Attracting more Commercial Litigation Clients using Funding and Insurance Options
In the highly competitive commercial dispute resolution market, staying ahead of the curve often means offering clients innovative solutions beyond legal expertise alone. Today’s businesses face an array of challenges, from intricate regulatory frameworks to complex contractual negotiations. To thrive in this competitive environment, commercial lawyers must not only provide exceptional legal services, but also offer strategic financial tools that allow their clients to make informed decisions.
Leveraging funding and insurance options can be an effective way to attract and retain commercial law clients and stand out from the crowd. Through understanding the intricacies of funding commercial litigation and safeguarding against unforeseen risks, legal professionals can establish stronger, more mutually beneficial relationships with businesses of all sizes.
The impact of litigation on clients
Commercial litigation can have a substantial financial impact on clients, often involving both direct and indirect costs. Listed below are some key considerations:
- Legal fees and expenses: The most immediate and obvious cost is the fees charged by law firms for their services. This includes solicitor fees, administrative costs, and expenses related to court filings, research, expert witnesses, and more. For complex cases, these fees can escalate rapidly.
- Opposing Party’s Costs: In commercial litigation, the losing party, in most circumstances, will be required to pay the legal fees of the winning party. Adverse costs in commercial litigation can be substantial.
Regardless of whether a company is pursuing or defending a commercial litigation claim, the litigation is likely to have a negative impact on the balance sheet if appropriate funding or insurance is not secured.
One of the main issues encountered is the fact that the level of legal costs payable by the client will be somewhat unknown until the end of the case. Solicitors are often unable to provide clients with details on exactly how much their case will cost them.
How funding and insurance options can help you attract commercial law clients
The potential impact on the business balance sheet can be enough to put a business off pursuing commercial litigation.
Using a combination of litigation funding and insurance options can help litigants to shift the risk off the business balance sheet.
Moreover, solicitors can provide more certainty to clients in relation to how much the litigation is going to cost them, so that they can make more informed decisions. For example, a solicitor may charge a fixed fee for investigating the merits of the claim, and the remaining costs would be covered by litigation funding and insurance.
In providing solutions to financial barriers, law firms can attract a wider range of clients, including those who may not have considered pursuing legal action due to budget constraints.
Furthermore, a law firm can differentiate itself in the market and position itself as a one stop shop for clients’ legal needs by offering comprehensive legal funding and insurance options.
In complex commercial disputes, clients may be more inclined to choose a firm that can assist with financing the case and provide insurance coverage. This can lead to attracting higher-value cases and potentially more substantial fees for the firm.
Funding and insurance options available
No win, no fee funding
“No win, no fee” arrangements are a billing model used by solicitors.
The most common type of “no win, no fee” agreement is the Conditional Fee Agreement (CFA). Under this type of arrangement, clients are not obligated to pay solicitor fees if the case is unsuccessful.
In cases where the client wins their case, a pre-agreed success fee is charged by the solicitor.
Damages Based Agreements (DBAs) are another form of no win, no fee agreement, where solicitor is compensated through a percentage of the damages recovered.
In instances involving no win, no fee agreements, it is common for parties to obtain an “after the event” (ATE) insurance policy. This policy safeguards the client against potential costs incurred by the opposing side in the event of an unsuccessful case.
Third party funding
Third party funding (TPF) entails a third party, often a specialised legal funding company, providing financial backing to a party engaged in a legal dispute. In return, the third party receives a share of any damages or settlements awarded. This form of funding is also referred to as litigation funding or litigation finance.
Third party funding can be instrumental in various legal scenarios, including commercial disputes. It enables the funded party to cover legal fees, expenses, and disbursements, thus allowing them to pursue their case even if they lack the necessary financial resources to do so.
After-the-event legal expenses insurance (ATE)
Business legal expenses insurance can be taken out as after the event insurance (ATE insurance).
ATE insurance is used to protect claimants from the risk of having to pay the other side’s costs if their case is unsuccessful. The insurance policy will respond to the opponent’s legal fees, and, on occasion, it may insure disbursements, depending on the policy.
There can be an upfront cost for commercial ATE insurance. In some circumstances, however, payment of this insurance premium is deferred until the conclusion of the case and clients may only pay for this premium from the funds received if their case is successful.
How can Annecto Legal Assist?
Annecto Legal can help commercial law firms to attract clients using legal funding and insurance options. Simply we help businesses realise the value of their commercial litigation claims and shift the risk of commercial litigation away from the business balance sheet.
Many businesses are missing opportunities to remedy disputes because they feel the pursuit of justice is too expensive. Annecto Legal was established to help businesses pursue claims and remove any perceived cost barrier to litigation.
Contacts:
David Law (m) +44 7540 303035 or david.law@annectolegal.co.uk
Mark Beaumont (m) +44 7730 217643 or mark.beaumont@annectolegal.co.uk