UK Law and Practice Contributed by: Daniel Robin and Chloe Franklin, SDV Fenchurch
1. Key Drivers and Resolution of Insurance Disputes
tain provisions do not operate in the way the insurer or the policyholder may have intended. 1.3 Dispute Resolution Strategy and Outcomes Insurance disputes are commonly resolved through pre-action correspondence, negotiation, mediation or other forms of ADR before formal proceedings are issued. Litigation or arbitration remains important for high-value claims, strategically significant disputes, or cases where the parties require judicial determination of a point of construction or principle. For policyholders, early settlement may provide cer- tainty, preserve commercial relationships and reduce the cost burden of litigation. For insurers, settlement may allow exposure to be controlled and precedent risk avoided. However, where a coverage issue affects a wider portfolio of claims or turns on wording used across the market, insurers may be more inclined to defend the position through formal proceedings. A stark example of that was the COVID-19 Business Interruption Litigation. The general position in the English courts is that the losing party pays the winner’s costs, and therefore any party in litigation has to account for the risk of paying adverse costs as well as their own legal costs. 2. Jurisdiction and Choice of Law 2.1 Choice of Law in Insurance Contracts In commercial insurance and reinsurance, the parties’ express choice of law is generally respected. English law is common in London market placements, espe- cially in reinsurance, marine, aviation, energy, financial lines and multinational programmes. Disputes tend to arise where a programme contains several documents with inconsistent wording. The practical focus is therefore on identifying what the par- ties actually agreed across the slip, schedule, policy wording, endorsements and any hierarchy clause. 2.2 Jurisdiction and Forum Selection Jurisdiction clauses are generally upheld, particularly between sophisticated commercial parties. Exclusive
1.1 Common Triggers of Insurance Disputes The most frequent causes of insurance disputes in England and Wales remain issues of policy inter- pretation, late notification, aggregation, exclusions, and disputes over compliance with policy condi- tions. The English Courts have consistently upheld that the approach to policy interpretation is a literal- ist one, based on the plain and ordinary meaning of the words used from the perspective of an ordinary policyholder. This can sometimes lead to an outcome which is uncommercial for one of the parties. These issues arise across a broad range of business lines, including property, business interruption, construction all risks, professional indemnity, directors’ and offic- ers’ insurance, cyber, public liability and reinsurance. In recent years, the nature of insurance disputes has become increasingly shaped by systemic and market- wide events. COVID-19 business interruption litiga- tion, Russian aviation losses, cyber incidents, sanc- tions, cladding and fire safety claims, supply chain disruption and climate-related losses have all gener- ated complex questions of causation, aggregation and policy response. 1.2 Role of Policy Wording and Drafting Policy wording remains central to insurance litigation in England and Wales. The courts interpret insurance policies according to ordinary contractual principles, with the starting point being the natural and ordinary meaning of the words used, read in the context of the policy as a whole and the factual and commer- cial background known to the parties at the time of contracting. Recurring areas of contention include notification clauses, conditions precedent, aggregation wording and exclusions. The precise wording of the policy is often determinative, particularly in commercial insur- ance where the courts are generally reluctant to depart from clear contractual language, even where the out- come may be commercially unattractive to one party. Issues can arise from the insurance industry being slow to adapt its wording following the identification of ambiguous provisions or the court’s finding that cer-
250 I NSURANCE L I T IGATI O N 2026
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