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Contingency Insurance

AppealGap® offers coverage for losses resulting from a favorable verdict, judgment, arbitration award, or agency determination being reversed on appeal. 

Ambridge AppealGap® policies can benefit parties by: 

  • providing an insured with immediate liquidity in situations where a lender is willing to use the proceeds of the policy as security in the event of an adverse outcome on appeal
  • serving to remove a “deal blocker” to completion of a merger, acquisition, restructuring, liquidation, licensing agreement, or other business transaction where concerns over the impact of an appeal either prevent consummation of the transaction or cause an unacceptable discount in the transaction consideration
  • removing a balance sheet position in situations where an insured’s independent accountants are satisfied that AppealGap® Contingency Liability Insurance adequately eliminates or reduces the need for a financial balance sheet provision or reserve.

AppealGap® policies are custom-tailored to respond to an insured’s specific circumstances, and may cover losses such as compensatory damages, pre- and post-judgment interest, enhanced or exemplary damages (plaintiff’s policy), and prosecution costs or attorney’s fees award. In select cases, AppealGap® may even be used to insure a party that has lost an initial appeal.

Our policies can be utilised by virtually any individual or entity that is party to a litigation or other proceeding on appeal. In addition, coverage can be extended to respond to the concerns of an entity that is not a party to the appeal in question, but nevertheless may suffer negative financial consequences as a result, such as investors, lenders, and other third parties interested in the resultant case law or legal precedent.

AppealGap® Case Studies

The investors in Company X, which is a defendant in a proceeding brought by a group of inventors for alleged patent infringement, wish to sell the company in an auction process. After years of litigation, a judgment is rendered in favour of Company X. The inventors immediately file for an appeal of the judgment. While the accused products do not generate significant revenue for Company X, the potential damages associated with the reversal of the judgment on appeal are significant in relation to the enterprise value of Company X. An AppealGap® policy with an assignment feature may be issued to the company to respond to loss payable by Company X if the judgment is reversed.

The inventors of a chemical manufacturing process file patents on their process and license the patented process to clients. During the term of one of the licensing agreements, a licensee, Company A, terminates its licensing agreement. Upon discovering that Company A is infringing their patent by continuing to sell products which utilise the inventors’ process, the inventors sue Company A for patent infringement. After extensive litigation, the court finds in favour of the inventors. The judge enters a judgement against Company A in the amount of €10,000,000. Company A immediately files a notice of appeal. The inventors are concerned about their ability to survive the appeal given their limited financial resources and the threat that an adverse decision on appeal will serve to deter new licensees from entering into similar license agreements. A bank is prepared to offer financing to the inventors, however, they express concern about the inventors’ ability to repay the loan if the first instance judgment is reversed. The inventors may obtain an AppealGap® policy, with the lender as a “loss payee”, to cover the outstanding loan payments in the event the judgment is reversed.

Company Z, a close company specialising in plastics manufacture, buys back the shares of one of its founders, Founder A, for €500,000. While this figure was considered an attractive price at the time of the buyback, two years later and after a substantial increase in annual sales Company Z is approached by an interested buyer willing to purchase the company for €20,000,000. Founder A becomes aware of the impending purchase and sues Company Z and its directors and officers, claiming that the Company duped him into selling his shares for an inadequate sum and that the defendants intended to seek interested buyers at the time his shares were sold. The court hearing the case refuses to issue an injunction preventing the sale and dismissed the case against Company Z. Founder A subsequently appeals the court’s decision. The prospective buyer of Company Z is unwilling to proceed with the potential acquisition unless the downside risk associated with a successful appeal by Founder A can be eliminated. As a condition to completing the acquisition, Company Z may obtain an AppealGap® policy, with the buyer as an additional insured, to respond to losses in the event Founder A is successful in the appeal.

Solicitors represent Company B, a specialist manufacturer. Company B believes that its largest competitor is attempting to disrupt lucrative contractual relationships with several of its key customers. The solicitors commence proceedings on behalf of Company B alleging various economic torts against the competitor and seeking damages of €25,000,000. The competitor responds alleging that Company B’s allegations are baseless and threatens to seek indemnity costs from Company B and a wasted costs order against its solicitors. The court dismisses both the case against the competitor and the defendants’ costs applications. All parties appeal the decision of the court. The solicitors firm and Company B seek coverage for costs awarded against them if the competitor’s appeal is successful. Specifically, Company B seeks cover for the difference between the standard costs (for which it accepts liability) and the indemnity costs which the competitor wishes to recover, and the solicitors seek cover for a waste costs award. The solicitors firm and Company B may obtain an AppealGap® policy to respond to awards against them in the event they are found liable for filing a frivolous lawsuit against the competitor.

After being assessed tax by HMRC in relation to the tax treatment of a transaction, Company F appeals the assessment to the Special Commissioners where a decision in favor of the company is issued. HMRC is granted leave to appeal the decision of the Special Commissioners. Company F has just arranged for a much-needed injection of capital by an investor at the time HMRC is given leave to appeal the decision. If HMRC is successful in its appeal, the amount of tax due will exceed the amount of capital being raised in the proposed investment. When the investor learns of the pending appeal, it advises Company F that it is unwilling to proceed with the investment because of concerns regarding the financial impact of a successful appeal by HMRC. An AppealGap® policy may be obtained on behalf of Company F, allowing the investment to proceed.

Want to know more?

If you would like to learn more about AppealGap® Contingency Liability Insurance:

Frequently asked questions

The AppealGap® policy is available in connection with virtually any commercial dispute or litigation with the exception of insurance coverage, personal injury, environmental, toxic tort, class action litigation, or securities litigation involving public companies. In addition, Ambridge has limited appetite for the underwriting of appeals of arbitration decisions.

While not the focus of AppealGap® Contingency Liability Insurance, in select cases this type of appeal risk can be considered. We suggest that you call us to discuss the matter in further detail before asking your client to prepare a complete submission.

To perform a preliminary review of your AppealGap® Contingency Liability Insurance risk, we ask that you provide:

- the docket for the matter

- copies of key pleadings and motions (with briefs) or claim/dispute documents (with briefs)

- copies of any decisions, orders, awards, etc. issued in the underlying litigation or proceeding, including the decision which has been (or may be) appealed.

Although every piece of litigation and dispute is considered on its own merits, Ambridge can underwrite an AppealGap® Contingency Liability Insurance risk for litigation or a proceeding in which the prospective insured has not received a decision; provided, however, that the matter is factually developed enough for Ambridge to assess the legal merits of the risk and the potential damages. Although factually intensive disputes which have not been through discovery or a first decision either at the arbitration or agency level are more challenging to underwrite, depending upon the developments of the case, Ambridge can still perform a preliminary review with the goal of providing you with an indication of whether the risk fits our appetite.

Ambridge’s primary focus is on AppealGap® Contingency Liability Insurance risks that involve disputes in Europe, the United States, Australia, Canada, and New Zealand. In some jurisdictions, there may be practical considerations that preclude the offering of an AppealGap® policy. If the appeal is taking place in another jurisdiction, please contact us.

Provided the documents set out above are available and provided to us, typically Ambridge can give you preliminary feedback within three business days. In addition, a brief conference call with your client and/or its legal advisors may be necessary for Ambridge to complete a preliminary review of a matter in litigation or arbitration.

Each Ambridge AppealGap® Contingency Liability Insurance policy is tailored to respond to an insured’s specific circumstances. As such, this will depend on which provision you wish to have removed or amended.