Levene maintains that subprime claims are still "within expectations"

Businesses could be facing a future liability crisis if they do not face up to growing litigation issues, Lloyd's warned today.

In a new report 'Directors in the Dock - is business facing a liability crisis?’ published by Lloyd’s in association with the Economist Intelligence Unit, businesses are urged to anticipate and prepare for future liability risks.

Lloyd’s research has shown that boards everywhere are feeling increasingly challenged by litigation and are spending more time (13%) and money addressing these issues.

The survey found that product recalls have risen 50% in Europe in the past year, while trading environments are becoming ever more complex and new legislation such as the Corporate Manslaughter Act comes into effect. As a result, the report said, the price of products and services is increasing and innovation and risk taking is being stifled.

Though the likelihood of sub-prime related claims is on the rise, Lloyd's chairman Lord Levene said they were yet to exceed expectations. He said: "The case hasn’t changed. We don't currently expect the number of claims to cause any undue concern this year."

The report revealed that there is a growing concern among business leaders about the rise of a US style compensation culture in Europe and Asia and the liability fallout from the current instability in the financial markets.

Levene added: "Litigation is a leveller of modern businesses. No matter what their size, location or industry, all businesses are facing increasing liability risks. Product recalls are now a daily occurrence, rising 50% in Europe alone in the last year. Shareholder activism is on the rise and a complex operating environment and new legislation serves to increase risks further."

He added: "An increase in litigation and the fear of potential liability issues is impacting customers through a rise in the cost of products and services and also stifling risk taking amongst boards who are missing out on new opportunities.

"There are clear benefits to thinking differently about the liabilities they face and developing the right culture and structure to manage them more effectively."

The report included a global survey of over 180 board-level executives, supplemented by in-depth interviews.

Key findings include:

Two thirds of European business leaders expect to spend more time on litigation-related issues over the next three years;

39% expect the growing risk of litigation to increase the cost of their products and services and stifle risk taking over the next three years ;

Over half of all business leaders believe that a US-style compensation culture is spreading in Europe and Asia;

Two in three business leaders believe that the scale of liability claims arising from the credit crunch will exceed those arising from the Dotcom crash; and

Boards most fear future liability issues arising from advances in technology; environmental damage; and corporate governance.

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