Specific Litigation Insurance

Insurance for a pending or threatened litigation is available when the pending litigation jeopardizes and extraordinary transaction and is neither a class action nor a “mass tort”. Depending upon the majority of the lawsuit, the insurance can either:

Cover the defendant;
Cover the acquirer;
Buy-out the litigation, i.e., provide limits thought to equal or exceed worst feasible outcome in exchange for a premium that may be commuted if benchmark results are achieved; or
Provide limits in excess of a retention (which retention may serve as an escrow in a pending sale of the company)

The Benefits Provided

Deal Facilitated. Often the disclosure of pending litigation is first provided as a schedule to a purchase and sale agreement that is on the eve of being signed. Potentially significant litigation that is either not insured (e.g., breach of contract claims) or underinsured may jeopardize the transaction. An underwriter that can speedily quantify the risk adds immediate value to the deal proposition.
Risk Transferred. A highly rated insurer stands behind an adverse judgment based on a policy tailored specifically to the pending litigation.
Litigation Management Services Provided. The expertise of seasoned claims management will review the litigation strategies and tactics employed by defense counsel.

The Benefits Provided

Deal Facilitated. Often the disclosure of pending litigation is first provided as a schedule to a purchase and sale agreement that is on the eve of being signed. Potentially significant litigation that is either not insured (e.g., breach of contract claims) or underinsured may jeopardize the transaction. An underwriter that can speedily quantify the risk adds immediate value to the deal proposition.
Risk Transferred. A highly rated insurer stands behind an adverse judgment based on a policy tailored specifically to the pending litigation.
Litigation Management Services Provided. The expertise of seasoned claims management will review the litigation strategies and tactics employed by defense counsel.

Submission Requirements

Name of insured (or project name) and limits sought
Copy of all pleadings filed in the action and of all orders entered in the action
If substantive motion pending, copy of motion papers (support and opposition)
Loss calculation (statement or expert report quantifying potential damages)
Chronology of key events
Purchase and Sale Agreement (or term sheet or similar documents regarding the extraordinary transaction)
Expected timetable for closing

Submission Requirements

Name of insured (or project name) and limits sought
Copy of all pleadings filed in the action and of all orders entered in the action
If substantive motion pending, copy of motion papers (support and opposition)
Loss calculation (statement or expert report quantifying potential damages)
Chronology of key events
Purchase and Sale Agreement (or term sheet or similar documents regarding the extraordinary transaction)
Expected timetable for closing