Contract enforcement insurance

In the winter of 2003, ACE Group, working with the insurance broker Willis, introduced a “Contract Enforcement” Insurance Policy. As described in Transnational Dispute Mgt., Vol. 1, Feb. 2004, either side to a contract can purchase a policy at the time they sign the contract. The insurers “will review the contract in question with their legal advisors to ensure that the terms of the contract are fair and appropriate.” The policy will insure them for the litigation costs incurred in court or arbitral proceedings to enforce the contract. Those costs can be “pursuit costs” by an aggrieved party or “defense costs.”

The article also describes “after the event” contract insurance. With these policies, a law department may be able to obtain coverage when litigation over a contract is contemplated. Other forms of insurance are available to protect against the costs of litigation (See my posts of July 25, 2005 and July 20, 2005 — patent litigation; March 23, 2006 #5 – employment practices litigation; and April 23, 2006 – after a lawsuit is filed.).

Why don’t law departments purchase insurance policies to hedge them and their budgets against the vagaries of legal actions?

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