SWITZERLAND Law and Practice Contributed by: Jodok Wicki, Daniel Zemp, Fabienne von Moos and Doruntina Dembogaj, CMS von Erlach Partners Ltd
that even a successful insured bears a material share of its own costs. That structural gap affects settle- ment economics, the allocation of defence expendi- ture within a policy, and whether it is worthwhile to pursue costs orders against unsuccessful claimants. Managing Complexity The central challenge is co-ordination. Where several insurers or policy years may respond to the same claim, unco-ordinated defence activity can quickly drive costs beyond what any single insurer antici- pated. Early appointment of lead counsel and a clear separation of liability, coverage and allocation work- streams reduce that risk. Policy wording determines the boundaries – in particular whether defence costs erode the indemnity limit and what consent or rea- sonableness requirements apply – so the cost frame- work should be mapped at first notice rather than after costs have already escalated. 5.4 Cost Risk Management and Funding Solutions Insurance Programme and Legal Expenses Cover The first mechanism for managing litigation cost risk is the insurance programme itself. Swiss liability policies commonly cover reasonable and necessary defence costs for covered third-party claims, subject to deductibles, sublimits and prior consent require- ments. Whether those costs erode the indemnity limit or sit outside it depends on the policy wording. Separate legal expenses insurance is widely available and commonly used by private individuals and SMEs, typically subject to policy limits, exclusions for claims with no reasonable prospect of success and restric- tions on the choice of lawyer. For larger commercial insureds, the primary liability policy and any excess or Third-party litigation funding is lawful in Switzerland and regularly seen, although not used every day. This is also because funders apply strict selection cri- teria; they typically look for both a high claim value and strong prospects of success before committing to fund a case. A funder pays lawyers’ fees, expert costs and court disbursements in return for a share of the recovery. The client and not the funder must umbrella layers remain more important. Third-Party Funding and Fee Structures
retain informed control over litigation and settlement decisions, and counsel must preserve professional independence throughout. Swiss law prohibits pure contingency fees under Arti- cle 12 (e) of the Federal Act on the Free Movement of Lawyers (BGFA), although a success premium in addition to a genuine base fee may be permissible subject to certain conditions. The base fee must pro- vide appropriate remuneration independently of the outcome, and the success-related component is sub- ject to limits under Swiss case law. Residual Cost Exposure After-the-event insurance is not an established feature of the Swiss market. Where insurance and funding do not cover the full risk, early budgeting, staged expert instructions and mediation remain the principal tools for managing the remaining exposure. 5.5 AI-Driven Claims Volumes and Complaints Volume and Triage AI-assisted drafting tools are increasing the number and speed of complaints reaching insurers. Although it is too early to quantify a Swiss-wide increase in meri- torious claims, AI-assisted drafting of insureds seek- ing indemnification from insurers is clearly increas- ing the workload. Generative tools can turn a brief incident description into a detailed demand, trans- late submissions across languages and co-ordinate similar claims. The immediate effect may therefore be more repetitive or inflated demands rather than a proportionate increase in proven liability. For insur- ers, the principal difficulty is triage and authentication: an AI-produced statement may contain plausible but inaccurate facts, invented legal authorities, duplicated heads of loss or inconsistent supporting material. Authentication and Evidence Deepfakes and other manipulated documents, imag- es, audio or video may create disputes about what occurred and who authorised it. Metadata, prove- nance, chain of custody and comparison with original system records can help identify manipulated materi- al. Automated similarity checks and targeted requests for underlying records are useful, but blanket refusal based solely on the suspected use of AI is not a safe approach – human review remains necessary for
235 I NSURANCE L I T IGATI O N 2026
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