This article originally appeared in Bloomberg Law.
With any significant trial court judgment, there is always a risk that an appellate court will reverse (in whole or in part) or reduce a damages award. Judgment preservation insurance (JPI) allows plaintiffs who prevailed at the trial court to insure all or part of a damage award while an appeal is pending.
It is axiomatic that the wheels of justice move slowly. An appeal from a favorable legal judgment can take many years to resolve. Indeed, in some circumstances, the delay is the point. Transforming a legal skirmish into a war of attrition can cause a plaintiff to cry uncle, opting to settle the matter while leaving money on the table. But JPI can change that.
Put simply, JPI is a targeted way to ring-fence appellate risk while allowing companies with a favorable judgment to immediately leverage the financial benefits of the award. JPI can be used in the context of summary judgment awards, trial verdicts, and arbitration wins. With JPI, plaintiffs who prevail at the trial court level can obtain immediate protection of judgments that are threatened with reversal or reduction in damages on appeal. For corporate plaintiffs, JPI may provide additional final statement benefits.
What is Judgment Preservation Insurance?
JPI is a form of insurance that guarantees a prevailing plaintiff will receive all or part of the trial court’s judgment regardless of what happens to the judgment on appeal, or, in some cases, after a retrial. Generally, JPI is concerned only with final judgments. There can be no loss unless and until the judgment is final and there is no longer any chance of further appeal.
Essentially, JPI is appellate risk insurance—a certain way to “neutralize” the risks associated with appeal. JPI can be obtained by either a party to the litigation or a litigation funder looking to lock in a certain level of return. Depending on the amount of the policy, JPI indemnifies the policy holder for some or all of a judgment. Indeed, it may insure all of the judgment, or it may be targeted at a specific legal issue that is challenged on appeal, such as attorneys’ fees or statutory damages.