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LEGAL VIEW
IN ASSOCIATION WITH:
HAVING THEIR DAY IN COURT
Lawsuits are commonplace in America’s business world, where judgements and settlements can reach billions of dollars in high-profile cases.
Now it appears that the UK is becoming increasingly litigious, with businesses bearing the brunt of a rising trend to resort to the law on this side of the Atlantic.
There is a desire among people here to ‘have their day in court’ that the experts say is being fuelled by factors that include the cost-of-living crisis and economic instability.
As a result business litigation is now considered a “significant threat” to the reputation, operation and strategy of companies of all sizes.
A recent study involving senior UK business leaders highlighted that threat. Its findings revealed that seven out of ten were concerned about the rise in litigation and the impact on their trading.
Nearly three quarters of firms said they had experienced a rise in litigation over the last five years with 60 per cent expecting cases to further increase over the coming 12 months.
Since 2019, more than two in five had been subjected to legal threats. Despite all these rising trends, almost a fifth said that they were not prepared to handle law cases brought against their business.
When asked which areas of their business had been hit by litigation, almost two thirds cited reputational damage and more than six in ten said it had an impact on their operations and management time.
A similar number said it impacted their
strategy. The majority revealed there was a “significant financial impact” on the firm.
The worrying research was carried out by global risk management and insurance broker Gallagher.
Its report also revealed the most common types of legal issues cited by UK businesses were employee, contractual and financial disputes.
Employee litigation is a particular growing threat, with some individual cases in recent years costing companies hundreds of thousands or even millions of pounds.
Mid-sized businesses with between 501 and 1,000 employees are the most likely to have faced litigation over the past five years with over half reporting being subject to legal threats.
These rates remain high even among smaller businesses that are less likely to have in-house legal expertise, with almost two in five smaller
assumption that legal disputes are only a worry for big business.
“Concerningly, despite the established upward trend of business litigation cases and a consensus that this will persist, many companies do not feel prepared to manage incoming legal threats, potentially leaving them open to hundreds of thousands of pounds in awards and legal fees.”
Gary explains that firms are able to protect their business from the cost of litigation by taking out insurance.
He says: “There is a broad range of cover available to handle costs of a legal dispute either made by or against the company.
“From an issue with a supplier contract, an employment dispute, property damage or a
All parties within any litigation have an
obligation to attempt to settle before the need of court intervention
firms saying they have been subject to action.
Gary Fletcher of Gallagher says: “Litigation poses a considerable risk to the operational and financial health of UK businesses, with service sectors vital to the economy coming under particular strain.
“This data would appear to be evidence that British society at large is becoming increasingly litigious – and businesses are bearing the brunt.
“While larger companies are more likely to face legal threats, even businesses with fewer than 50 employees are reporting high levels of litigation against them, challenging the general
personal injury claim, legal expenses insurance will help protect businesses from the huge expense of professional fees.
“Companies should speak to their broker to see what cover might be right for them.”
Ella Holden is a member of the insolvency and litigation team at Lancashire-based Farleys Solicitors. She stresses that not all business disputes have to reach a courtroom.
Alternative Dispute Resolution (ADR) is a type of resolution that avoids the need to go to court. It can take the form of mediation, arbitration or third party adjudication.
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