City law firm, Fieldfisher, has launched a Damages-Based Agreement (DBA) insurance solution to help it to support more clients with litigation funding. The firm claims that the COVID-19 pandemic means more businesses want to share the risk of the cost of litigation with their lawyers.
Litigation funding enables businesses and individuals to bring legal cases without having to bear the full cost of the legal action if they are unsuccessful. The litigation funder can pay a proportion of the cost of the case but takes a proportion of the damages if the claimant is successful.
Various forms of litigation funding have been widely used, including individual ‘no-win-no-fee’ arrangements. Now the approach is becoming more popular in commercial litigation where businesses want to reduce the risks and costs of litigation.
In a DBA arrangement, the lawyer is remunerated by a fixed percentage of any litigation damages, rather than charging hourly rates.
Fieldfisher has set up the DBA insurance policy with an unnamed insurer. It will pay a proportion of Fieldfisher’s unbilled work in progress and disbursements if the firm is unsuccessful in a case it has funded. The firm says the policy is the first of its kind as it covers a portfolio of cases directly funded by the firm. It claims this approach is cheaper than other forms of litigation funding and enables it to offer its clients better terms.
Tony Lewis, dispute resolution partner at Fieldfisher, said: “This product is a real challenge to funders in the market and incredibly timely. In the new COVID 19 world, businesses more than ever are looking at how they can manage costs. We are providing certainty of cost for clients and showing that we have skin in the game, without the need for funders. We are taking the risk and costs off of businesses’ bottom line.”
James Burgoyne, Director – Claims & Technical, of Brunel Professions says conditional fee arrangements have previously been controversial, but has cautiously welcomed the new approach, which he says could mean that litigation funding cases are triaged more carefully.
“Certain types of conditional fee agreement and after-the-event insurance have previously caused a lot of damage to the insurance industry, directly leading to a contraction of the professional indemnity insurance market for surveyors and valuers for example. Any move promising to take the risk and cost of litigation away from a claimant can only encourage opportunistic rather than genuine litigation and as such can only be viewed with concern.”
“However, there is recent PI experience of litigation funders paying too little attention to the detail of a case, and funding weak and abortive actions on the basis of superficial and positive misapprehensions of the real issues, and hence their chance of success. If the solicitor genuinely has ‘skin in the game’ it might be hoped that cases would be better vetted from the outset. This would mean that weak and wrong-headed actions would not be proceeded with, to the benefit of all concerned.”
Brunel provides professional indemnity insurance broking services to professional firms. Visit our website to find out more or call Jonathan Filer on +44 (0)117 325 0752.