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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

Loopa Finance Appoints Raquel Assis and Roberto Gassmann as Investment Managers

Loopa Finance, the litigation and arbitration funder formerly known as Qanlex, has added two Investment Managers to support its expansion across Brazil, Chile, Europe and the United Kingdom.

According to a press release from Loopa Finance, Raquel Assis will be based in São Paulo and focus on consolidating the firm's growth in Brazil, one of its key markets. Roberto Gassmann, a Chilean-qualified lawyer based in London, will work to strengthen Loopa's presence in Europe and the UK while supporting its development in Chile and other Latin American markets.

Assis previously worked at Demarest Advogados on high-value civil litigation and international arbitration, including matters handled alongside Quinn Emanuel. She later joined Lass Legal Capital as an Investment Associate, where she assessed and structured nine-figure investments across Latin American jurisdictions.

Gassmann brings more than seven years of experience in complex litigation and international disputes. Most recently at Baker Botts in London, he worked on investment treaty and commercial arbitrations under ICSID, UNCITRAL, ICC and LCIA rules, covering mining, energy, oil and gas, infrastructure and construction disputes. He earlier practised at Chilean firms Albagli Zaliasnik and Balmaceda, Cox & Piña Abogados.

"Every investment decision we make begins with a thorough understanding of the legal merits, risks and commercial realities behind a dispute," said Fernando Folgueiro, Co-Founder and Managing Partner of Loopa Finance. He added that the two appointees will strengthen the firm's ability to evaluate complex cases and build closer relationships with law firms and businesses across its markets.

Loopa operates with its own capital on a non-recourse basis, funding litigation and arbitration expenses, advancing against expected recoveries, and offering portfolio, law firm and class action funding, as well as legal costs insurance. The firm recently closed its $70 million Fund III.

Commercial

Samil PwC and Lithic Equity Partners Sign MOU on Third-Party Funding in Korea

Samil PwC has signed a memorandum of understanding with dispute funding advisory Lithic Equity Partners to build out joint capability in international disputes and third-party litigation funding for Korean companies.

As reported by Herald Business, Lithic Equity Partners announced the agreement on 2 November, with Samil PwC publicising it the following day. Lithic, an Asia-Pacific international dispute funding advisory, is led by chief executive Moon Jin-seung. Samil PwC is led by chief executive Yoon Hoon-soo.

The two firms have divided the work along their respective specialisms. Samil PwC will handle quantum and damages assessment, expert witness testimony, eDiscovery, accounting and financial analysis, valuation, forensics and tax. Lithic will assess the economic viability and funding suitability of claims, prepare dispute budgets, structure third-party funding arrangements, supply intelligence on the global funder market, and compare and negotiate funding terms.

The parties also plan joint seminars, webinars, forums and conferences, along with knowledge exchange and published research. The stated aim is to help Korean companies respond strategically as cross-border disputes grow in volume and complexity.

Hong Jun-ki, who heads Samil's audit division, said damages assessment and accounting and financial analysis are becoming more important as disputes grow more complex. Moon described third-party funding as a non-recourse financial instrument rather than merely a means of covering costs.

The tie-up is a notable signal for funding in Korea, where third-party funding remains at an early stage of adoption. Pairing a Big Four accounting practice's quantum and forensic capability with a dedicated funding advisory gives Korean claimants a domestic route to structuring funded international claims.

Commercial

New Zealand High Court Refuses Opt-Out Class Action Over Northland Outage

The High Court of New Zealand has declined to allow an Omni Bridgeway-funded claim against Transpower and contractor Omexom to proceed on an opt-out basis, finding the proposed class of up to 24,000 businesses lacked sufficient common issues.

As reported by NZ Lawyer, the judgment in *Skibo Limited v Transpower New Zealand Limited* [2026] NZHC 3275 was released on 21 October. The claim arises from the June 2024 collapse of a transmission pylon at Glorit, near Wellsford, after an unsupervised Omexom contractor removed all the nuts from three of the tower's four legs during routine maintenance. Roughly 180,000 people and 20,000 businesses lost power, some for days.

The court held that the duty of care question could only be answered with "it depends," following the Court of Appeal's approach in the cladding class action, and warned of an evidentiary vacuum beyond the two named plaintiffs. Large electricity users had bespoke supply arrangements and had taken differing protective steps, including insurance and backup generators. An adverse finding on duty would bind class members who had not opted out and who might have stronger claims, and the two named businesses were not sufficiently representative. The risk that the case would not proceed at all without an opt-out order could not overcome the absence of common issues. The court invited the plaintiffs to recast the claim or run it on an opt-in basis.

The claim is run by Lee Salmon Long and Piper Alderman on a no-win-no-fee basis with Omni Bridgeway funding. Losses have been estimated at NZ$60m by Infometrics and NZ$80m by the Northland Chamber of Commerce. LeeSalmonLong partner David Bullock has said the defendants' NZ$1m regional resilience fund was unlikely to cover actual losses.