Sharp increase in the number of US cases set to be reflected in the UK shortly

Commercial litigation is rising and insurers are likely to be in the firing line, according to Nichola Evans, partner at insurance law firm Browne Jacobson.

UK Government figures for 2007 saw the highest number of actions being commenced in the Queens Bench Division for five years and statistics released by the Ministry of Justice last week also show that the number of defended claims is on the increase with a 16% rise on 2006.

As companies face increasing financial pressures in the wake of the global credit crisis, businesses inevitably analyse the quality of advice provided by professions such as insurers, brokers and financial firms. With a 58 per cent increase in class actions in the US recently reported, this is a trend that is sure to come to the UK in the next few months, according to Evans.

She said: “The old economic maxim that when the US sneezes, Europe catches a cold, is also true where litigation is concerned. We have seen a sharp increase in the number of cases in the US in the last quarter and this pattern is sure to emerge in the UK shortly. While the insurance sector is already believed to have earmarked $60bn to deal with litigation arising from the recent crisis, individual firms need to prepare now to defend their corners vigorously as we predict a flood of litigation on the approach to 2009.”

Evans is recommending that insurers undertake an audit of their current caseloads. She added: “In our experience, those businesses that prepare for litigation, taking a pro-active approach to defending themselves, are the ones that will come out of the process with the least damage.

“While part of the pro-active process involves sending a clear and consistent message to the market that every claim will be vigorously defended, using specialist techniques, such as alternative dispute resolution (ADR) at an early stage can ameliorate an insurer’s position. Taking a strategic and pragmatic approach to litigation is usually the best approach. ”