Insurance Litigation 2022

Global Overview – Insurance Litigation 2022

As with the first edition of this Chambers guide, we define insurance litigation to include disputes to which insurers or reinsurers are directly party, such as coverage disputes, but also disputes in which they are not named but have a financial interest as indemnifiers of one or more parties.  As a result, the guide addresses not only laws governing insurance contracts, but extends to issues such as how litigation is funded and other relevant aspects of insurance-related dispute resolution in each jurisdiction.  Arbitration remains highly relevant, as many insurance contracts include arbitration clauses – meaning that coverage disputes are often resolved by one or more arbitrators, affording parties privacy and avoiding precedents being set. It follows that the relevance of any discussion of case law is limited to understanding what is actually happening in terms of dispute outcomes. 

Long-term issues

At the end of 2021, the full impact of the COVID-19 pandemic on risk and litigation landscapes had yet to emerge. That remains true today in some jurisdictions, as cases continue to be filed. In the UK, there was at least significant clarity on a number of important coverage issues for primary claims, albeit a tail of reinsurance questions will follow. In round terms, while there is a still a legacy of claims to face, the management of risks associated with the pandemic is better understood and no longer perceived as extraordinary. Other trends and issues we touched upon in the introduction to the previous edition have continued – the impact of Brexit, the rise of Eastern markets and the proliferation of cyber-exposures among them. A year of extreme weather events has given rise both to losses but also inevitably to yet further focus on climate change.

Environmental, social and governance trends to the fore

The last of these is a sure indicator that questions bound up in the label “environmental, social and governance” will remain at the forefront of any discussion of what preoccupies insurers. ESG frameworks are matters that every major business in the West is likely to be actively considering or, in some form, already implementing. At the heart of this is the complex and evolving reality of how businesses (including insurers) are answerable on a range of issues not only to shareholders, but also in one way or another to regulators, consumers, employees, suppliers, public opinion (as diffusely shaped and manifested in a range of media) and other communities. This creates, if nothing else, challenges in identifying associated risks that are (or with new products might be) insured, and measuring those risks. It is too large a subject and too early to say with much confidence exactly how current political or social controversies on questions like climate change will play out in court and what stake insurers will have. Nevertheless, the strong sense is that claims against established products like D&O, employment practices liability insurance (EPLI) and others will increase, while the boundaries of what the law recognises as giving rise to a cause of action in connection with the wider impact of businesses’ activities will be relentlessly tested in coming years. Going forward, it will be important for insurers to focus on and understand their policyholders’ attitude to ESG and the values and purpose of would-be insureds, who will increasingly be expected to focus on objectives beyond profit and to be mindful of a range of stakeholders when managing their businesses and making investment and recruitment decisions.       

Significant "new" crises

In the meantime, however, significant "new" crises have started. Most obviously in the sphere of geopolitics, the return of war to central Europe and the resulting sanctions have given rise to many urgent problems including, for insurers, a range of specific coverage and compliance issues.  More generally, however, the war has exacerbated political risk in a post-pandemic world at a time when insurers are increasingly focused on issues that are, by their nature, systemic and bound up with a highly complex political landscape. 

Looking forward, the cost of living crisis is likely to have a significant impact on potential future claims. When money is tight, individuals and businesses look to alternative sources for funds, perhaps pursuing claims which they might overlook in more buoyant economic times. The combination of the impact of the war, coupled with spiralling energy prices and inflation, which increases the cost of materials, is already disrupting supply chains which will likely impact contract performance times and the quality of products, if inferior substitute raw materials and component parts are used to address such issues. These stresses may well give rise to claims in the product liability, product contamination and product recall sector and may hamper progress on construction projects. 

Conclusion

Overall the insurance industry remains, post-pandemic, affected by big global issues in an increasingly globalised world. Nevertheless, as emphasised in the introduction to the last edition, most disputes are local and the rules and forums in which they are resolved vary considerably. For that reason above all, a guide such as this will hopefully be useful to those interested in insurance and the disputes in which it becomes implicated.