Q&A With A Co-Founder Of Level Insurance On This Really Unique Product
I have long remarked that the insurance industry does a good job of offering products to address the risks associated with unique and new exposures. I’m referring to legitimate risks — not those silly policies that the media loves to talk about, that provide insurance for things like Liberace’s hands, Tom Jones’s chest hair and Michael Flatley’s legs.
A couple of years ago I did a story on Level Insurance, a then-new company offering one of most unique insurance products I had ever seen: Litigation Cost Protection – coverage for plaintiffs’ attorneys for their costs in the event that a contingency fee case ends in a defense verdict.
The concept is simple. A lawyer-policyholder takes a case on a contingency fee, it goes to trial and there is a defense verdict. He or she can now recover their cost disbursements, such as expert witness fees, travel expenses, court reporter fees, trial exhibit costs and all other monies spent in furtherance of the case. The policy does not use qualifiers like reasonable costs. The attorney is reimbursed for whatever was spent. If the case settles or is disposed of on summary judgment, no coverage is owed. The online application process takes minutes and the premium is simple – 7% of the coverage limit regardless of the type of case (exclusive of taxes and fees). The limits available are between $3,500 and $250,000.
Litigation Cost Protection recently received important regulatory wins that will no doubt make the policy more attractive to potential purchasers: The Bars of Florida and North Carolina both issued ethics opinions stating that a lawyer can purchase the policy and include the premium in the costs charged to the client following a settlement or win at trial. To do so, both opinions made clear that the lawyer must follow several proscribed steps, which include making certain disclosures to their clients.
I recently checked-in with Level Insurance co-founder Larry Bassuk to see how things have been going for the company and its Litigation Cost Protection. To learn more about this really unique product, what it took to get it off the ground and the challenge of finding an insurer, willing to underwrite a policy for the benefit of plaintiffs’ lawyers, check out my Q&A with Larry here.
1. What was your lightbulb moment for Litigation Cost Protection?
I was inspired by a mentor to explore innovative business opportunities within the legal industry. As a practicing trial attorney, the law ‘business’ is the one I know best. As I brainstormed opportunities, I noticed that finance and insurance tools, which are routinely leveraged in other industries, were largely unavailable to attorneys. This observation lead to the idea that an attorney’s financial exposure in a contingency fee relationship could be mitigated with insurance. It was just a matter of applying established insurance principles to that particular risk.
I approached Justin Leto, who is now my law and business partner in several ventures, with the raw concept. Justin was a solo practitioner at the time, and is a very business-savvy attorney. We refined the concept and embarked on the extremely fulfilling experience of turning our theoretical ideas into a national business.
2. The road from concept to market must have been a challenging one. Can you describe what that journey was like.
It was indeed a challenge, however, the experience has been extremely rewarding. There were essentially three stages to taking the concept to market. First, we had to validate the concept [of insuring case costs] and establish that it could serve as the premise for a viable insurance program. We then worked with a prominent actuarial consulting firm for nearly one year for the purpose of gathering, analyzing and interpreting the data and ultimately modeling the risk. As a result, we had something concrete and substantiated that we could present to insurance carriers. The decision to work with actuaries early on, although it took a lot of time, effort and resources, was a critical decision.
Armed with what was, in essence, the structure of the insurance program (risk modeling, pricing, assumptions, etc.) and extensive market research, we then shopped the coverage to national insurance companies. The carriers (largely household names) were intrigued by the coverage and recognized its potential, however, many were concerned or downright turned off by the notion of providing insurance coverage to trial lawyers. This part of the process was very challenging. We ultimately teamed up with an exceptional carrier partner, Aspen Specialty Insurance Company.
Next, we had to build the business itself. This included raising money and building out a fairly sophisticated, online-based underwriting and payment system (our entire process has always been 100% online and only takes a few minutes). We created and then built our brand, Level Insurance, and deployed a national marketing campaign to promote the business, which is something we still engage in daily.
3. LCP is such a unique idea. Has that been a challenge to selling it?
Educating our market has been a challenge. No matter the idea, reaching the market and competing for customers’ attention is an ongoing process. Because Litigation Cost Protection is a new concept, when attorneys first learn about it they often respond with equal parts curiosity and skepticism. Since Justin and I are both practicing attorneys (along with Lindsay Milstein, who joined Level about a year ago), we are able to explain the coverage in ways that our customers understand. We can answer hyper-technical questions, which increases each potential new customer’s confidence.
Ultimately, once we have someone’s attention, we are met with enthusiasm and have been very successful in acquiring new customers.
4. How have plaintiffs’ attorneys been using LCP?
First and foremost, trial attorneys are using Litigation Cost Protection like they use all other insurance coverage—to mitigate their risk and to gain peace of mind. We routinely sell $250,000 policies back-to-back with $10,000 policies, which goes to show that our customers have varying risk appetites and strategies. Some attorneys use Litigation Cost Protection for certain types of cases (for example, all of their product liability cases) while others use it for cases that exceed a certain cost-threshold to litigate. We designed this coverage to be flexible. Attorneys can pick and choose which cases to cover and they customize their limits for each case.
Across the board, I hear that our customers feel more confident litigating their covered cases, feel more comfortable spending money to litigate their cases and overall have more peace of mind knowing that their risk exposure is controlled.
We enjoy hearing creative ways in which our customers are using their coverage to their benefit. For example, some attorneys are sending their Declarations Page to opposing counsel, with the message that they should inform the insurance adjuster assigned to the case that the plaintiff’s attorney has Litigation Cost Protection and is committed to trying the case unless a reasonable offer is made. This has reportedly enhanced settlement negotiations and results.
I’ve been advised that lenders are offering better terms, rates and higher amounts of financing for cases that are backed by Litigation Cost Protection. In fact, after hearing this many times, we included a loss payee endorsement form as part of the application policy, so attorneys can name their lender as a loss payee. This has further facilitated the process and provided value to our customers.
5. How have the sales and claims experience been?
Although I cannot provide specifics, I’ll share that we have grown from offering Litigation Protection in only five states to offering it nationally. We have sold policies in approximately 35 states and nearly all of our customers have incorporated Litigation Cost Protection into their practice, meaning they routinely obtain coverage. We are proud of our company’s growth and we continue trending upwards. Our claims experience is in line with our projections, and we pride ourselves in handling claims expediently, easily and fairly.
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