Sonoma Risk Insurance Agency Offers New Products to Manage Litigation Risks.
In our August 3, 2010 post, we discussed a recent article written by Kevin B. Martin in the August 2010 edition of The Orange County Lawyer. Mr. Martin is CEO of Sonoma Risk Insurance Agency, which offers contract litigation insurance underwritten by individual member companies of Zurich in North America. The insurance, subject to certain terms and exclusions, will cover court-ordered attorney's fees in contract cases depending on the amount of coverage purchased by a particular plaintiff or defendant. (Of course, these contract cases will be ones with contractual fee clauses.)
Co-contributors Marc and Mike were intrigued and met recently with Mr. Martin, who was formerly a partner with Bingham McCutchen. Here are the highlights of the contract litigation insurance policies offered through Sonoma Risk:
· Plaintiff Contract Litigation Insurance (PCLI) or Defendant Contract Litigation Insurance (DCLI) are designed to insure plaintiffs or defendants in contractual lawsuits against the risk of paying their adversaries' attorney's fees if unsuccessful in prosecuting or defending against breach of contract claims.
· The insurance policies must be purchased within 60 days of filing of a contract-based complaint (for PCLI) or within 60 days of service of a contract-based action (for DCLI).
· The insurance policies will pay whatever a court adjudicates to be reasonable attorney's fees after a merit-based "prevailing party" adjudication in a contract action. (This occurs even if there are tort or statutory claims involved, as long as the court finds they were intertwined with the contract claims for purposes of a fees award.)
· The insurance policies are subject to four exclusions and non-coverage caveats: (1) "bad boy" fraud; (2) no fees awarded if there is a resolution other than a merits-based prevailing party determination; (3) no fees awarded for post-rejection fees incurred after rejection of a Code of Civil Procedure section 998 offer (although pre-offer fees are covered); and (4) fees awarded as discovery sanctions or bad faith conduct sanctions.
· The carrier reserves the right to appoint, at its own expense, counsel to oppose a fee petition or represent the client in an appeal of a fees award.
· The insurance will follow if the plaintiff is compelled to arbitration by defendant; however, the insurance coverage will not remain if plaintiff compels arbitration or if the defendant under a DCLI compels arbitration.
These insurance products are intriguing, given that 90% of lawyers in a recent survey said they would advise clients of insurance that can minimize their financial risk in litigation and 82% of clients surveyed indicated that they expect their attorneys to advise them of insurance that can minimize their financial risk in litigation. (Also, keep in mind that Bureau of Justice statistics show that defendants lose 2 out of 3 contract cases at trial.)
Mr. Martin can be reached at 310.954.1522 ext. 224 or at [email protected], for those readers who are interested. You can contact Sonoma Risk for the premium structure --it seems to be reasonable in nature.