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Litigation Buyout Insurance
Transfer of an identified litigation liability to support a transaction or wind-down.
- A judgment or award won
- A judgment against youThis cover
- Funder capital deployed
- Law firm fees and WIP
- Security for costs
- The opponent's costs
- Disbursements
- Own legal costs
Illustrative. The exposures a dispute can put on a balance sheet. What a policy responds to is set by its wording.
What is Litigation Buyout Insurance?
Litigation Buyout Insurance is a form of litigation risk transfer that may be arranged around a liability removed from the balance sheet. Transfer of an identified litigation liability to support a transaction or wind-down. Terms, where available, are set case by case through underwriting.
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Schedule · specimen
Litigation Buyout Insurance
Not a policy. A specimen to show how this cover is structured. Cover exists only when a policy is issued, on its own wording.
- Terms
- Terms, where available, are set case by case through underwriting.
- Protects
- A liability removed from the balance sheet, depending on policy terms.
- Terms
- Limit, premium and conditions are set by underwriting on the specific risk.
Clause 1
The insured
Who it is for
Sellers, buyers and lenders in transactions where a known dispute would otherwise block or reprice the deal, and businesses winding down that need to close a liability.
Clause 2
Insuring clause
What risks can be protected
An identified litigation liability, transferred so that it no longer sits with the business or the deal.
Clause 3
Operation of cover
How it works
The insurer assumes the financial risk of the dispute, often taking over or funding the defence.
The business can then complete its transaction or wind-down without the contingent liability.
Clause 4
Underwriting
Underwriting factors
Contingent risk is priced on a legal question rather than a whole case.
Underwriters focus on the precise issue at risk (an appeal point, a liability that may crystallise, a judgment that may be reversed), the quality of the legal analysis, the size of the exposure and the time until it resolves. Independent opinions from appellate or specialist counsel are often central.
Clause 5
Proposal documents
Information required
- (a)The judgment, award or claim documents;
- (b)The grounds of appeal or the alleged liability;
- (c)Independent counsel's analysis of the specific risk;
- (d)The amount at stake and how it would be paid; and
- (e)The transaction or financing context if cover is needed to support one.
Clause 6
Limit, premium and staging
Potential structure
A single premium in exchange for assuming the liability up to a limit, with the insurer controlling or co-ordinating the defence.
Clause 7
Alternatives
Alternatives
- (a)Escrow or price adjustment;
- (b)A specific indemnity from the seller; and
- (c)Warranty and indemnity insurance where the risk is unknown rather than identified.
Clause 8
Territory
Jurisdiction notes
Contingent cover is most developed around US and English law disputes, but it follows the legal risk rather than the insured's location.
Appellate practice, the standard of review and how long an appeal takes in the relevant court all shape terms.
Specimen for explanation only. Terms, limits and exclusions are set by underwriting on each matter and by the wording issued.
Frequently asked
What is a litigation buyout?
A transaction in which an insurer assumes the financial risk of an identified dispute, so the liability no longer sits with the business or blocks a deal.
How is litigation buyout cover different from W&I insurance?
Warranty and indemnity insurance covers unknown breaches of warranties; known disputes are normally excluded. Buyout and contingent risk cover are designed for the known, identified risk.
Is Litigation Buyout Insurance available for my dispute?
Availability depends on the merits, the quantum, the costs profile and the counterparty. Every risk is assessed individually and no cover exists until a policy is issued.
Does this quote a price?
No. Pricing is a function of the specific risk and is never quoted in the abstract. Nothing on this page indicates the cost or availability of cover.
Can it be combined with litigation funding?
Frequently, yes. Funding supplies capital; insurance defines the downside. The two are often structured together.
General information only. This page is not legal, financial, investment or insurance advice. Any insurance is subject to underwriting and to the terms of the policy wording issued.