Increased Attention in the Legal Community; Co-Contributor Marc Quoted in California Lawyer; Co-Contributor Mike To Speak At July 8 Century City Panel.
In our August 3 and 6, 2010 posts, we discussed contract litigation insurance (CLI), a product being offered by Sonoma Risk Insurance Agency. We described the coverage in depth in those prior posts — it is a form of insurance coverage for an adversary attorney’s fee award subject to certain conditions, certain exclusions, and underwriting qualifying standards.
We can now report that Sonoma Risk is getting more and more exposure in the legal community. Among other things, it is profiled in a November 1, 2010 article by Cynthia J. Larsen of the Orrick Law Firm and in a March 2011 article by Mike Rosen in the California Lawyer.
In the California Lawyer article, Mr. Rosen reports that 95% of Sonoma Risk’s clients, including real estate and construction companies, are based in California and have collectively bought more than $9 million in policies to cover fee awards in specific contract cases, paying one-time premiums ranging from less than $1,500 to about $230,000. The article shows why our blog exists: of the roughly 4 million contract disputes filed annually in U.S. courts, as many as 70% involve contracts with fee-shifting provisions. Co-contributor Marc is quoted as saying, “Attorney’s fees are very significant in deciding whether to go to court. It’s possible for fee-shifting provisions to greatly add to the risks of litigation, and many lawyers and clients are risk adverse.” Interestingly enough, Sonoma Risk is apparently offering new coverage in this area as litigation heats up (because its standard CLI is usually obtained at an early juncture after a lawsuit is filed), although the premiums are obviously higher when coverage is bought when things are beginning to explode in a litigation matter.
Ms. Larsen’s Orrick article concurs with co-contributor Marc’s perception that paying an adversary’s lawyers is one of the main risks worrying both plaintiffs and defendants in contract litigation. She also notes that parties will likely be asking for CLI coverage information in discovery as this form of insurance catches on, similar to the form interrogatory we have all seen relating to non-fee insurance. Mr. Larsen also makes the point that CLI coverage should be attractive to ERISA fiduciaries and bankruptcy trustees who want to protect corporate funds or the corpus of an estate from an adverse fee award, even though the fiduciaries and trustees are generally protected from personal liability by the business judgment rule.
BLOG UPCOMING EVENT–Co-contributor Mike looks like he will be speaking at a July 8 Century City panel involving a Provisors Legal Affinity Group meeting. Mr. Ames of Sonoma Risk has put together a panel of various Southern California law partners and Southern California corporate counsel, which will explore such topics as effective attorney’s fees provisions, CLI, and drafting effective attorney’s fees motion. Mike will take good notes and report back on the highlights of this meeting.