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Legal wrangling is nothing new for the insurance industry – but to be accused of “hijacking the legal system” is something altogether different.
That, however, was the conclusion reached by a new report released today suggesting that disputes between businesses and insurers typically take three years to resolve – and that claimants are only usually picking up around 60% of the amount they are seeking. It was suggested that businesses are failing by being too pragmatic and leaving the finer details to insurance brokers.
The research was commissioned by Mactavish, the City consultancy, and reported on by The Times newspaper. It made an analysis of five years of UK court and arbitration hearings revolving around business insurance disputes and discovered that a mere 32% of decisions fell in the policyholder’s favour; while 45% of insurance claims worth more than £1 million were disputed by insurers and less than 5% of those went to full trial with companies having contractual terms in place that first insist on mediation ahead of binding arbitration. Furthermore, the report noted that among those disputes that do make it all the way to full trial, an eye-catching 70% fail.
The report suggests that policies are drafted to favour insurers – making it difficult for claimants to win. As such, it is calling on in-house lawyers to increase their diligence when they look at insurance policies so that businesses aren’t trapped into contracts that are ultimately hard to dispute.
“It is almost impossible with some insurance contracts not to breach the policy when a business makes a claim,” Bruce Hepburn, chief executive of Mactavish told The Times.
“The companies that bring insurance claims are not chancers,” he went on to say. “They honestly believe that the product that they have bought should have covered their claim. But the heads of their legal departments need to be more diligent in assessing the insurance policy contracts before they sign them.”
Transport, construction, manufacturing and business services were the most common areas for disputes – with disagreements over the specific business losses covered by a policy making up the bulk of the arguments.
