Worried that being on the losing side in contract litigation will mean paying not only damages, but also your adversary's legal bills? Property-casualty insurer Zurich North America is rolling out a policy, offered via Sonoma Risk Insurance, that shields a defendant in contract litigation from the risk of paying the opposing party's attorneys' fees if it loses in court. Zurich already offers similar coverage for plaintiffs.
Zurich argues that companies with such coverage might be more willing to defend claims and that the insurance will help companies do a better job of budgeting for litigation costs.
William Boeck, senior vice president and insurance and claims counsel at brokerage Lockton Financial Services, notes that commercial coverage generally would not pay for the other side's legal fees in contractual disputes. And errors and omissions policies usually exclude contractual liability, including attorneys' fees, he says. So the new Zurich coverage "does fill a niche," Boeck says.
He suggests companies' interest in the coverage will reflect how often they're involved in contract litigation and whether they've had to pay attorneys' fees in the past.