After the Event or Legal Expense Insurance Is the Middle Ground Discussed.
Kevin Martin, founder and CEO of Sonoma Risk Insurance Agency, has written an interesting article, aptly entitled “Leveling the Playing Field in Contract Disputes,” in the August 2010 edition of The Orange County Lawyer.
In some statistics directly relevant to this blog, he states that a quick search of reported California cases in the last year shows that more than $14 million have been awarded in the form of “loser pay” fees, with the average award being approximately $300,000. As he observes, serious money—wow (and then some)!
Mr. Martin then contrasts the English rule (loser pays) with American rule (each side bears its own fees), but indicates that contractual fee shifting provisions often convert the American rule into a loser pays situation. He then argues that there is a middle ground: ATE (After the Event Insurance) or LEI (Legal Expense Insurance) products, which emerged in the English and Welsh insurance markets. According to a recent report from the Manhattan Institute’s Marie Gryphon, ATE insurance is now purchased for three in four civil lawsuits in the British market. Mr. Martin observes that actual experience shows that this type of contract litigation insurance actually deters the filing of frivolous actions.
Now, he also discusses the fact that equivalent insurance products are available in the United States to cover attorney’s fees awarded against plaintiffs pursuant to “loser pays” provisions. Such insurance can be purchased within 60 day of the commencement of litigation and covers all attorney’s fees imposed under an adverse ruling.
Interesting option. Mr. Martin did not discuss the carriers offering this insurance or the premium structure for such coverage. If anyone has had experience or has feedback on these features of this insurance, let us know by using the feedback email listed on our home page.