Litigation insurance is used to de-risk a negative outcome to litigation in a business.
Typically, the policy will cover either (i) the total financial liability should the case be lost or (ii) the catastrophe scenario sitting over a more likely (uninsured) financial outcome.
Potential or ongoing litigation within a business can be difficult to account for from an M&A perspective.
- As a buyer you will need to assign a financial value to the potential downside post completion – this can be very difficult to do accurately.
- As a seller, the existence of the matter could put off potential buyers, delay an exit or burden you with a long and unwanted period of potential indemnity.
Litigation insurance allows parties to apply a precise value to the uncertain outcome of litigation within a business and take the issue off the negotiation table.
Please contact us if you require more details about litigation insurance.