Law firm litigation funding and insurance options
Litigation funding, in all its guises, is a constantly evolving sector with new products entering the market on a regular basis – some from well-established funders and insurers and others from new entrants seeking to bring innovation in order to carve a niche for themselves.
Most clients are heavily reliant upon their solicitors to advise them on funding packages and insurance for commercial disputes, and yet few solicitors are well-placed to provide the kind of up-to-date and comprehensive advice that ensures clients can make a fully informed decision.
Annecto Legal prides itself on offering a professional service to solicitors that are seeking to navigate this complex market place on behalf of their clients.
Litigation is of course risky (even in the most ‘certain’ of cases) and the risk of excessive legal costs is often what prevents clients from pursuing commercial litigation (as evidenced in Annecto Legal’s research for SMEs available below). By helping clients to mitigate financial and adverse costs risks, solicitors can, at the same time, make it more likely for clients to use their services.
Is it possible to reduce risks for clients without hugely increasing risks for your legal practice?
Annecto Legal provides solicitors with free help and guidance around retainer options, third party funding and legal expenses/ after the event insurance, to help lawyers:
- meet their professional obligations to clients;
- use the best available funding option for any case;
- ensure that cash flow is maintained, rather than just growing WIP;
- generate new business by actively promoting risk management tools to clients.
As well as one-to-one assistance, Annecto Legal can also give access to the most appropriate funding and insurance products for commercial disputes.
It may surprise many solicitors that not all funding and insurance products are the same
Annecto Legal works with the leading insurers and third party funders, as well as those innovative new entrants, to understand, develop and promote a full range of options for commercial disputes.
As a consequence of this work, solicitors can save time (and money) using this professional service to:
- quickly identify the right products for a case;
- assist with applications (the Annecto Legal application process is the most straightforward in the market);
- follow-up with insurers and funders;
- get all applications over the finishing line as quickly and efficiently as possible.
Any solicitors that have attempted to secure funding directly will immediately recognise the benefits of this kind of support, and will be able to see the time and money that it saves fee earners.
In addition to assisting with the process of funding, Annecto Legal’s unique market access also provides solicitors and their clients with market-leading products offering a range of benefits:
- sliding scale returns for funders (so clients may only give away 5% of damages in a quick settlement, but 30% of damages if the case runs to trial, with multiple stages in between);
- provides solicitors the option to share in the funder’s returns, giving lawyers access to ‘hybrid-damages based agreement (DBA)’ style returns, without the full DBA risk;
- flexibility to fund cases that don’t offer a simple cash return on successful conclusion (patent cases, for example);
- funding and insurance for cases of £50,000 upwards, not just massive damages claims;
- portfolio funding for multiple (unrelated) cases as well as one-off cases;
- disbursement funding and WIP funding;
- a speedy decision-making process with simple application procedures;
- light touch oversight in funded cases, rather than onerous reporting requirements.
Funding is obviously not the appropriate course in every case, but we know that many clients benefit from transferring risk and costs from their balance sheet, and in some cases the presence of financial backing can encourage settlement (especially when that backing is at a sensible cost to the client).
Litigation financing and insurance explained
After the event insurance (ATE Insurance)
After the event legal expenses insurance could be best thought of as similar to a ‘swap’. For either no upfront fee or a small upfront fee, the insurer takes on all of the risk of the potential adverse cost award. The client has therefore, swapped their obligation to pay the defendants in the event of a loss with the obligation to pay the insurer in the event of a win.
This is generally an attractive swap as the client is likely to be in a better financial position following a win than following a loss. Also, the payment to the insurer will only be a percentage of the adverse costs rather than the whole amount.
Third party funding agreements (TPF)
Third party funding is an arrangement in which a litigation funder with no prior connection to the dispute agrees to finance all, or a part of, the legal costs in return for a percentage of the damages if the case is successful. TPF can also be used alongside a wide range of funding options, such as ATE insurance, conditional fee agreements and damages-based agreements.
With the help of TPF litigation, you can avoid taking any financial risks at all: the funder pays for everything in return for a share of the damages. If the case fails, the funder bears all the costs – you pay nothing.
Third party litigation funding providers take on the risk of your litigation finance, freeing up your cash flow and shifting all the risk off your balance sheet.
In return for taking the risk, the funder will typically seek in the region of a fifth to a third of any damages recovered. That means you keep up to 80% of the reward, having taken none of the risk.
Why Annecto Legal?
The team at Annecto Legal are happy to take enquiries and provide guidance across all aspects of law firm litigation funding arrangements and insurance for commercial dispute resolution. We encourage solicitors to explore all options with clients, rather than allow strong cases to fall away or under-settle due to lack of funds.
Annecto Legal Ltd, 106 Kennedy Building, Murray Street, Manchester , M4 6HS
0800 612 6587