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Florida Bar Approves Litigation Cost Insurance Pass-Through

Florida Bar Approves Litigation Cost Insurance Pass-Through

The Florida Bar Board of Governors recently determined that it is permissible for attorneys to ask their clients to the cost of “litigation cost protection” insurance. This form of insurance reimburses an attorney up to the insured amount of costs advanced on behalf of the client if the attorney takes a case to trial and receives no recovery.

The product carries a premium of seven percent (7%) of the amount of protection sought. For example, if an attorney seeks $100,000 in cost protection, the premium would be $7,000. The Board of Governors’ decision, which passed by a 23-17 vote, would allow the attorney to pass this $7,000 cost on to the client.

Supporters of the measure argue that it allows sole practitioners or smaller firms to take on larger, more well-funded defendants. They contend that some attorneys might offer unique specialties that would benefit their clients, but do not have the resources to represent the clients in complex or protracted litigation. Naturally, insurance companies are high on the list of well-funded defendants against which supporters of this product contend that plaintiff’s lawyers contend need assistance in leveling the playing field.

Opponents point out that the client is not a direct beneficiary of the insurance. Clients are being asked to pay for an insurance product that ultimately benefits the attorney. The product’s supporters, however, respond that clients do benefit from access to more experienced lawyers, funding for expert witnesses and other costs incurred in litigation.

The Board of Governors’ approval of this cost pass-through comes with certain disclosure requirements. An attorney using this product must inform the client that other attorneys may offer contingency fee arrangements without passing along the expense of the litigation cost insurance; explain the insurance and why it’s in the best interest of the client; provide a copy of the policy to the client and advise the client to have another attorney review it; and not allow the coverage to adversely affect the attorney’s independence or professional judgment.