Legal Spend & Litigation Monitor

Q3-2026: Developments Through September 23, 2026

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Litigation costs continue to rise as higher outside-counsel rates intersect with increasing claim severity, evolving plaintiff strategies, third-party funding and rapid adoption of new technology.

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Alan Gray's Legal Spend & Litigation Monitor tracks developments that affect defense costs, litigation strategy and claim outcomes. The summary combines legal-market indicators with key developments that warrant attention from claims and litigation organizations.

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Key Takeaways

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• Outside-counsel cost pressure remains elevated. U.S. law-firm worked rates increased 7.1% year over year in Q2, while separate Wells Fargo data show first-half law-firm revenue increased 12.4% and lawyer demand rose 4.8%.^{1, 2}
• Litigation severity remains a significant claims concern. A September report found nuclear verdicts increased 40.7% in 2025, reaching the highest level identified since 2009.⁶
• Litigation management is becoming more complex. Expanding litigation-funding disclosure requirements and growing AI use are changing how claims organizations evaluate plaintiff resources, legal-service economics and counsel oversight.^{7, 8}

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Legal Spend & Litigation Dashboard — Q2 2026

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All figures compare Q2 2026 with Q2 2025 and reflect the latest available quarterly data. Dashboard metrics will be refreshed as new quarterly data become available.

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What the Dashboard Tells Us

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Q2 data show broad legal-cost pressure: rates and litigation demand are rising, staffing is shifting toward associates and non-equity partners, and technology spending is accelerating.

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Thomson Reuters tracks these trends across 195 large and midsize U.S. law firms.¹ For claims organizations, total litigation cost increasingly depends on staffing, technology use and whether added resources improve outcomes.

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New Wells Fargo data reinforce that picture. Its survey of more than 140 firms found first-half revenue up 12.4%, lawyer demand up 4.8% and expenses up 9.6%. Inventories rose 17.7%, while collection cycles slowed 5%.² For claims organizations, the data suggest that strong law-firm economics are continuing even as clients face sustained pressure on legal budgets.

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Five Litigation Trends to Watch

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1. Defense and Indemnity Cost Pressure Remains Elevated

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The 2026 CLM Litigation Management Study found that 81% of respondents reported rising indemnity costs and 76% higher defense costs.³ The findings reinforce the need to evaluate legal spend alongside claim outcomes, case duration and settlement costs.

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Wells Fargo's first-half results provide additional context: strong demand and pricing helped law-firm revenue rise 12.4%, while expenses increased 9.6%.² As a result, claims organizations are absorbing pressure from both rising claim costs and higher outside-counsel costs.

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2. Nuclear Verdicts Continue to Increase

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A September 2026 report identified nearly 200 U.S. verdicts of at least $10 million in 2025, up 40.7% from 2024, with total awards of about $25.6 billion. Forty verdicts exceeded $100 million.⁶ The continued growth in large awards reinforces the importance of monitoring venue, plaintiff counsel, litigation strategy and settlement exposure.

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3. Litigation Funding Transparency Efforts Are Expanding

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Third-party litigation funding remains under scrutiny. After North Carolina enacted the first broad state ban on litigation financing, a federal court in Louisiana adopted a rule requiring disclosure of third-party funding arrangements, while more than 200 companies, including major insurers, urged federal rulemakers to adopt broader disclosure requirements.^{4, 7} For claims organizations, greater transparency may provide additional insight into plaintiff resources, case duration and settlement dynamics.

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4. AI Is Moving From Adoption to Accountability

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AI is increasingly affecting legal-service economics and oversight. Thomson Reuters reports that 71% of in-house legal professionals expect firms to change how they charge as AI use increases, while 62% of law-firm professionals say pricing remains unchanged. Reuters also identified AI-related errors in at least 1,395 federal and state court cases.⁸ For claims organizations, AI raises questions about efficiency, pricing, verification and quality control.

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5. Bodily-Injury Severity Adds Pressure to Auto Claims

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Auto bodily-injury severity remains a source of litigation pressure. CCC reported average paid BI claim severity increased 10.3% year over year and 32% over four years, with both frequency and severity rising.⁵ Higher severity can increase reserves, settlement pressure and defense costs, reinforcing the need to assess legal spend alongside underlying exposure.

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How Alan Gray Can Help

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As litigation costs and claim severity rise, Alan Gray helps claims organizations strengthen oversight of legal spend, counsel performance and complex litigated claims.

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• Legal invoice review and spend analysis
• Outside-counsel performance and billing oversight
• Litigation benchmarking and trend analysis
• Independent review of complex and high-severity claims

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Citations

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1. Thomson Reuters Institute. Q2 2026 Law Firm Financial Index: A Heavier Load, Yet a Faster Crossing. 10 Aug. 2026.
2. Thomas, David. "US Law Firm Revenues Soared in First Half of 2026 — Wells Fargo Survey." Reuters, 25 Aug. 2026.
3. Claims and Litigation Management Alliance and Suite 200 Solutions. 2026 CLM Litigation Management Study. 2026.
4. Thomas, David. "North Carolina Becomes First State to Ban Third-Party Litigation Financing." Reuters, 23 June 2026.
5. CCC Intelligent Solutions. Crash Course 2026: Complexity Compounds. 31 Mar. 2026.
6. Hemenway, Chad. "Nuclear Verdicts Go Boom, Increase 40.7% in 2025." Insurance Journal, 7 Sept. 2026.
7. Thomas, David. "Litigation Finance Disclosure Rule in Louisiana Expands Transparency Push in US Courts." Reuters, 9 Sept. 2026; Hemenway, Chad. "Insurance Companies Join Letter to Push TPLF Disclosure in Federal Courts." Insurance Journal, 15 Sept. 2026.
8. Thomson Reuters Institute. Future of Professionals 2026: Legal Report. 2026; "AI Error-Ridden Court Filings Surge Despite Three Years of Sanctions." Reuters, 17 Sept. 2026.