Harbour Underwriting’s managing director and underwriting director, Rocco Pirozzolo, was on a panel at Brown Rudnick’s litigation funding conference at The Langham Hotel in London on Thursday, 14 March
This was Brown Rudnick’s third annual Litigation Funding Conference and Rocco was honoured to have been invited to be a panellist once again, this time discussing the ‘In-House Perspective’.
Rocco’s fellow panellists were Ayse Yazir of Bench Walk Advisors, Nathaniel Catez of Moelis, and Andrew Clarke, formerly of ExxonMobil. Brown Rudnick’s Jessica Lee moderated the panel.
Funding and insurance for corporates
Jessica Lee started by asking the panel how they approach due diligence when approached for litigation funding by general counsel. Ayse Yazir said there is not much difference to when a law firm approaches them although one key issue is whether the corporate is likely to become insolvent. This would be a game-changer for a funder.
Rocco said it would make no difference from a dispute insurance perspective, and he would still look at the merits, the economics and enforcement. He also said there was “some comfort in dealing with corporates as they have to be reasonable and commercial, and they won’t be fazed by the ups and downs of litigation”.
How do general counsel approach litigation funding?
Andrew Clarke said general counsel approach litigation funding very much from a business perspective with the focus being on the commercial consequences: “It’s a business decision – what action is likely to yield the best outcome?”
Nathaniel Catez of Moelis said corporates view litigation funding as another form of corporate finance that allows them to unlock value from their legal assets and provide them with more flexibility. He said that many corporates still have gaps in their knowledge concerning issues such as pricing, funding structures and control, but overall there has been a significant increase in knowledge among general counsel regarding litigation finance.
Rocco said that corporates should be able to rely on their external lawyers as their trusted advisors and these lawyers should be “more savvy about the litigation funding and insurance options available to their clients”.
He said that although many lawyers (such as those in the audience) are knowledgeable, “there is still an education process to go through with a lot of law firms, and that is a challenge. I think lawyers should come out of their comfort zone when they talk about funding options.”
Rocco added that there are external parties, such as brokers or advisors, who can help. He continued: “The basic concept of funding and insurance is not difficult but it’s the external lawyers who have to push it and get comfortable with it and not hide behind their client care letter.”
Control
The panel also discussed a fear general counsel often express, which is that by using litigation funding, they will lose control of the case. Rocco said concerns about control ignore the fact that litigation funding agreements have protections for clients that deal with the issue of control. “Corporates have sophisticated panel lawyers who act as gatekeepers to make sure the litigation funder is not in breach of the control provisions and, therefore, I see the control issue as misconceived,” he said. Finally, Rocco said that having worked on a variety of cases involving litigation funders over the last 15 years or so, he has never seen a litigation funder take control of a case.
Risk
The panel then discussed the question of risk. Rocco said litigation is not being viewed correctly as a business risk, whereas it clearly is. “Even if you have good merits of success in a case, you would typically say the case has a 60% chance of winning,” he said. “That means there is a 40% chance of losing and wasting money on your own expenses and lawyer’s fees, and you have a 40% exposure to adverse costs. Everyone has a different risk appetite, and that includes corporates. The question is assessing that appetite for risk. Is the corporate willing to absorb the risk, or does it want to mitigate it by taking out funding and dispute insurance?” He concluded by saying a key issue is giving corporates the chance to think about the options available to them.
Pricing
In terms of pricing, Rocco said Harbour Underwriting wouldn’t price differently because the insured was a corporate; it prices the risk: “When we talk to insureds or brokers, pricing is bespoke and is dealt with on a case-by-case basis, as it depends on the submission received.”
