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What is judgment preservation insurance? 

Judgment preservation insurance serves as a safety net for plaintiffs who have secured favorable rulings in trial courts. This specialized insurance shields against the risk of reversal or reduction in damages or legal fees. 

By opting for judgment preservation insurance, plaintiffs can mitigate the uncertainties of appeals, ensuring they retain a significant portion of their court award. 

 

Essential insights into Judgment Preservation insurance 

While much of the focus in the realm of plaintiff (claimant) litigation risk transfer revolves around averting adverse outcomes and the consequent loss of legal fees, securing a favorable initial decision is only part of the equation—and thus, only part of the actual risk a plaintiff faces when litigating. 

The initial jubilation following a substantial monetary award can quickly dissipate when defendants challenge the decision through appeals or annulments. The prospect of prolonged uncertainty regarding the financial award, compounded by existing litigation fatigue (as it often takes years and substantial plaintiff time to get to the initial judgment), can weigh heavily on plaintiff. For corporate clients, this waiting game can compound cash flow issues, lead to investor hesitancy as well as delay mergers and acquisitions.   

Judgment Preservation Insurance or ‘appeal risk’ insurance, a niche insurance product available through TheJudge’s extensive panel of insurers, is now becoming increasingly popular as it offers a solution to mitigate the risk of losing a hard-won award and provide some financial certainty. 

 

How does appeal risk insurance function? 

A judgment preservation insurer agrees to indemnify the award holder for a predetermined portion of their damages award against the risk of reversal, whether partial or total, through an appeal or annulment. Therefore, underwriting typically occurs once the initial award is known. 

For instance: Let’s say Company X secures an $80 million award but faces an appeal that could potentially overturn the decision. In this scenario, the appeal risk insurer might agree to cover $40 million of the award value. This assurance enables the award holder to reassure its shareholders that at least $40 million of their award is safeguarded. 

If the award is completely overturned, the insurer indemnifies the insured for the full $40 million policy limit. Alternatively, if a partial reversal results in a reduced award of, say, $30 million, the insurer covers the shortfall between the final award and the coverage limit, meaning they pay the $10 million difference. 

 

How are premiums structured? 

Insurers typically charge the insured party a premium based on the maximum indemnity limit, tailored to the specifics of each case and the perceived appeal risk. 

 

Who provides appeal risks insurance? 

TheJudge collaborates exclusively with internationally recognized insurance companies boasting at least an “A-” or “excellent” financial security rating, as assessed by leading rating agencies like Standard & Poor’s and AM Best. 

 

My client has a substantial award they wish to safeguard—what coverage limits are available? 

There’s no fixed upper limit for JPI, although market conditions will drive available capacity at a given time.  Each insurer typically has a maximum level of coverage they’re comfortable extending for any single risk. Insurers may co-insure the risk in cases requiring extensive coverage to meet the desired target. TheJudge’s extensive network ensures access to covers ranging from $10 million to policies requiring $250m+ 

 

Is appeal risk insurance accessible to defendants as well as claimants? 

Potentially. While it is more straightforward to underwrite the risk of an appeal against a claimant award, in some instances, it may be feasible to arrange cover for defendants who have prevailed at first instance but face appeals from claimants. 

 

What cases are suitable for appeal risk insurance? 

Insurers’ appetites vary. Some insurers specialize in niche areas and case types, while others adopt a broader outlook. Insurers typically require confidence in the credibility and integrity of the legal system that rendered the initial award. They must also believe there’s a strong likelihood of the insured prevailing in the appeal and securing a final award exceeding the proposed coverage limit. 

Cases suitable for appeal risk insurance span various domains, including construction claims, energy disputes, securities cases, patent disputes, high-value contractual claims, and class action suits, among others. Insurers assess both litigation and arbitration cases, including investment treaty arbitrations where a respondent state seeks to annul an award. 

 

Want to read a live example of how Judgment Preservation insurance works?  Click here to read about a recent matter in the press involving significant JPI policy.

 

 

 

                                                                                                 

James Blick – Key Contact (USA)                                                                          Robert Warner  – Key Contact (UK, EU, Offshore)                                                          

James.blick@thejudgeglobal.com                                                                            Robert.Warner@thejudgeglobal.com  

Location: California                                                                                                   Location: London