A groundbreaking research project by Demotech has uncovered a covert, tech-enabled litigation machine that is destabilizing U.S. insurance markets and worsening the financial fallout for storm-stuck homeowners. The “tech-enabled litigation instigation” model has allegedly been operating since 2017, redirecting property owners away from legitimate claims handling and into costly and unnecessary litigation.
According to Demotech President Joe Petrelli, “these coordinated, high-tech scam and email attacks exploit post-storm confusion, capitalize on consumer crisis, and accelerate carrier litigation to unsustainable levels.” Through tactics such as search-engine manipulation, pay-per-click advertising, phishing, and data scraping, third-party actors intercept homeowners immediately after a disaster.
Many consumers unknowingly bypass their insurance company altogether.
The findings showed that property owners are being dumped directly into a litigation track, and this is “often without an understanding that they had bypassed their insurance company’s normal claims process.”
Demotech’s companion report, which was released on November 11, 2025, details how these industrial-scale litigation platforms have fueled insurer insolvencies, transformed settlement patterns, and contributed to the rise of “nuclear verdicts.”
One Florida study estimated that litigated property claims cost 360% more than non-litigated claims of the same concern. In one period, Petrelli noted that several small Florida carriers “had a 3% market share of premiums, yet saw their market share of new, annual litigated claims grow to nearly 20%.”
The rapid growth of this model has attracted billions in third-party litigation funding and is pressuring the legal profession to loosen rules restricting non-lawyer ownership of law firms.
To address the financial concern, North Carolina Senator Thom Tillis (R) and Oklahoma Rep. Kevin Hern (R) are proposing a federal tax on profits from litigation funding, aiming to reduce incentives for predatory lawsuits.
Demotech warns that reform is urgent, and policyholders are urged to “contact their agent or carrier directly” and not to click on unsolicited online advertisements or popup ads.
