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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

Perpetual Lifts Omni Bridgeway Stake to 15.4% After Months of Buying

Perpetual Limited has increased its holding in litigation funder Omni Bridgeway to 15.403%, according to a substantial holding notice lodged with the ASX, consolidating its position as one of the funder's largest institutional shareholders.

As reported by Kalkine Media, the Form 604 shows Perpetual and its related bodies corporate now control 44,613,540 ordinary shares carrying 15.403% of voting power in Omni Bridgeway, up from 41,291,970 shares and 14.256% at the time of the previous notice in April 2026. The change in relevant interest was recorded on September 18, and company secretary Sylvie Dimarco signed the notice on September 22.

The annexure to the filing sets out a two-stage pattern of trading by Perpetual Investment Management Limited between June 12 and September 18. Perpetual was a net seller through June and July, with disposals executed via custodians Citicorp Nominees and HSBC Custody Nominees (Australia). From late July onward the direction reversed, with purchases recorded on multiple dates including August 27 and 28 and across September 15 to 18, executed through both custodians.

The accumulation comes during a period of pronounced volatility for the ASX-listed funder. Omni Bridgeway reported record FY26 commitments and investment proceeds alongside a 89% fall in net profit, and was recently dropped from the S&P Global BMI index. A sizeable institutional shareholder adding to its position against that backdrop is a notable signal for a sector where public-market sentiment has lagged operational performance.

Omni Bridgeway has not commented on the change in Perpetual's holding.

Commercial

Funder’s 20% to 25% Cut Draws Scrutiny in Macquarie Shield Class Action

A funded class action filed against Macquarie Investment Management over the collapse of the Shield Master Fund is drawing criticism from within the Australian advice industry, with questions being raised over whether litigation funding is the right route for investors who have already been partially compensated.

As reported by ifa, the action was served on September 17 on behalf of Rachelle Dessent and roughly 2,800 account holders who lost superannuation in the Shield collapse. Gordon Legal, which is running the case, alleges investors have not been fully compensated despite the $321 million Macquarie paid out last year covering total amounts invested, after the firm admitted failures related to Shield. The claim seeks the growth those savings might have achieved had they remained invested elsewhere, together with damages for distress. Netwealth was served with draft documents for a separate potential class action on September 21.

Central to the criticism is the cost of the funded route. Save Our Super advocate Melinda Kee, who told ifa that Gordon Legal approached her last year and that she "wasn't interested," pointed to the firm's own disclosure that the litigation funder is entitled to between 20% and 25% of any settlement fund if the action succeeds, with legal costs also payable from the group's award subject to court approval.

Kee argued that pursuing claims through AFCA and the Compensation Scheme of Last Resort is free and delivers compensation directly to investors. With average losses around $120,000, and lower for many Macquarie and Netwealth investors following the return of capital, she suggested many residual claims could fall within the $150,000 CSLR cap.

The case turns in part on so-called "but for" losses. Financial Services Minister Daniel Mulino recently confirmed that only actual losses will be compensated through the CSLR from July 1, 2027.

Commercial

Court of Appeal Rules Clients Cannot Force Disclosure of Secret ATE Commissions

The Court of Appeal has ruled that former clients have no mechanism under the Solicitors Act to compel their solicitors to reveal commissions earned on after-the-event insurance, even while criticising firms that refuse to answer the question as behaving unwisely.

As reported by The Law Society Gazette, the judgment in Turner v Coupland Cavendish upheld a challenge brought by the solicitors and found there is no route through a Part 18 request for further information to force disclosure in a Solicitors Act costs assessment. Lady Justice Andrews, giving the lead judgment, said there was no "shortcut" for former clients seeking information about secret commissions on ATE premiums.

Andrews nonetheless made clear her discomfort with the position. As a fiduciary, she said, a solicitor ought to tell a client about any commission if asked, and where a firm refuses there appears to be no easy or cost-effective remedy. She described the solicitors' conduct as "unattractive," "unwise" and "unedifying," and acknowledged the unfairness of requiring a client to produce evidence that a commission was paid in order to obtain the evidence needed to prove it, when that evidence sits with the solicitor. She stopped short of proposing a fix, flagging it instead for those able to change the rules or the law.

The sums at stake in the underlying matter were modest. The ATE premium on the original personal injury claim was £245, with any commission likely to be no more than £25. Andrews observed that the principal beneficiaries of a successful challenge would be those who have built an industry out of challenging solicitors' costs. The claim was led by Leeds firm JG Solicitors.

At first instance, Costs Judge Rowley refused the Part 18 request. Mr Justice Sweeting reversed that decision in the High Court, and the Court of Appeal has now restored the original position.