Insurance Disputes Being Filed More Often in Federal Courts

Lex Machina, a LexisNexis company, announced the release of its first annual Insurance Litigation Report, which encompasses data on more than ninety-three thousand insurance cases pending in federal court since 2009. The Insurance Litigation Report showcases data and tends involving disputes between an insurer and a policyholder, a beneficiary, or another insurer asserting the rights of a policy holder. The report includes analytics from both the broad insurance data set as well as five common insurance types: Automobile, Homeowners, Life, Uninsured/Underinsured, and Business Liability.

The report shows that there has been a major increase in the numbers of filed federal insurance cases in the last several years. The report also confirmed that federal courts are far more likely to rule in favor of insurers than claimants. The two areas that had the biggest jump were automobile claims and homeowner claims. Automobile claims rose by thirty nine percent, uninsured/underinsured motorist claims rose by fifty percent, and homeowner’s claims rose by eighty percent. While claims are going up, insurers tend to be satisfied due to the insurer friendly outcomes in federal courts.

For instance, insurers were victorious in eighty-five percent of duty to indemnify cases and in eighty percent of duty to defend cases. However, if cases went to trial, claimant prevailed more than fifty five percent of the time. We suspect the federal courts offer “incentives” to both plaintiffs and defendants, since plaintiff’s appreciate the expedited nature of federal courts, whereas, insurer-defendants enjoy the “friendly confines” of stricter federal courts and statically more favorable outcomes.  Thanks to Melisa Buchowiec for her contribution to this post.  Please email Brian Gibbons with any questions.