Contract Litigation Insurance: A Confidence Booster

Litigation has no certainty but uncertainty.  From the strategies of your opponent, to the ultimate outcome, the process of litigation is laden with events and decisions over which the participants may have little or no control, and as such the outcome cannot be accurately predicted.  

 

Even the costs and amount of attorney fees to be expended cannot be estimated with certainty.  This is the nature of litigation.  In some cases, a litigant may even be on the hook for its opponent’s attorney fees if he loses.  When a party is faced with the possibility of paying the attorney fees of the other side, the decision to commence litigation or to defend a lawsuit rather than settling is daunting, possibly to the point of total surrender.  Because attorney fees could exceed the amount of the original claim itself, this possibility can be paralyzing. 

 

Of course you don’t have to worry about any of this if your attorney has assessed your case as a “slam dunk” or a “guaranteed winner”.  Unfortunately, like unicorns and the tooth fairy, such things do not exist in the real world. 

 

Business owners, with the assistance of counsel, must realistically assess their litigation exposure and risk of loss: a sober, unvarnished review of the strengths, and yes, the weaknesses too.  Studies support this prudent approach, as statistics developed by the Bureau of Justice Statistics have shown that 33% of plaintiffs and 66% of defendants end up on the losing end of their contract disputes at trial.  Although Pennsylvania law generally requires that each party in ligation pay their own attorney fees, it is becoming increasingly common for parties to shift the risk of attorney fee costs to the other side by including an attorney fee provision in their contracts.

 

Now it is possible to insure against the possibility of paying an opponent’s attorney fees in breach of contract lawsuits by purchasing Contract Litigation insurance.  This relatively new insurance product may provide just the leverage and confidence necessary to initiate litigation to pursue claims or to defend against dubious claims rather than to capitulate under the risk of paying your opponent’s attorney fees if you lose.

 

If you are faced with litigation arising out of a contractual relationship, contact our construction group attorneys to find out more about this coverage and whether it may be appropriate for you. 

 

Thomas O. Williams is a Shareholder with Reager & Adler specializing in Commercial, Construction, and Civil Litigation; Construction Law; Debt Recovery; Alternative Dispute Resolution; Personal Injury and Employment Law.  Tom can be contacted at 717-763-1383 or TWilliams@reageradlerpc.com. 

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Harrisburg Magazine Readers' Choice 2011