Liberty Mutual unveils contingent legal risk cover

A Liberty Mutual Insurance Group unit is introducing contingent legal risk insurance coverage, with up to $165 million in limits.

Liberty Mutual said in a statement Thursday that Liberty Global Transaction Solutions’ contingent legal risk insurance policies can cover a very broad and diverse range of known liability risks, with the common theme they must be capable of legal evaluation and analysis.

It says these risks often arise in the context of a merger and acquisition transition but may also be stand-alone risks with no connection to a deal. 

Where used on a deal, contingent legal risk insurance may be used in conjunction with representations and warranties/warranty and indemnity insurance policies, and are often used to cover a known risk that has been excluded from cover under these policies, and which may otherwise block a deal if neither the buyer nor the seller is unwilling to bear that risk.

Liberty Mutual said the risks covered by contingent legal risk insurance policies are typically low probability but high severity in nature.

It said risks that may be covered by these policies, which will be written by Liberty GTS on a global basis, include the risk of a court judgment being overturned on appeal; the risk of a regulatory permit or consent being revoked; the risk of an identified diligence finding crystalizing into a financial loss for the target business; and the risk of creditor claims preventing either cash being released from an escrow or from investment funds winding up and liquidating closed portfolio company holding vehicles.

Aude Bonnemaison, who is London- and Paris-based, has been named Liberty GTS’ first underwriter dedicated to the product, and will report to London-based Liberty GTS chief underwriting officer Gareth Rees, who will also head this new division, the insurer said in its statement.