It’s been a while since I was last interviewed, so I’m glad I had the opportunity to discuss a very interesting development related to IP lawyers, especially lawyers and their clients, with someone who has a problem. The development I am referring to is the rapid rise of litigation-related insurance, which represents yet another step in the evolution of litigation finance as a financial sector. This week, you’ll hear from Stephen Kyriacou Jr., managing director and senior attorney in the Aon’s Litigation Risk Group, where they establish and place insurance policies for the risk of crimes. Prior to moving to Aon, Stephen spent nearly ten years as a litigation attorney at Boies, Schiller & Flexner in New York, where he represented clients from a variety of industries in domestic and international trials, appeals, and litigation in a variety of jurisdictions. .
Now to the interview. As usual, I have added a brief comment to Stephen’s answer below but I have provided his answer to my first question when he submitted it.
Gaston Kroub: For those who don’t know, how would you explain litigation risk insurance and what are the requirements for good insurance, especially in the case of IP litigation?
Stephen Kyriacou: When we talk about “litigation risk insurance,” we are talking about reducing or eliminating the financial risk associated with litigation by transferring that risk to the insurance markets. The placements we work on in Aon’s Litigation Risk G3roup often involve insuring defendants against the risk of catastrophic damages and insuring plaintiffs who win large verdicts against the risk of reversals on appeal. We also ensure minimal returns on litigation related business and the costs that companies expect from emergency litigation. We can also offer more comprehensive solutions such as legal fees in so-called “bad money” areas or for contracts that are carried out under “loss fees”, class action and “purchase” insurance, asbestos claims and other long tail legacies. liability, successor liability and fraudulent conveyance insurance, as well as judgment collection and compliance. In fact, if there is a liability-related risk that can be classified as a low-risk, high-risk event, it may not be covered by many of the insurance carriers that Aon works with.
In general, the contracts we deal with fall into two categories – one-off risks and portfolio risks. When we cover one type of insurance, the liability insurance or “AJI” works like any other insurance. If you have a claimant who wants 100 million dollars and costs 90 million dollars in a limit of more than 10 million dollars, the insurer is responsible for 10 million dollars for each claim against them when the insurers pay the full amount, up to the limit of coverage.
Often these days, we find ourselves on the side of plaintiffs, placing what we call judgment protection insurance or “JPI,” where we uphold lower court rulings or arbitration awards that have already been won by litigants. The JPI policy effectively establishes the recovery of the “floor value” in these cases, assuming that there is no collection risk associated with the defendant. JPI’s $90 million policy on a $100 million settlement will guarantee policyholders at least $90 million regardless of appeal. If the verdict is upheld, the defendant will receive $100 million from the defendant; if the claim is fully reimbursed, the insured will receive $90 million from the carrier on the policy; and if the verdict is reduced to, say, $50 million, the insurer will receive $50 million from the plaintiff plus $40 million from the carrier.
These one-size-fits-all policies are standard and pre-designed for both insureds and insured cases, and we have a lot of flexibility in terms of processing requirements. These policies do not allow insurers to cover closed cases; the insured retains decision-making power and continues to negotiate with its elected representatives. The process of setting a “floor price” for JPI policies can be very useful for judgment holders who want to monetize their judgment while an appeal is pending using a process we call “insurance-backed financing.” That’s because the insurance company takes the trust property – in my example, a judgment that can be worth anywhere from $ 0 to $ 100 million depending on what happens on appeal – and give you a fixed price – in my example, $ 90 million.
For reputational risk, we often look at the initial litigation before any claims are reduced to an award or settlement, and then establish a minimum return on the investment required to make the litigation profitable. , a final, non-trial judgment after a trial. These cases are often linked, meaning that the maximum recovery from several cases can cover the total “risk” for the insurers unless a smaller recovery has occurred. We can put these types of policies in place for investors and investors in litigation-related matters and law firms with improbable criminal records.
When it comes to what makes a good insurance policy, the outcome of a lawsuit can be difficult to predict, and that’s exactly what insurers are trying to do when they write this. First, the cases or cases covered by the insurance must be strong. And we need to demonstrate that power to insurers, which means we need adequate information on its benefits. With JPI, we can provide insurers with the entire appeal history, which makes their records easier, because they can see most or all of what the appeals team will review when deciding the case. Risks on the safety side, on the other hand, are difficult to underwrite, until they are well known, because otherwise insurers cannot know what they want to underwrite.
Encouraging the insured to seek treatment is a priority. This is not “bad insurance,” and insurers are well aware of the possibility of bad choices. It is also very important that our clients and their counsel work closely with our team at Aon to find support. Every insurance and tort insurance we build is highly collaborative, with extensive back and forth discussions and knowledge between the insurance advisors, Aon, and the underwriters.
These thoughts grow when we face IP cases, which is one of the most common cases that insurers see, especially in the defense of the insurance to retain the judgment, based on the large judgments that occurred in the area, as you wrote a few weeks ago. Many insurers do not have litigation expertise in-house, so they must rely heavily on our team at Aon and our clients’ IP lawyers to provide them with a map to write. And as you have seen recently, there are many ways to get rid of a patent case. Insurers note that the federal circuit is one of the most unpredictable appellate courts in the federal courts, and doctrines such as patent eligibility, anticipation, and obviousness, not to mention the failure of the PTAB, make it very important for IP claims to be filed. insurance policies are as robust and well documented as possible.
GK: There’s a lot to glean from Stefano’s answer, which is one of the most succinct, yet clear explanations of the current state of the game when it comes to risk insurance that I’ve seen. As I understand litigation finance, I believe it is important for IP attorneys to educate themselves on the risk insurance litigation, to ensure they are not doing their clients a disservice by failing to refer them to insurance products that will help them. they benefit from their position in ongoing or pending litigation. In addition, it is interesting to consider how insurers view large IP cases, which may not always match the way judges evaluate the cases. It’s still early days, but it looks like the impact of specialized insurance on managing litigation-related risks will be with us for a long time – and will help lawyers and their clients better assess the risks of immigration.
Next week, we’ll hear from Stephen about where the opportunities for lawyers and their clients may lie with the rise of tort insurance, as well as his thoughts on some of the things he’s learned from the insurance he’s created.
Please feel free to send comments or questions to me at email@example.com or via Twitter: @gulu. Any topic suggestions or ideas are very welcome.
Gaston Kroub lives in Brooklyn and is a founding partner Kroub, Silbersher & Kolmykov PLLCintellectual property litigation boutique, and Markman Advisors LLC, a leading consultant in patent matters for the financial sector. Gaston’s practice focuses on intellectual property litigation and related counsel, with an emphasis on patent matters. You can reach him at firstname.lastname@example.org or follow him on Twitter: @gulu.