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Vol. 5, Iss. 10
October 12, 2016

New Insurance Product: Coverage For Lawyers Losing Contingent Fee Cases


The insurance industry has long-offered products to protect against unique and new risks. I’m talking about real risks – not those silly policies that the media loves to talk about, that provide insurance for things like Liberace’s hands, Tom Jones’s chest hair and Michael Flatley’s legs.

The legal press recently reported that some plaintiff’s attorneys have gotten together and formed a company that offers insurance to lawyers for their costs in the event that a contingency fee case ends in a defense verdict. I was intrigued so I checked it out. Add this new offering from Level Insurance to the list of insurance products designed to protect against a unique risk.

Level Insurance’s website isn’t shy about sharing information – although I couldn’t find a sample policy to consider possible coverage issues. Here are some of the salient features.

The company’s elevator speech that appears on its website goes like this: “Level Insurance is an insurance agency created by trial lawyers for plaintiffs and their attorneys. With the introduction of Litigation Cost Protection, Level Insurance provides a solution to the inequities that typically exist in litigation. As trial lawyers, the principals of Level Insurance understand first-hand the financial risks involved in litigation as well as the immeasurable value of having a security net to mitigate risks. Level Insurance’s Litigation Cost Protection program is managed by Socius Insurance Services and underwritten by Aspen Specialty Insurance Company.”

From the company’s FAQ page:

What’s being insured?: “If your case goes to trial and loses (zero-dollar recovery). The covered case must go to trial and lose. If the case settles, for example, or is disposed of on summary judgment, there is no coverage for any costs incurred.”

What costs are covered?: “Litigation Cost Protection covers costs spent in furtherance of litigation. These cost disbursements include, for example, expert witness fees, travel expenses, court reporter fees, trial exhibit costs and all other money that you invest into the lawsuit that is spent in furtherance of it. The policy does not use qualifiers like ‘reasonable costs’ (sic) you are reimbursed for whatever you spend, period.”

What’s Not Covered?: Attorney’s fees, general overhead and/or office expenses, an opposing party’s costs or attorneys’ fees as may be awarded by the Court, and the premium paid for this policy are not covered.

What are the Limits available?: Between $3,500 and $250,000.

What is the Premium (exclusive of taxes and fees)?: 7% of the coverage limit regardless of the type of case

What if there’s an appeal?: “Your Litigation Cost Protection policy follows the case through appeal, up to policy limits. Your claim is paid after the appellate process has concluded. So, for example, if your case goes to trial and loses, and no appeal is filed, you may submit your claim for payment after the window to file an appeal has expired. If, on the other hand, an appeal is filed, you may submit your claim for payment after the appellate process concludes.”

The FAQ page has lots more information.

My take -- Of course contingency fee lawyers take an expense risk when filing actions. But very few cases reach a jury. And, in many cases, getting a small jury award or small settlement is still a “loss” – but that’s not covered here; you need a zero verdict. And a lawyer’s other big risk of taking a contingency fee case – maybe even bigger than costs -- is the opportunity cost of his or her time. That’s not insured. So will contingency fee lawyers buy Litigation Cost Protection? I have no idea. Just because an insurance policy provides utility doesn’t mean that people will buy it. Look at life insurance. The utility of it is beyond question and it’s relatively inexpensive in many cases. But only about 60% of the public has it and nearly half of them may not have enough. [http://www.bankrate.com/finance/insurance/money-pulse-0715.aspx] All in all, as I see it, the jury is out on this one.

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