Understanding Litigation Cost Insurance for Law Firms by Karolina Sikorska
For contingency fee law firms, investing in a case is a mandatory part of the business. Expert witnesses, depositions, medical records, accident reconstruction, trial exhibits, and other litigation expenses are often necessary to maximize outcomes for clients. The challenge is that those costs are advanced long before a recovery is ever realized, and there is no guarantee of success.
While these investments are fundamental to the contingency fee model, they also create financial exposure. When a case does not result in a recovery, the firm typically absorbs the full cost of those advanced expenses.
Litigation cost insurance was developed to address this challenge.
Litigation cost insurance is a risk management solution that protects law firms against the loss of advanced case expenses on covered contingency matters. In the event that a covered case is unsuccessful, the policy reimburses eligible litigation costs, helping mitigate the financial impact of the loss.
Litigation cost insurance is distinct from litigation funding. It does not provide capital to finance a case, nor does it influence litigation strategy. Rather, it serves solely as an insurance product designed to protect a firm's investment in the cases it is already pursuing. Complex matters involving medical malpractice, product liability, premises liability, catastrophic injury, mass torts, and other complex litigation often require substantial expenditures over multiple years. For many firms, the cumulative financial exposure across a portfolio of cases can be significant. By transferring a portion of that risk to an insurance carrier, firms can better manage their balance sheet while maintaining the flexibility to pursue a more complex portfolio of cases.
This type of capital protection allows attorneys to make strategic decisions based on what is necessary to achieve the best outcome for their clients, rather than being constrained by concerns about unrecoverable expenses. As plaintiff firms continue to evaluate new approaches to risk management, litigation cost insurance is an incredibly valuable and empowering tool. It enables firms to protect capital, reduce portfolio risk, and pursue complex litigation with greater financial certainty and confidence.
Historically, litigation cost insurance programs have not been structured to align with the economics and lifecycle of contingency cases. Rather than requiring an upfront payment, premiums through Redan Insurance are only due upon case resolution and may be treated as a recoverable case expense. This approach minimizes cash flow impact while providing protection throughout the life of the case.
At Redan, we believe the strongest advocacy occurs when law firms have the confidence to fully invest in their cases. Litigation cost insurance protects the capital deployed throughout the litigation process, helping firms manage risk while continuing to pursue the most exceptional result for their clients.