Who we help
Private Equity
Take the dispute out of the deal.
- A judgment or award won
- A judgment against you
- 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.
How can litigation insurance apply to private equity?
Contingent litigation exposure that blocks, prices or delays a transaction. Litigation insurance may be used here to convert an open-ended downside into a more defined one, depending on policy terms and subject to underwriting. Structures, where available, are arranged case by case.
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Key points
- Terms, where available, are set case by case through underwriting.
- Contingent litigation exposure that blocks, prices or delays a transaction.
- Exposure can be measured across costs, capital and judgment risk together.
- Protection, where available, is arranged around the specific decision being taken, not sold as a package.
- Jurisdiction can affect how much of the exposure is costs-driven.
The exposure
Known disputes in a target can stall a sale, depress its price or require large escrows.
Sponsors exiting a business want certainty that a contingent liability will not follow them.
What can be protected
- An identified litigation liability through buyout or contingent risk insurance
- The downside of an adverse judgment
- On the buy side, specific risks excluded from warranty and indemnity cover
How engagements usually run
Cover is typically arranged on the transaction timetable.
Underwriters work with deal counsel and litigation counsel so that cover is in place for signing or completion.
Illustrative scenario
A portfolio company faces a £40m claim that the buyer will not accept. The seller buys adverse judgment cover above £5m, allowing the deal to complete without a £40m escrow.
Figures are invented to show the mechanics. They describe no real client, matter or outcome.
Questions worth asking first
- Is the risk identified or unknown?
- Is the issue excluded from W&I cover?
- What is the deal timetable, and who will control the defence after completion?
Frequently asked
Can a known dispute be insured in an M&A deal?
Yes. Contingent risk or litigation buyout cover can ring-fence an identified dispute that warranty and indemnity insurance excludes.
Can insurance replace an escrow for a litigation risk?
Often it can reduce or replace one, by capping the loss above an agreed level so that the buyer's price or escrow requirement falls.
Does W&I insurance cover known litigation?
Generally no. Warranty and indemnity insurance excludes known issues, which is why contingent risk or buyout cover is used for identified disputes.
Who buys contingent risk insurance in a deal?
Either side: a seller to achieve a clean exit, or a buyer to protect itself without a large escrow or price reduction.
How long does it take to insure a litigation risk in a deal?
It can often be done within a transaction timetable if deal and litigation counsel provide the analysis early.
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.
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