Contingent Fee Insurance

Law firms are increasingly working on a contingent basis in order to pursue cases that otherwise may not have the appropriate funding to pursue. Often, law firms will seek funding of their fees and third-party expenses from financial institutions including litigation funders. Instead of going to the funding market first, companies or law firms can look to insurance to remove the outcome risk. Just like with a litigation funder, the risk goes through an underwriting process but, this time, by insurance underwriters who specialize in creating litigation insurance solutions for known, threatened, or pending litigation. In exchange for a fixed premium, the company or law firm can obtain downside protection to prevent a total loss of expenses or work in progress (WIP) incurred in the prosecution of litigation.

Stage of Litigation

Contingent Fee Insurance can be purchased at any stage of litigation.

How It Works

• The insurer will conduct an underwrite of the risk which usually requires substantial diligence.
• Once the insurer has completed the underwrite, it will usually engage in a Q&A with the law firm (for any items that might need clarification).
• If the risk is insurable, the insurer will propose policy terms and pricing.
• A one-time premium transfers up to 100% of the risk to the insurer.

Key Benefits

• Provides certainty: regardless of what happens in the case, the law firm will recover its WIP and expenses.
• Alleviates litigation fatigue by providing a plaintiff the security it needs to continue the fight.
• Allows law firm to pursue claims they may otherwise turn down due to fear of not being able to collect sizeable fees and expenses.
• Facilitates settlement as Contingent Fee Insurance can provide the leverage needed to mitigate any notion that a cash-strapped plaintiff will settle on the cheap.