For over 17 years, we have been at the forefront of this highly specialized sector in European markets and through TheJudge Americas LLC, we bring our expertise and litigation insurance solutions (backed by major international insurers) to the US legal market.
While a new concept to many US businesses, Litigation Insurance has been actively used in thousands of commercial cases in Europe over the past decade. It is the ideal tool for clients who wish to self-finance their attorney fees and/or out of pocket costs and has the potential to fundamentally alter how US corporate enterprises manage their litigation and arbitration budgets going forward.
Attorney Fee Insurance or Litigation Insurance is a policy taken out by a plaintiff to provide an indemnity for the fees and/or out of pocket costs they incur when pursuing a commercial dispute (litigation or arbitration). If the case is unsuccessful, the insurer reimburses the plaintiff for the insured legal fees and expenses up to the agreed budget. This can help in-house counsel to manage their legal budget and avoid any unexpected surprises.
The premium for Attorney Fee Insurance is often fully contingent upon success, but typically costs less than one third of the return charged by litigation funders, which is a key differential that attorneys need to be aware of when advising their clients on potential litigation finance options. It also means insurers can consider matters where the economics (i.e. the ratio of likely damages to the litigation budget) would not be viable for traditional litigation finance.
While Attorney Fee Insurance can be used in isolation, it can also work alongside a litigation finance arrangement. For example, an insurer might cover the attorney fees in parallel to a litigation finance company funding the out of pocket costs.
Unlike third party finance companies who will often only consider claims in the tens of millions or above, insurers are keen to have a wider book spread, which means they will consider cases where the legal fees budget are as low as $200,000 through to multi-million dollar budgets.
Litigation insurance premiums can potentially be structured in several different ways, depending upon the scenario, case economics and the client’s preferences.
Many of our clients elect to structure their litigation policies on a deferred and contingent upon success basis. A contingent premium means the insurer is only paid if the case is successful. If the case is unsuccessful the insurer receives no premium and is liable to pay a claim.
While applications for insurance are generally made at the outset of the case, it is possible to secure cover at a more advanced stage in the proceedings, and with the potential to retrospectively insure fees and expenses already incurred. This is significant, as even corporate claimants can experience ‘litigation fatigue’ or ‘fee fatigue’, particularly in cases which may have run on longer than originally envisaged or gone over budget.
Increasingly, US contract dispute resolution clauses are incorporating fee shifting (adverse costs) provisions in the event of a dispute arising between the parties. Arbitrators are also increasingly awarding costs against the losing party in international arbitrations.
In addition to arranging Litigation Finance and/or Attorney Fees Insurance, our team specializes in the placements of Fee Shifting (Adverse Costs) Insurance. This covers the policyholder’s potential liability for the opponent’s fees and costs if the case is lost and a fee-shifting award is made against the plaintiff. This insurance provides a piece of mind and drastically alters the cost / benefit analysis when considering pursuing a meritorious claim.
Cover is purchased based on the estimated adverse cost exposure. A variety of options exist in terms of the premium payment, including fully deferred/contingent upon success premiums. This means the insurer only receives a premium if the case is successful. Under this premium model, if the case loses the insurer receives no premium and is liable to pay a claim up to the limit of cover.
We are experts in providing solutions for clients facing potential security for costs applications. There are many potential ways in which security for costs issues can be addressed, including specific financial instruments. Please contact us to discuss your requirements.
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