With more UK technology businesses looking to enter into the US market, it is important that these companies are aware of the differences between the practices and procedures that operate here in the UK.
The US has a reputation for being a litigious society. With a population which is approximately 5.5 times greater than that of the UK, there is already a greater chance of a claim being brought against you in the US. However, there are also other contributing factors which add to the frequency and severity of US litigation :
• Unlike the UK, in the US the losing party does not reimburse the legal costs of the successful party, unless the parties agree by contract before the litigation. As US claimants are not at risk of having to pay their opponent’s fees if they lose, this makes it more attractive for them to pursue a claim.
• The introduction of solicitors working on a contingency fee or ‘no win no fee’ basis means that there is little cost to start a lawsuit. Furthermore, in the UK if a case is won by a no win no fee solicitor, that solicitor will be able to obtain your owed legal fees from the losing party, plus a success fee of no more than 25% of the damages awarded. In the US, a no win no fee solicitor takes a percentage of usually 35-40% of the damages awarded in favour of their client. This is a powerful incentive for the US solicitor to achieve the desired outcome, often resulting in excessive investigation work, which leads to an increase in both time frames and costs.
• In addition to federal courts and laws, the US is made up of 50 separate states, each is a separate legal jurisdiction with its own courts and laws. Claimants can often capitalise on these differences by trying to have their case heard in the state most likely to give them a favourable judgment. As many cases in the US are held before juries, state demographics and even varying political opinions may be seen to influence an outcome.
• It is more common in the US for damages exceeding compensation to be awarded to punish the defendant.
With the above in mind, contractual terms which are subject to a US court of law can be heavily weighted in the US employers’ favour.
These contractual terms often impose non-negotiable hold harmless agreements/waivers of subrogation, or the like, in favor of the US employer. Agreeing to free the employing party of all responsibility of liability leaves the other contracting party at an extreme disadvantage. These agreed obligations generally fall outside the scope of coverage provided by a UK insurance policy, which can result in the declinature of coverage, unless specifically agreed to by the insurer.
To add to confusion, the US frequently use different terminology to the UK to describe elements of insurance coverage and there are certain forms of coverage which are more specifically associated to the US. Requirements for Umbrella Liability, Crime/Fidelity Bond, Automobile Liability or Contingent Motor Liability, Technology Errors & Omissions, Cyber-risk and Network Security, are to name but a few.
Furthermore, there can also be key differences to the coverage provided in the US. Such as the differences between Employers’ Liability and Workers Compensation :
• Employers’ Liability protects the employer against compensation claims from an employee as a result of the employers negligence.
• Workers Compensation provides the cost of medical expenses and lost wages to the employee in exchange for the waiver of their right to sue the employer for negligence.
And the differences between Public Liability and Commercial General Liability :
• Public Liability provides cover for third party bodily injury and property damage claims
• Commercial General Liability can provide cover for advertising injuries (such as slander, libel, misappropriation, copyright and trademark infringement) and products Liability, as well as the public liability covers.
Here at Macbeth we offer insurance solutions which provide answers to all of the above.