View source for Definition:Litigated claim

⚖️ '''Litigated claim''' refers to an [[Definition:Insurance claim | insurance claim]] that has escalated beyond informal negotiation or standard [[Definition:Claims adjusting | claims adjustment]] and entered the formal legal process, typically through the filing of a lawsuit by the [[Definition:Claimant | claimant]] or [[Definition:Policyholder | policyholder]] against the [[Definition:Insured | insured]] or, in some cases, directly against the [[Definition:Insurance carrier | insurer]]. Once a claim becomes litigated, it triggers a fundamentally different handling workflow within the insurance company — one that involves [[Definition:Defense counsel | defense counsel]], court filings, discovery, and potentially a trial or structured [[Definition:Settlement | settlement]] negotiation. In [[Definition:Liability insurance | liability lines]], litigated claims represent a significant share of total [[Definition:Loss costs | loss costs]], often consuming disproportionate resources relative to their volume.

📂 When a claim enters litigation, the insurer's [[Definition:Claims department | claims department]] typically transfers or escalates the file to a specialized litigation unit or a senior [[Definition:Claims adjuster | claims examiner]] with authority to manage higher-value exposures. The carrier retains or appoints [[Definition:Panel counsel | panel counsel]] — law firms pre-approved to handle defense work — and establishes [[Definition:Case reserves | case reserves]] that reflect the anticipated cost of both [[Definition:Indemnity | indemnity]] payments and [[Definition:Allocated loss adjustment expense (ALAE) | allocated loss adjustment expenses]]. Throughout the process, the adjuster and defense attorney coordinate on strategy, guided by the insurer's [[Definition:Litigation management guidelines | litigation management guidelines]], which dictate everything from acceptable billing practices to when mediation or [[Definition:Alternative dispute resolution (ADR) | alternative dispute resolution]] should be pursued. Regular [[Definition:Reserve | reserve]] reviews occur as new information — depositions, expert reports, court rulings — reshapes the expected outcome.

💰 The financial and operational weight of litigated claims makes them a central focus for insurance leadership and [[Definition:Actuarial analysis | actuarial teams]] alike. Litigated claims tend to settle for significantly more than their non-litigated counterparts, and their extended duration introduces [[Definition:Tail risk | tail risk]] that complicates [[Definition:Loss reserving | reserving]] and [[Definition:Reinsurance | reinsurance]] planning. Carriers increasingly use [[Definition:Predictive analytics | predictive analytics]] to identify early which claims are likely to become litigated, allowing proactive intervention — faster contact with claimants, early settlement offers, or preemptive involvement of experienced adjusters — to reduce both severity and expense. For [[Definition:Insurtech | insurtechs]] building [[Definition:Claims management system | claims management platforms]], integrating litigation-tracking capabilities and automated reserve triggers has become a key differentiator.

'''Related concepts:'''
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* [[Definition:Claims adjusting]]
* [[Definition:Litigation management guidelines]]
* [[Definition:Allocated loss adjustment expense (ALAE)]]
* [[Definition:Alternative dispute resolution (ADR)]]
* [[Definition:Case reserves]]
* [[Definition:Panel counsel]]
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