Contingent Liability & litigation insurance can turn an unpredictable situation into a known and quantifiable risk, which can enhance a company’s balance sheet and provide certainty to an uncertain outcome. Our Contingent Liability and Litigation Insurance Practice is led by a former litigator with years of experience investing and structuring litigation finance programs. We are dedicated to crafting bespoke solutions for these high-stakes exposures and leverage our team’s unrivaled breadth of experience to do so for our clients.

TRANSACTION LIABILITY

Intangible Asset & Contingent Risk

Overview

The Intangible Asset & Contingent Risk Practice of Lockton Transaction Liability has been uniquely built to harness the expertise of its leaders and their experience creating bespoke risk transfer solutions at the intersection of financing, legal risk, and insurance. The IACR team helps clients both manage and mitigate complex risks, and also monetize and optimize the use of intangible and contingent assets. Please see below for some examples of the types of solutions that the IACR team offers.

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Types of IACR Policies

JPI policies protect stakeholders against the risk that a trial court judgment could be reduced or reversed on appeal. Plaintiffs who are successful at trial can obtain a JPI policy to “lock in” the value of their favorable judgment. Optionally, the insured can then use the JPI policy to unlock the value of the award through an insurance-backed lending solution.

An adverse judgment insurance policy helps ring fence active pieces of litigation to cap a company’s exposure. Adverse judgment insurance is intended to be used for low-risk, high-severity events. The ringfencing is often for known liabilities that come up in an M&A transaction stemming from legal or regulatory risk and can be used to stand in for a litigation escrow. This type of insurance can also be used to protect a company from remote, but potentially catastrophic, litigation exposure outside of the context of an M&A deal.

Specific contingent risk policies offer risk transfer solutions for circumstances in which a particular risk is active and specifically defined. These policies utilize insurance to value known legal assets or liabilities and can be structured in ways that are customized to the organization involved and the current state of litigation. While these solutions mostly relate to insuring outcomes for active pieces of litigation, the insurance market is willing to consider various types of known risks — such as whether a certain situation might give rise to legal liability.

An IP CPI policy is a novel risk transfer solution that facilitates debt financing for growth-stage companies. By backstopping a portion of the company’s principal and interest payments to a lender, an IP CPI policy can unlock investment/funding opportunities that might not otherwise be available between debt capital providers and growth-stage borrowers.

TPI is a policy that protects against production shortfalls caused by technology failures, enabling manufacturers to issue long-term warranties and clean energy projects to secure funding, successfully start up, get built, and operate profitability. This allows lower-cost capital providers to manage aggregation risk in commercialized technologies and participate in innovative projects without applying a risk premium.

Why Lockton?

Lockton’s Transaction Liability Practice is the industry-leading group of insurance brokers who place representations and warranties insurance, tax insurance, and intangible asset and contingent risk insurance. Since the earliest days of transaction liability insurance through its eventual widespread adoption, Transaction Liability’s group of advisors has been the go-to call for deal-makers, other attorneys and corporate professionals, and anyone looking for innovative and strategic applications of insurance capital and risk transfer capacity transacting throughout the Americas. No one has advised on more transactions, which allows the team to provide clients true counsel regarding the risks they face, the ways in which they can be mitigated and the ways to address them should they come to fruition.