Insuring a Client’s Own Legal Costs: A Middle Ground Between Self-Funding and Litigation Funding
For many commercial clients, the decision to litigate is not constrained by cashflow. They have the resources to instruct experienced counsel and pursue complex disputes properly. What often gives them pause is something more subtle, but no less significant: the prospect of spending very large sums on legal fees with no guarantee of recovery.
In high-value commercial disputes, legal costs can quickly reach seven figures. Even where the merits are strong, boards and general counsel are increasingly uncomfortable with the idea that those fees may be entirely irrecoverable if the case does not succeed. The question is no longer can we fund this? but how much risk are we prepared to carry?
Traditionally, clients have been presented with a fairly stark choice. They either self-fund and accept full downside risk on fees, or they transfer that risk almost entirely by using litigation funding, often at the cost of giving up a significant share of the upside if the case is successful.
There is, however, a third option that is gaining traction: insurance designed to protect a client’s own legal costs.
What Own-Side Fee Insurance Actually Does
Own-side fee insurance allows a client to insure all or part of their legal spend on a case. The client continues to pay fees in the ordinary course, but if the claim ultimately fails, the policy responds by reimbursing the insured costs, subject to the agreed terms.
This is not a substitute for funding. No capital is advanced and the insurer does not participate in the proceeds of a successful claim. The value lies squarely in managing downside risk.
For clients who are well capitalised but risk-averse, this distinction matters.
Why Sophisticated Commercial Clients Are Paying Attention
For the right case, own-side fee insurance can materially change how litigation risk is assessed internally.
It allows clients to:
Cap their potential loss on legal fees,
Retain full control over strategy and settlement decisions, and
Preserve the upside of a successful outcome without sharing proceeds with a funder.
From a governance and balance-sheet perspective, this can be far easier to justify than an open-ended litigation budget. The client is not betting the entire fee spend on a single outcome; they are paying a premium (which may be deferred and contingent upon success) to convert an uncertain exposure into a defined risk. That is often a far more palatable proposition for investment committees and boards.
Comparing Insurance and Funding in Practice
Litigation funding continues to play an important role, particularly where clients genuinely cannot or do not wish to deploy capital into a dispute. For those clients, transferring both risk and cost makes sense.
For clients who can self-fund, the economics are often less attractive. Funding typically involves repayment of the funder’s capital plus a success fee in the form of a return multiple or percentage of the proceeds (dependent on the jurisdictions and legality of such arrangements), which can substantially reduce net recoveries. Where the primary concern is not liquidity but the risk of wasted fees, that trade-off of litigation funding can feel disproportionate.
Own-side fee insurance sits between these two models. The client bears the cost of fees as the case progresses but protects itself against the downside. If the case succeeds, there is no funder to repay and in the vast majority of cases - a far smaller success fee (in the form of an insurance premium) to erode the recovery.
Why This Is Relevant for Law Firms
From a law firm’s perspective, this type of insurance can be an effective tool in addressing client hesitation at an early stage. It can help unlock claims that might otherwise stall once budgets are scrutinised, or where decision-makers are uncomfortable with the all-or-nothing nature of self-funding.
It can also sit alongside a range of fee arrangements, including blended rates, capped fees, or partial contingency structures, without changing how the case is run day-to-day. That said, these policies are highly bespoke. Availability, pricing and scope of cover depend on factors such as the merits, jurisdiction, procedural posture, budget discipline and counsel track record. Speaking to an experienced broker can help lawyers gauge the availability of insurance for a particular case and ensure they are presenting their client with the most comprehensive options for financing legal fees.
The Importance of Specialist Broking
Unlike conventional insurance products, litigation risk insurance is underwritten on a case-by-case basis. Appetite varies significantly between insurers, and small differences in structure can have a meaningful impact on both pricing and coverage.
This is where specialist brokers like TheJudge, add value. We understand how to present a case to the market, which insurers are active for particular risk profiles, and how to structure cover that aligns with both client objectives and litigation strategy.
For firms advising sophisticated commercial clients, involving a broker early can often expand the range of options available and avoid pursuing structures that are unlikely to be viable.
A More Nuanced Approach to Litigation Risk
As litigation costs continue to rise and clients become more disciplined about capital allocation, insuring legal fees is becoming a more mainstream part of the risk-management conversation. It will not replace litigation funding, and it will not suit every case. But for clients who are willing to fund their disputes yet unwilling to leave their legal spend entirely at risk, it offers a pragmatic and increasingly well-understood alternative.
In many cases, the difference between proceeding and walking away is not the strength of the claim, but the ability to manage the financial risks around it.