THE ROLE OF INSURANCE IN LITIGATION
The use of insurance in the context of litigation is not a new concept and in some sectors, such as construction or shipping, businesses are very familiar with how it operates and the considerations that go with that. However, in recent years insurers have started to provide insurance in an increasingly wide range of sectors, and businesses, whether acting as claimants or defendants, need to be aware of how insurance and litigation interrelate.
The benefits of insurance in relation to litigation risks should not be underestimated. For defendants it can give comfort that their balance sheet will not suffer if the claim is successful. For claimants it can be a means to recover a loss quickly and without the need to resort to expensive litigation.
Businesses therefore need to keep track of the insurances they have in place, the risks they cover, and the policy conditions that need to be fulfilled in order to successfully claim on the policy.
Where is insurance likely to arise?
Many of the insurance products that cover the risk of a business being sued are well known: for example, professional indemnity, public liability, employer’s liability and so on. However, insurers also provide insurances that can be claimed on in lieu of having to bring a claim against a third party – for example: (i) breach of seller’s warranty in a corporate transaction, known as warranty & indemnity insurance; (ii) property title infringements, known as title risk insurance; (iii) failure by creditors to meet debts, known as credit default insurance; (iv) defaults by tenants under the terms of a lease, known as a tenant default insurance; and (v) insurance against property damage, such as property and contractors all risk insurance.
Jan-Mar 2016 issue
Burges Salmon