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Maximizing Claimant Success: Harnessing the Synergy of Litigation Funding and Litigation Insurance

June 8, 2023

Maximizing Claimant Success: Harnessing the Synergy of Litigation Funding and Litigation Insurance

“The emergence of legal insurance products has been a game changer in allowing both clients and law firms to lock in judgments, ring fence potentially deleterious outcomes, and provide for certainty where uncertainty used to be the rule.” – Ross Weiner, Legal Director at Certum Group  Uncertainties abound in today’s complex legal landscape, leaving individuals and businesses vulnerable to the high costs associated with legal disputes. A pair of innovative solutions–litigation funding and litigation insurance–have emerged as powerful tools that, when utilized in tandem, can offer peace of mind to those involved in legal proceedings. In this article, we delve into the benefits inherent in synergizing these two forms of financial assistance, exploring the various types of litigation insurance, the individuals and entities that benefit from these products, and the numerous advantages they bring to the table.  Types of Litigation Insurance Products Below are popular forms of litigation insurance: 
  • After-the-Event (ATE) Insurance: ATE insurance policies are designed to protect litigants against the opposing side’s costs and expenses, should the claimants fail to win their case. It is typically purchased by plaintiffs, though some insurers do issue ATE insurance to defendants. These policies typically cover adverse costs, including the opponent’s legal fees and disbursements. ATE insurance is purchased after the event which prompts the claim, but before the legal proceeding initiates (the closer to the start of the proceeding, typically the more expensive ATE insurance becomes). As ATE insurance protects against an adverse costs award, it is not applicable in the United States, which does not have a cost-shifting regime in place (except in extremely rare circumstances). 
  • Before-the-Event (BTE) Insurance: BTE insurance, also known as legal expense insurance, offers coverage for potential legal costs before a dispute arises. This product provides coverage for legal expenses in various scenarios, such as personal injury claims or contract disputes. 
  • Judgement Preservation Insurance (JPI): JPI is exactly as it sounds–insurance that protects a claim or group of claims which have already received judgements. JPI is very straightforward, and essentially meant to be a math problem: If your judgment is X, and you receive Y, the insurer will cover the difference or a portion thereof. As such, documentation is minimal, with fraudulent activity being the primary exclusion inserted into the agreement.  According to Stephen Kyriacou, Jr., Managing Director and Senior Lawyer at Aon: “Judgment preservation insurance can be used for more than simply mitigating appellate risk. Judgment holders have used it to accelerate the recognition of judgment-related gains in their earnings, to monetize judgments while appeals are still pending, and even to convert more expensive unsecured debt into less expensive debt secured by the policy, since the policy effectively guarantees a minimum recovery so long as there is no collection or enforcement risk associated with the judgment.”
  • Litigation Funding Insurance: Litigation funding insurance is a specialized form of coverage designed to protect litigation funders, who provide financial support to claimants in exchange for a share of the proceeds, if the case is successful. This insurance safeguards funders against the risk of losing their investment in the event of an unsuccessful outcome. It provides critical protection against adverse cost orders and helps to minimize the financial risks associated with funding litigation. Stephen Kyriacou explains: “It has been a years-long challenge persuading certain insurers to consider insuring litigation finance-related risks, but we’ve seen recently that insurers have become much more willing to consider high-quality risks from funders when all parties work together to creatively structure coverage and properly align interests and incentives. As more insurers continue to come around to the idea of insuring funders over the coming years, the litigation and contingent risk insurance market will continue to grow, and even more value-creating solutions will become available to litigation finance firms.”
  • Portfolio Insurance: Portfolio insurance, also known as litigation risk portfolio insurance, is a comprehensive solution that covers multiple litigation cases within a portfolio. This type of insurance allows law firms, corporations, or litigation finance companies to spread the risk across a range of cases, reducing their exposure to any individual matter. Portfolio insurance offers cost predictability and stability, enabling stakeholders to manage their litigation risks more effectively and allocate resources strategically.
There have been other ancillary uses of insurance, such as when one firm looks to purchase the docket of another firm’s cases, or to insure a portfolio of IPs that have an associated value. As the Insurance and Litigation Funding industries continue to become intertwined, expect more bespoke products to emerge.   Users of Litigation Insurance Products There are three typical users of litigation insurance products: 
  • Individual Litigants: Individuals involved in legal disputes, such as personal injury claims or family law matters, can benefit from litigation insurance products. ATE and BTE insurance provide financial protection, enabling individuals who seek justice without the fear of exorbitant legal expenses.
  • Businesses and Corporations: Litigation can pose significant financial risks for businesses and corporations, diverting resources from core operations. Litigation insurance products help shield companies from the potentially crippling costs associated with commercial disputes, professional negligence claims, or intellectual property conflicts.
  • Law Firms: Law firms can also benefit from litigation insurance products. By offering these products to their clients, law firms enhance their value proposition, differentiate themselves in the market, and provide an additional layer of protection to their clients.
Benefits of Litigation Insurance Products The benefits of utilizing litigation insurance are clear-cut: 
  • Cost Mitigation: Litigation insurance products alleviate the financial burden associated with legal disputes. They cover legal costs, including solicitor fees, expert witness expenses, court fees, and opponent’s costs, reducing the financial risks for litigants and providing access to justice for those who might not have the means otherwise.
  • Risk Management: Litigation is inherently uncertain, with outcomes dependent on various factors. Litigation insurance acts as a risk management tool, providing litigants with the confidence to pursue their case knowing that their financial interests are protected. It enables litigants to make informed decisions based on the merits of their case rather than financial constraints. 
  • Enhanced Negotiation Power: Litigation insurance empowers litigants during settlement negotiations. With insurance coverage in place, litigants can approach negotiations from a position of strength, knowing that they have the financial resources to endure protracted litigation. This can lead to more favorable settlement outcomes and increased bargaining power.
  • Access to Justice: Perhaps one of the most significant benefits of litigation insurance is its role in ensuring access to justice for individuals and businesses. By removing financial barriers, these products level the playing field and enable litigants to pursue their legal rights, even against well-funded opponents.
Litigation funders understand the ‘access to justice’ problem quite well. Litigation insurance further contributes to the democratization of our legal system by ensuring that even if the claim is unsuccessful, claimants are protected from the potentially crippling costs of litigation. This assurance encourages claimants who may be otherwise deterred by the financial risks associated with litigation to pursue their claims with confidence. Consequently, the collective impact of litigation funding and insurance is an increased participation of claimants, a broader range of cases being pursued, and a more inclusive legal system. As Rebecca Berrebi, Founder and CEO of Avenue 33 points out, “The increased availability of insurance has enhanced the options available to claimants and law firms when it comes to protecting the downside of litigation. Only time will tell whether or not the litigation-focused products offerings will remain cost-effective additives to litigation finance.” Litigation Funding & Litigation Insurance Litigation insurance products have emerged as valuable tools in the legal landscape, offering financial protection and peace of mind to those navigating the complexities of litigation. Whether individuals seeking justice, businesses guarding against commercial risks, or law firms enhancing their service offerings, litigation insurance provides a range of benefits.  Similarly, litigation funding affords plaintiffs the opportunity to see their case to fruition, when there might otherwise be no avenue for remuneration. By combining litigation funding and litigation insurance, claimants gain access to a tailored financial solution that meets their specific needs. Each claim has unique financial requirements, and the flexibility of these tools allows claimants to structure a financial package that aligns with their case’s dynamics. This synergy offers claimants the freedom to allocate capital as required, covering legal costs, expert fees, and other case-related expenses while safeguarding against the risk of adverse costs. As the demand for these products continues to grow, they will mature into an integral part of the litigation landscape, empowering litigants and transforming the dynamics of legal proceedings for years to come. According to Boris Ziser, Partner and Co-Head of Finance and Derivatives at Schulte Roth and Zabel: “The growth of insurance products for the litigation funding space can be a real game changer, impacting not only the cost of capital, but expanding the universe of investors able to add this sector to their portfolios.” By integrating these two solutions, claimants can significantly enhance their prospects for success while reducing financial risks. This harmonious approach not only levels the playing field between claimants and well-resourced opponents, but also promotes a fairer and more accessible legal system.
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Commercial Deals

Nera Capital Launches $50M Fund to Target Secondary Litigation Market

By John Freund |

Dublin-based litigation funder Nera Capital has unveiled a new $50 million fund aimed squarely at secondary market transactions, signaling the firm’s strategic expansion beyond primary litigation funding. With more than $160 million already returned to investors over its 15-year track record, Nera’s latest move underscores its ambition to capitalize on the growing appetite for mature legal assets.

A press release from Nera Capital details how the fund will be used to acquire and sell existing funded positions, enabling Nera to work closely with other funders, claimants, and institutional investors across the U.S. and Europe. This formal entry into the secondary market marks a significant milestone in Nera’s evolution, with the firm positioning itself as both a buyer and seller of litigation claims—leveraging its underwriting expertise to identify opportunities for swift resolution and collaborative portfolio growth.

Director Aisling Byrne noted that the shift reflects not only the increasing sophistication of the litigation finance space, but also a desire to inject flexibility and value into the ecosystem. The secondary market, she said, complements Nera’s core business by allowing strategic co-investment and fostering greater efficiency among experienced funders. Importantly, the fund also opens the door for outside investors seeking litigation finance exposure without the complexities of case origination.

Backed by what the firm describes as “sophisticated investors,” the fund will support ongoing transactions and new deals throughout the UK and Europe over the next 12 months.

The move highlights an emerging trend in litigation finance: the maturation of the secondary market as a credible, liquid, and increasingly vital component of the funding landscape. As more funders diversify into this space, questions remain about valuation methodologies, transparency, and the long-term implications of a robust secondary trading environment.

Commercial Deals

Litigium Capital Partners with Morris Law for Nordic Litigation Funding Push

By John Freund |

In a move poised to reshape dispute financing in the Nordic region, Morris Law has entered into a collaboration agreement with Stockholm-based funder Litigium Capital. The deal will see Litigium Capital finance a portfolio of disputes handled by Morris Law under full or partial contingency fee arrangements. The strategic partnership marks a significant step toward broader adoption of success-based billing in the region, while also easing litigation cost pressures for clients.

A press release from Morris Law confirms that the agreement, effective immediately, enables Morris Law clients to share the financial risks of litigation with both their counsel and the funder. Under the terms, Litigium Capital receives a portion of Morris Law’s success fees upon favorable case outcomes.

Notably, the agreement includes strong safeguards. with no client information will be disclosed to Litigium without explicit consent, and control over litigation strategy remains solely with the client. Both parties also adhere to strict codes of conduct. Morris Law follows AGRD Partners’ guidelines, while Litigium Capital is governed by the European Litigation Funder’s Association (ELFA), which sets confidentiality and conflict management standards.

Morris Law CEO Martin Taranger, who leads the first AGRD firm to embrace this model, underscored the alignment of interests that fee-sharing creates. Litigium Capital’s CEO, Thony Lindström Härdin, called the partnership a milestone in the region’s shift from traditional billing to more flexible, client-friendly funding models.

This partnership raises compelling questions for legal funders eyeing the Nordic market. As client demand for alternative billing rises, will other regional firms adopt similar models? With Morris Law and Litigium Capital setting a precedent, the Nordics could emerge as a new frontier for portfolio litigation funding.

Commercial

Harris Pogust on What Not to Do with Half a Billion Dollars

By John Freund |

Veteran mass tort attorney Harris Pogust is offering a cautionary tale to the litigation finance community, reflecting on the collapse of his former firm, Pogust Goodhead, after an eye-popping $500 million investment from Gramercy Funds Management. Now serving as a senior adviser at Bryant Park Capital, Pogust is urging funders to rethink how capital is deployed—and monitored—when backing law firms.

An article in Bloomberg Law captures Pogust’s retrospective on the 2023 mega-funding round, which at the time marked one of the largest single infusions into a plaintiff-side law firm. Despite the capital, Pogust Goodhead faltered under internal investigations and allegations of lavish spending, ultimately surrendering asset claims to Gramercy tied to the full $617 million value of the funding arrangement. Pogust bluntly warned that, absent proper oversight, handing a large check to a law firm can quickly devolve into what he described as “buy a Maserati and have fun,” with firms burning through capital without accountability.

In his current role, Pogust is advocating for a more hands-on model where funders act more like partners than passive financiers. He supports collaborative budgeting, ongoing financial oversight, and stronger alignment on outcomes between funders and firms. He also pushed back against calls for heightened regulation or taxation of litigation funders, suggesting that current legislative efforts unfairly target the industry.

For litigation funders, Pogust’s experience offers a timely reminder of the risks that accompany rapid deployment of capital without guardrails. As the size and complexity of funding deals continue to grow, the industry may need to adopt stricter governance standards, enhance operational due diligence, and establish frameworks that ensure discipline in how law firms deploy capital. Pogust’s remarks serve as both a warning and a blueprint for what responsible litigation funding should look like going forward.