Insureds must monitor unresolved litigation to mitigate risks

Unresolved litigation - insureds MUST take an interest…

Insureds and also Insurers should be asking their lawyers what can be done to resolve litigation at the lowest cost…after all the Civil Procedure Act 2010 (Vic) includes overarching obligations to:

s22 - use reasonable endeavours to resolve dispute
s24 - ensure costs are reasonable and proportionate

I see this type of story all the time:

• An insured with a liability policy (lets say PI insurance); and

• A claimant sues for (lets say for misleading and deceptive conduct + lets add a contract and tort claim for good measure); and

• A panel law firm is appointed by the insurer (they file a defence and along they go); and

• The insured gets on with business… as they should…

• But Legal costs are continually being incurred and the insured has little to no involvement.

Lets say $75,000 is spent on legal costs or WORSE - Maybe the insured doesn’t even know what is spent; and

• Then comes insurance renewal…

• Lets say this is the insured’s second claim (with similar legal costs) and a couple of other ‘notifications’; and

• The underwriter rightly starts probing prior to renewal;

• Whilst the claims aren’t huge…well not as big as they could be, the insurer is concerned as to the ‘risk profile’ and starts discussing a premium increase

• maybe a BIG premium increase.

AND worse still your broker says other insurers are less interested.

• INSUREDS/Policyholders - here is your WAKE UP CALL!!!!!

  • You may have an insurance policy that works
  • You may have someone else paying for the litigation
  • You may not know it, but litigation costs can come home to ROOST!

Rightly - you might say “Blair, we don’t have a final say on litigation - the insurer does…THEY have to consent to settlements etc etc”

I KNOW, I KNOW

but YOU should take a considered interest in the litigation. For example, you as insured or your broker can ask:

• What steps are being taken in the proceedings? and Why?

• Have offers like a Calderbank and/or Court or Tribunal Rules offer been made? if not, why not?

• Are there other are steps or things that can be done to resolve the dispute or minimise the cost of litigation?

Why is this SO important?

• litigation starts and ticks along and as it ticks along legal costs arise;

• most insureds don’t take an interest because someone else is paying - the INSURER

• but LATER these costs transfer to your CLAIMS HISTORY

• …Yes, I also know - its not your fault! you have a defence! - I GET it.

• but you should monitor the litigation - ask QUESTIONS, know whats happening and why and what other options exist

As always reach out if you are an insured, broker or insurer who needs a peer review of litigation. We regularly see litigation become entrenched and need a fresh set of eyes.

This article is a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Tagged as:

• litigation