Contract litigation insurance reduce the risk of loser pays exposure in a lawsuit
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Contract Litigation Insurance Reduce the risk of loser pays exposure in a lawsuit. INSERT AGENCY LOGO HERE. Agenda . What is the risk? Contract Litigation Insurance Scenario example Benefits How does it work? Application process. The Facts: A Real Risk.

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Contract Litigation Insurance Reduce the risk of loser pays exposure in a lawsuit

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Contract litigation insurance reduce the risk of loser pays exposure in a lawsuit

Contract Litigation InsuranceReduce the risk of loser pays exposure in a lawsuit

INSERT AGENCY LOGO HERE


Agenda

Agenda

  • What is the risk?

  • Contract Litigation Insurance

  • Scenario example

  • Benefits

  • How does it work?

  • Application process


The facts a real risk

The Facts: A Real Risk

66% OF DEFENDANTS LOSE THEIR CONTRACT CASES AT TRIAL

33% OF PLAINTIFFS LOSE THEIR CONTRACT CASES AT TRIAL

- Bureau of Justice Statistics


Contract litigation insurance

Contract Litigation Insurance

  • In the majority of contract cases, if [you / your business] lose, you are responsible for paying your adversary's attorneys’ fees – “loser pays” risk

  • This loser pays risk can arise from either a prevailing party provision in a contract or by state law

  • Contract Litigation Insurance provides coverage for the loser pays risk – the risk of paying your adversary’s attorneys’ fees


Contract litigation insurance cont

Contract Litigation Insurance (cont.)

What is a prevailing party provision?

It is a clause in a contract that says if there is a dispute between the parties the loser pays the winner’s attorneys’ fees. Prevailing party provisions are also called:

  • Fee-shifting Provisions

  • Adversary’s Attorneys’ Fees Provisions

  • Attorney’s Fees Provisions

    EXAMPLE: “In the event that a dispute arises with respect to this Agreement or any of the terms or provisions thereof, the party prevailing in such dispute shall be entitled to recover from the other party its costs, including reasonable attorneys’ fees and expenses, incurred in ascertaining such party’s rights under this Agreement, whether or not it was necessary for such party to institute suit.”


Contract litigation insurance cont1

Contract Litigation Insurance (cont.)

What is the risk from state statutes?

Certain state statues require that the winner in a contract dispute can recover their attorney’s fees from the loser - - Even without a prevailing party provision in a contract

  • EXAMPLE:“TEX CP. CODE ANN. § 38.001 : Texas Statutes - Section 38.001: RECOVERY OF ATTORNEY'S FEES - A person may recover reasonable attorney's fees from an individual or corporation, in addition to the amount of a valid claim and costs, if the claim is for: (8) an oral or written contract


Contract litigation insurance cont2

Contract Litigation Insurance (cont.)

Prevailing Party Provisions exist in many types of contracts and can influence the course of litigation. Some examples include:

  • Construction

  • Real Estate

  • Franchise

  • Employment

  • Consulting Services

  • Manufacturing

  • Leasing

    Because the majority of contracts contain a prevailing party provision, to the extent you are involved in a lawsuit, you are likely exposed to the risk of paying your adversary’s attorneys’ fees


Contract litigation scenario cont

Contract Litigation Scenario (cont.)

Business A enters into a contract with [Your Company] to provide manufacturing services.

The contract states:

  • Business A will provide manufacturing services to [Your Company] for an agreed upon fee

  • The contract will cover a defined length of time

    The contract has a prevailing party provision:

  • If a lawsuit arises out of the contract, the winner in the lawsuit will be able to recover their attorney’s fees from the losing party.


Contract litigation scenario cont1

Contract Litigation Scenario (cont.)

  • [Your Company] believes Business A has “breached” their contract and files a lawsuit against them

  • Both businesses retain legal counsel and start paying their lawyers to proceed with the lawsuit


Contract litigation scenario cont2

Contract Litigation Scenario (cont.)

If [Your Company] wins the lawsuit, Business A will have to pay [Your Company] $120,000 to cover your attorneys fees – pursuant to the prevailing party provision in the contract.


Contract litigation scenario cont3

Contract Litigation Scenario (cont.)

If Business Awins the lawsuit, [Your Company] will have to pay Business A$400,000 to cover their attorneys fees – pursuant to the prevailing party provision in the contract.


Benefits of contract litigation insurance

Benefits of Contract Litigation Insurance

  • Helps provide budget certainty – litigation is notoriously uncertain

  • Provides coverage that standard insurance policies exclude

  • Allows an attorney to prosecute / defend case without worry that client may be responsible for their adversary's attorneys’ fees

  • Improves settlement negotiating position

  • Underwritten by Zurich, a global and financially stable provider

  • No Subjectivity to Coverage

  • Affordable premiums, especially when considering the amount at risk

    PEACE OF MIND!


How does it work

How does it work?

What does the policy cover?

  • The amount of attorneys’ fees awarded (up to the policy limits) by the court to the winning (or prevailing) party

    • Payment is made after summary judgment or trial

      When can a litigant apply for coverage?

  • This is one of the only insurance policies that you may purchase at the time the “event” (litigation) occurs and up through one year from the filing date.

  • Coverage is least expensive during the early stages of litigation. However, as litigation progresses, the cost of coverage can increase and the ability to obtain coverage can decrease.


How does it work cont

How does it work (cont)?

How long does the coverage last?

  • The CLI period matches the duration of the covered litigation. When the covered litigation terminates, the contract litigation insurance policy expires.

    How is a policy triggered?

  • The insured must have lost at summary judgment or trial and their adversary found by the court to be the winning (or prevailing) party. The court must then order the policyholder to pay the prevailing party’s attorney fees.

    What is not covered?

  • Settlements, default judgments, voluntary dismissal, mediated settlements, stipulation, or cases originally filed in arbitration.


The facts

The Facts

90 % OF LAWYERS SAID THEY WOULD ADVISE CLIENTS OF INSURANCE THAT CAN MINIMIZE THEIR FINANCIAL RISK IN LITIGATION

- INSTITE Research, April 30 – May 2009


Application process

Application Process

  • Contact us at the time the lawsuit is filed or served

  • To apply:

    - Complete a simple, one page application

    - Provide a copy of underlying contract containing prevailing party

    provision

    - File-stamped copy of complaint

  • Typical turn-around time: 24 - 48 hours


Contract litigation insurance reduce the risk of loser pays exposure in a lawsuit

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