As a homeowner, one thing you must know is that increasing property damage claims are directly causing surges in real estate litigation cases.
As more catastrophic weather events occur alongside skyrocketing repair costs, denied, underpaid, or delayed claims are also on the rise. They're forcing property owners to initiate litigation for courts to resolve the disputes.
An August 2025 Insurance Information Institute (III) article, for instance, noted that in 2024, U.S. property claims volume rose 36%. A key driver was the 113% surge in catastrophe claims.
It also touched on how excessive claims litigation is driving up claim costs and prolonging claim disputes.
If you take the time to understand the link between homeowners' insurance claims and residential real estate lawsuits, you can make more informed decisions to protect your property and finances.
What Does Real Estate Litigation Mean?
The term "real estate litigation" refers to the legal method of resolving disputes related to real estate properties (including residential). Such disagreements can arise due to the property's:
- Ownership
- Use
- Contracts and transactions
- Condition
Real estate litigation cases are formal lawsuits whose primary aim is to have courts assist in resolving the dispute. Judges usually require the party who is at fault to compensate the "winning" party, either with financial compensation, a specific action or performance, or both.
Why Would a House Be in Litigation?
One factor that can cause a house to be in litigation is a breach of the purchase contract. A specific example of when this can happen is if a seller refuses to close. Another is if the buyer backs out without prior notice and enough justification.
Failure to disclose significant property defects can lead to residential real estate litigation, too. Active concealment, for instance, occurs when a seller deliberately hides defects and chooses not to disclose such information to the buyer.
There's also the growing problem of property damage claims insurers deny, delay, or underpay. Homeowners who believe their insurance company has done any of these actions without adequate reason may turn to the courts for resolution.
They may sue their insurer for "bad faith."
What's the Link Between Property Damage Claims and Real Estate Litigation?
U.S. News and World Report cites figures from the III stating that property damage is the most common category of home insurance claims. It accounted for 96% to 97% of all homeowners' claims between 2019 and 2023.
Unfortunately, not all property damage claims get paid or settled with the right price at the right time. In some cases, insurance companies have even denied claims outright, even valid ones.
Such situations often trigger homeowners to proceed with real estate litigation.
Increasing Catastrophic Weather Events
Understanding the connection between homeowners' insurance claims and real estate lawsuits is particularly crucial if you own property where climate risks and disasters are becoming more common.
Take New York, for example.
The New York State Climate Impacts Assessment says that projections for the state point toward hurricanes and tropical storms increasing in intensity. The more intense they get, the stronger the winds and the more rain they'll produce.
Ultimately, they can lead to increased coastal and inland flooding. It's for this reason that a property appraisal or valuation is imperative before and after potential losses; it can help establish diminution in value and quantify damages, according to this litigation appraiser NYC guide.
Skyrocketing Repair Costs
The more severe weather events that occur and the greater the havoc they wreak, the more homeowners' insurance policyholders will likely file claims. The more claims filed, the more losses insurers will face, compounded by ever-increasing repair costs for labor and materials.
Surging Insurance Denials, Underpayments, and Disputes
In an attempt to manage losses, insurers may deny, underpay, delay, or dispute more claims, even if they are valid. Valid claims that don't get paid at all, on time, or with the right amount are examples of bad faith insurance practices.
Homeowners can sue for bad faith insurance. Such lawsuits can seek damages for:
- Policy benefits and complete coverage
- Emotional distress
- Attorney fees
- Punitive damages
Frequently Asked Questions
How Long Does Real Estate Litigation Take?
Real estate litigation is a multi-step process that can take anywhere from months to years to conclude. It depends on the severity and complexity of the problem and the disputed amount.
Do All Real Estate Lawsuits Go to Court?
No. Even in situations wherein the plaintiff's initial intention is to litigate in court, most real estate disputes start with a case assessment and pre-trial.
The term "plaintiff" refers to the party filing the legal claim or initiating the lawsuit, such as an insurance policyholder who alleges their insurer denied their valid claim.
Case assessments and pre-trials involve correspondence between the parties. They'll assess their rights and attempt mediation, usually with the help of lawyers.
What if Mediation Fails?
If the parties can't come to an agreement following mediation, the plaintiff can file a formal lawsuit. In the case of an insurer denying, underpaying, or delaying a valid claim without just cause, the plaintiff would likely file a "first-party bad faith insurance" lawsuit.
The defendant (e.g., the insurer) gets "served" with the lawsuit (or demand letter). Demand letters often provide defendants with options to settle the matter before it goes to court (e.g., cover the full value of the claim within a specified amount of time).
If the defendant still doesn't reply to the demand letter or defend their actions, the plaintiff can choose to move things on with interim hearings and motions. The goal of these processes is to resolve the dispute or get a specific ruling before a full trial.
The case enters the trial and judgment phase if interim hearings and motions fail to result in a settlement. During this step, the judge decides the winning party based on the evidence provided by all parties involved.
Arm Yourself With Knowledge Regarding Real Estate Litigation
Remember: As severe weather events occur more frequently and the cost of labor and materials continues to surge, more property owners like you may have to file more damage claims. It could then lead to increased real estate litigation, as insurers attempt to control or minimize their potential losses.
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