The extraordinary cost of litigation, insurance or other, is back in the legal lights. “HSF Kramer seeks £81m in costs from mega Russian aviation case” was one headline this week; “AerCap Wants £81M Costs from Insurers in Missing Jets Case” was another. Both stories relate to the same case, and the same insurance fail: AIG and other insurers refusing to pay out in full for the loss of commercial aircraft wrongly retained in Russia after the country’s invasion of Ukraine in 2022.
The costs in this case are big, but they are not out of kilter when compared to other recent cases. Earlier this year the parties to the ‘dieselgate’ emissions case currently going through the High Court tried to peg their costs at a combined £430m. Another earlier case that springs to mind, also involving HSF, saw the law firm’s then client, Royal Bank of Scotland, roundly criticised for running up £100m in costs defending a shareholder dispute.
While these figures are staggering enough on their own, what they don’t explain are the machinations going on behind the scenes. Litigation is now so costly and time consuming, the barriers to entry risk becoming insurmountable for all but the deepest pockets. Pursuing an unpaid insurance claim through the courts will now take at least two years and is likely to cost seven figures.
Sure, the successful claimant will get some of those costs back, but nowhere near the full amount. As a general rule of thumb standard costs are normally awarded at around 60% of the total spend. So you spend millions pursuing your claim, you waste years and you only get back a fraction of your costs.
And guess what? Insurers know this. It is the most powerful bargaining tool they have and one they are not afraid to use. Luckily there are ways to overcome all this, but it’s not for the faint-hearted, or the inexperienced.
Mactavish creates a fairer market for policyholders. We are expert insurance buyers, designing policies that perform when called on and helping resolve disputes when they arise.
Mactavish Claims Litigation Index
The Mactavish Claims Litigation Index aims at tracking insurance litigation and claims performance and getting the market to focus on what really matters, the product you buy with your premiums, not just the premium itself.
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