settlement qualified as a covered “Loss” under its D&O insurance policy. The court found non-cash payments, such as shares, can be covered if they are amounts the insured is legally obligated to pay, refusing to limit “Loss” to only cash payments and emphasizing the importance of explicit policy language.

The decision reinforces the significance of Delaware law for policyholders, showing that non-traditional settlement payments—including stock—may be covered under D&O policies, and highlighting the need for clear documentation and careful review of policy terms, choice-of-law clauses, and insurer communications to maximize potential coverage.


A Delaware court ruled that a series of infant injury claims against Mattel and Fisher Price constituted a single “occurrence” under the companies’ CGL policies, as the claims arose from the same alleged product defect. However, the court held that coverage under excess and umbrella policies without a “Deemer Clause” was allocated to the policy in effect when each individual injury occurred, not just the first claim.

The decision highlights the importance of closely examining how “occurrence” is defined and modified by endorsements in each policy layer under general liability towers, as aggregation language and allocation rules can significantly impact the scope and timing of available coverage.


The Fifth Circuit vacated a coverage denial under an intellectual property (“IP”) exclusion, holding that the policy’s use of “the” before “misappropriation of ideas or trade secrets” created ambiguity over whether “actual or alleged” applied to that clause. Applying grammatical canons and Texas law, the court found the policyholder’s interpretation reasonable and reiterated that ambiguous exclusions must be construed in the insured’s favor.

This ruling is pivotal as insurers increasingly rely on broad IP exclusions to bar coverage. Even minor ambiguities in grammar or syntax can now be leveraged by policyholders to challenge overbroad or unclear exclusionary language, highlighting the importance of precise drafting and careful policy review.


The Minnesota Court of Appeals held that government closure orders, rather than the COVID-19 pandemic itself, constituted distinct “occurrences” under Life Time’s communicable disease coverage. This interpretation expanded coverage from a single $1 million sublimit to 29 separate limits—one for each jurisdiction issuing an independent closure order—based on the policy’s express language. Hunton partner Koorosh Talieh has recently commented on this case saying, “for policyholders, the takeaway is clear: Endorsements and specialized provisions often contain narrower or alternative triggers that can unlock coverage, even when insurers—such as Zurich here—press for occurrence aggregation to limit coverage. Practitioners advising policyholders should scrutinize those provisions carefully before conceding to a broad single cause theory.”

The decision underscores the paramount importance of policy wording and causation language, showing that courts will enforce coverage triggers as written and that separate governmental actions can yield multiple recoveries under per-occurrence limits

Procedural Considerations


In Fire‑Dex, the Sixth Circuit clarified that district courts may not abstain from hearing declaratory relief claims when they are closely linked to damages claims in insurance disputes, absent a traditional abstention doctrine. Fire‑Dex, a manufacturer of firefighting protective gear, faced consolidated lawsuits by firefighters and their spouses alleging exposure to toxic chemicals, including PFAS. It asked Admiral Insurance Company to defend and indemnify it under its general liability policies, but Admiral declined, prompting coverage litigation. After initially filing a federal declaratory action, Fire‑Dex brought a new suit in Ohio state court seeking (i) a declaration that Admiral owed a defense and indemnity, (ii) breach of contract damages, and (iii) bad faith damages. Admiral removed the case to federal court and sought its own declaratory relief, but the district court remanded the declaratory claims to state court and stayed the damages claims.

The Sixth Circuit’s ruling is pivotal for policyholders because it ensures that related coverage and damages claims can be adjudicated together in federal court, reducing the risk of fragmented litigation, delays, and increased costs while providing greater procedural certainty in complex insurance disputes.

As We Enter 2026 . . .

The Hunton insurance team wishes you a successful year ahead. As 2026 unfolds, we will continue monitoring key developments in insurance coverage and litigation that could impact your business. Stay connected with us and follow our blog for timely updates, insights, and analysis!

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