A common provision in many contracts stipulates in the event of litigation between parties to the contract, the prevailing party in the litigation is entitled to recover their attorneys’ fees from the losing party. Coverage for this risk is almost always excluded by all forms of insurance policies, leaving unsuccessful litigants exposed to what can become a very significant financial loss.  Contract Litigation Insurance (CLI) provides a degree of protection from the uncertain nature of litigation.  This new form of insurance coverage can insure a plaintiff or defendant in a contractual lawsuit against the risk of paying their adversary’s attorneys’ fees if unsuccessful in prosecuting or defending their contract claim.

This coverage is even available to businesses or individuals during the early stages of a contractual dispute.  What types of contract disputes are most common? The risk of paying an adversary’s attorneys’ fees are especially common in contract actions arising out of employment contracts, real estate contracts, loan agreements, purchase agreements, partnership agreements and leases.

 To summarize:

• Coverage may be purchased by individuals or businesses currently involved in contractual litigation;
• CLI is available upon the filing of a contract action for a period of 1 year from the filing/service date;
• The coverage period matches the duration of the covered litigation; and
• Coverage is triggered when the opposing party prevails after a contested trial or summary judgment.

Coverage is underwritten by Zurich, an A+ rated carrier, and is available through Sonoma Risk Insurance in Los Angeles, CA. To learn more: http://www.sonomarisk.com/