Litigation Risk: Insurance and Assessment

Litigation Risk: Insurance and Assessment

Steven Schwartzapfel -Founding Partner Jun 16, 2022

For more than 35 years, Steven Schwartzapfel, the founding member of Schwartzapfel Lawyers P.C., has been one of New York’s most prominent personal injury attorneys. Steve represents clients in all types of personal injury cases. His experience, skill, and dedication have enabled Schwartzapfel Lawyers P.C. to recover hundreds of millions of dollars for their clients.

All businesses should keep the possibility of adverse litigation in mind when calculating finances, responding to public relations crises, and more. This is because, as a business grows, it becomes more vulnerable to different avenues of litigation, particularly civil litigation stemming from perceived slights and/or grievances experienced by the public.

In many cases, litigation can be expensive financially and reputationally for organizations. Litigation risk insurance is a new kind of insurance offering that may help businesses manage legal risks stemming from potential litigation actions. Furthermore, businesses can take advantage of litigation risk assessments to determine what level of insurance, if any, is worthwhile for them to have.

Not sure whether litigation risk is worthwhile for your organization? Let’s break down litigation risk insurance and assessments in detail. You can also contact Schwartzapfel Lawyers directly for more information and a free case evaluation at 1-800-966-4999.

What Is Litigation Risk Insurance?

In a nutshell, litigation risk insurance is a type of insurance designed to protect businesses from the possibility of high litigation costs. Most litigation risk insurance policies are bespoke, meaning they are custom-tailored and priced for specific business needs and projected expenses. Different policies may be designed to cover different possibilities or risks. For example, adverse judgment insurance only covers the cost of final judgments in litigation motions.

Regardless of the exact type, litigation risk insurance is meant to provide company executives with peace of mind. If they have the right insurance policy, they may be significantly protected from financial strain even if the litigation goes poorly for them.

For example, let’s say a company is sued by a consumer for product liability. The lawsuit is successful, and the court decides to award the plaintiff some millions of dollars. However, the company has litigation risk insurance.

Due to this insurance, the insurance company pays the award from the lawsuit. The protected business does not. In exchange, the protected business pays regular fees to the insurance company to remain covered.

Litigation risk insurance is not required by law. However, many companies are looking into litigation risk insurance these days to offset the risks of doing business in an increasingly interconnected, digitized world. In general, litigation risk insurance is especially worthwhile if you are at a higher risk of:

  • Having a legal action decided against you
  • Having a previously successful legal decision overturned due to an appeal

To speak with one of our litigation risk experts at no charge, call Schwartzapfel Lawyers at 1-800-966-4999. One simple phone call and we are confident that your legal footing will be surer and your understanding of things to come, as a result, much improved.

Types of Litigation Risk Insurance

There are many different types of litigation risk insurance. Overall, however, two types stand out as particularly common.

Adverse Judgment Insurance

As noted above, adverse judgment insurance is a specific type of litigation risk insurance that protects defendants, or any other intended beneficiaries, in the event that they receive an adverse judgment.

For example, if a business believes that it might lose an upcoming lawsuit, adverse judgment insurance may protect them from having to pay damages (either partially or completely). Adverse judgment insurance can be particularly worthwhile for businesses looking into mergers and acquisitions.

That’s because litigation risk is one of the largest issues with deal diligence. Many organizations, before merging or acquiring other companies, look into the possibility of adverse litigation or judgments. Litigation risk insurance of this type can help alleviate concerns and make companies more attractive for mergers or acquisitions.

Adverse judgment insurance may help potential organization buyers feel more comfortable with a purchase. Even if a potential business is at risk of litigation, if a business is protected by adverse judgment insurance, the purchasing company doesn’t have to worry about paying lots of cash in the event of an adverse judgment later down the road.

Even for outside mergers and acquisitions, adverse judgment insurance can be worthwhile. For example, adverse judgment insurance can protect businesses if well-financed plaintiffs sue them. This can, in turn, give the defending business more negotiation power so they can pursue more attractive settlement solutions.

For more on this, call Schwartzapfel Lawyers now at 1-800-966-4999.

Judgment Preservation Insurance

The second most common type of litigation risk insurance is judgment preservation insurance. This underwrites risk associated with litigation judgments being overturned or decreased during the appeals process. When protected by judgment preservation insurance, plaintiffs who succeed during trial actions can remain confident that their financial victory is insured.

Note that judgment preservation insurance typically insures companies up to a maximum somewhat below the total award. For instance, if a company is successful with a lawsuit and is awarded damages totaling $12 million, it may have judgment preservation insurance that covers it for up to $10 million in the event of a total reversal.

Judgment preservation insurance can be worthwhile in many areas, especially intellectual property litigation. For instance, imagine a scenario where an IP owner tries to gain full ownership of their IP plus damages against defendants.

The IP owner is successful, but they spent a lot of money and time to secure their litigation victory. The appeals process is still on the table, however, and they want to make sure they receive most of their award. Judgment preservation insurance provides peace of mind in this circumstance and others.

Judgment preservation insurance is especially useful for trials that have large damages. The larger the compensation award given to the plaintiff, the more incentive the defendant has to appeal the decision. Because appeals timelines often take place over several years, business owners may not want to worry about their awards during those time frames.

Even in the best-case scenarios or the most apparent open and shut verdicts, uncertainty can loom in the minds of successful plaintiffs. Judgment preservation insurance counteracts that uncertainty.

Dial 1-800-966-4999 and speak directly with a member of our award-winning team today. Alternatively, if you would prefer to firm up on litigation risk insurance first, please continue reading.

Is Litigation Risk Insurance Worthwhile?

That depends on your business, the strength of its finances, and your specific needs. For many organizations, litigation risk insurance can be extremely worthwhile, especially as they get larger and as their consumers or client numbers get higher.

Generally, the more customers or clients one has, the more potential avenues for litigation appear. If your organization has one million customers, that is one million potential people who may decide to sue your organization for valid or invalid reasons.

Furthermore, litigation risk insurance can be extremely worthwhile for companies involved in mergers and acquisitions, as broken down above. Smaller companies hoping to be acquired by larger ones can use litigation risk insurance to offset the inherent risk of purchasing them. That way, even if they are involved in litigation at the time of acquisition, the purchasing or parent company will not have to worry about paying excess litigation fees and/or damages.

If you’re not sure whether litigation risk insurance is worthwhile, you might consider a litigation risk assessment. Knowledgeable legal professionals such as Schwartzapfel Lawyers can help you determine:

  • Whether litigation risk insurance is important
  • Whether the cost of litigation risk insurance is worthwhile relative to the cost of negation damages
  • Whether there is other sound legal counsel that will be helpful during or on the run-up to a legal case
  • And more

For more information and a free case evaluation, contact us today at 1-800-966-4999.

Litigation Risk Assessments Explained

Litigation risk assessments are important tools that your business may use to determine whether litigation risk insurance is worthwhile. A litigation risk assessment is a process designed to provide business management with concise and early evaluations of the costs and potential risks associated with a specific piece of litigation, such as a defense case or a plaintiff case.

Litigation risk assessments can be formatted or tailored for specific cases or clients. Generally, though, they include these components at a bare minimum:

  • An introduction and recommendation to summarize the litigation and break down a recommendation or strategy for an optimal resolution.
  • A summary of facts, which breaks down the key facts of the case at hand.
  • The case status, which may also include anticipated discovery and motions and/or settlement discussions.
  • A legal analysis compiled by professional legal representatives. This should include the benefits and risks of obtaining judicial precedents.
  • Strengths and weaknesses of the client’s factual or legal position, such as whether the tribunal will be friendly or hostile, how competent the opposing counsel seems to be, etc.
  • The anticipated budget for legal proceedings.
  • The possible results and probabilities of those results. This can help organizations decide, for example, whether they should pursue aggressive settlements or push a case to trial. 
  • A conclusion and recommendation. The official recommendation will help companies make wise decisions regarding insurance, what course of legal action they should take, and more.

In other words, litigation risk assessments are very important for deciding the right action to take as a business executive.

Litigation risk assessments can be compiled and presented by attorneys. Generally, they are compiled by the attorneys expected to carry out future legal proceedings for the business. That’s because those attorneys have the most information about the accounts and/or clients, and will provide the most useful recommendations accordingly.

Bottom line: Litigation risk assessments can tell companies how likely it is that they will have to pay damages or awards to plaintiffs. They can also advise companies as to the likelihood of their receiving awards if they are considering future legal action against defendants.

Contact Schwartzapfel Lawyers Today

Litigation risk insurance is a new type of insurance product that major businesses should heavily consider, especially if they have encountered negative litigation results in the past. Both adverse judgment and judgment preservation insurance policies can be financially beneficial and lead to peace of mind for yourself and other executives.

However, you’ll likely want to carry out a litigation risk assessment before signing up for a new policy. Schwartzapfel Lawyers can help with this by examining the specifics of any upcoming legal action you may be facing, and then making professional recommendations based on our findings.

Additionally, we can tell you whether litigation risk insurance is worthwhile given the odds of an adverse judgment or a successful appeal claim against you. For more information and a free consultation, contact Schwartzapfel Lawyers right away at 1-800-966-4999.

Don’t wait. Protect your financial future starting today. Allow Schwartzapfel Lawyers the honor and privilege of fighting for you every step of the way.

 

Sources:

Schwartzapfel Lawyers, P.C. | Fighting For You

Emerging Trends In Litigation Risk Insurance | Insurance Journal

Litigation Risk Definition | Investopedia

Assessing your litigation risk | Courtroom Sciences

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