INDIA Law and Practice Contributed by: Neeraj Tuli, Rajat Taimni, Amrit Singh and Anuj Bahukhandi, Tuli & Co
5.4 Cost Risk Management and Funding Solutions Third-party litigation funding is permitted in principle, but the lack of a dedicated regulatory framework and limited judicial guidance have limited the development of this industry. As a result, the use of third-party fund- ing remains relatively uncommon. Instead, exposure to litigation costs is more often managed through insurance products that provide cover for third-par- ty liabilities and associated defence costs. Insurers’ involvement in the defence is also necessary to ensure that the most effective strategy is put in place, and for this, preparing an early liability and quantum assess- ment is necessitated. 5.5 AI-Driven Claims Volumes and Complaints In the author’s experience, there has not yet been a substantial increase in AI-generated claims and com- plaints in this jurisdiction. 6. Third-Party Claims and Defence Trends 6.1 Third-Party Claims and Direct Actions There is no equivalent law in India of the UK Third Par- ties (Rights Against Insurers) Act 2010. As a general rule, Indian law recognises the principle of privity of contract; consequently, a third party may not be able to bring a direct action or claim against an insurer. That being said, it is common practice for third par- ties to name the defendant’s insurer in motor acci- dent-related proceedings. The Motor Vehicles Act, 1988 (“MVA”) provides that the rights of an insured under a policy are transferred to a third party claim- ing against the insured in the event of the insured’s insolvency. The MVA empowers the Motor Accident Claims Tribunal to seek the insurers’ involvement in a third-party action against the insured if the tribunal believes the claim is collusive or if the insured fails to contest the claim. Section 164 of the MVA makes insurers liable to pay compensation in case of death or grievous hurt without the need to plead or estab- lish any fault under the following terms: (i) in the case of death, INR500,000 (approximately USD5,200); and (ii) in the case of grievous hurt, INR250,000 (approxi- mately USD2,600).
ability of defence costs. Claims involving multiple insureds or third-party claimants may also give rise to issues concerning allocation of liability and the inter- action between the underlying liability proceedings and the insurer’s coverage position.
5. Claims Against Insureds 5.1 Key Exposure Areas for Insureds
Claims against insureds in this jurisdiction primar- ily concern D&O policies, often driven by regulatory investigations and proceedings. Typically, such mat- ters would involve multiple stages, beginning with an investigation and often followed by lengthy hearings, trials and appeals. As D&O policies generally provide cover from all such stages, costs are incurred from the outset and could become substantial in view of the protracted nature of such proceedings. 5.2 Shifting Risk Landscape The rapid pace of technological development has made disputes in the IT sector increasingly complex, often involving complex systems, evolving technolo- gies and interconnected services. As a result, insurers must work more closely with insureds and technical experts to understand the underlying facts, assess liability and evaluate the nature and extent of any loss. 5.3 Defence Costs and Litigation Complexity High-value cross-border disputes have increased in number, in part due to the increased use of long-term outsourcing arrangements for technology transforma- tion, development and managed services. Disputes of this nature are often complex, time consuming, involve multiple jurisdictions and may result in signifi- cant defence and settlement costs. Insurers are there- fore adopting a more proactive strategy for managing claims, with more stringent control of defence costs and earlier engagement in the settlement process to determine whether a commercial resolution might be preferable to drawn-out and costly litigation that inevitably produces a degree of uncertainty as to both outcome and quantum.
158 I NSURANCE L I T IGATI O N 2026
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