AppealGap® Contingency Insurance
Information

Ambridge Partners’ AppealGap® Contingency Insurance product can be used to protect an insured against the financial impact of a judgment, arbitration award or tribunal decision favourable to the insured in arbitration, litigation or other proceeding being reversed on appeal.

We offer two types of AppealGap® policies:

  • Our “offensive” AppealGap® policy form is designed to respond to situations where the insured is the claimant or plaintiff in the arbitration, litigation or other proceeding and seeks protection against the damages or other amounts awarded to them being reduced or reversed on appeal of a judgment, arbitration award or tribunal decision.
  • Our “claimant’s” AppealGap® policy is designed to respond to situations where the insured is the defendant in the arbitration, litigation or other proceeding and seeks protection against the reversal of a decision in its favor (e.g. a finding of no liability) on appeal of the judgment, arbitration award or tribunal award.

Potential uses of the product include:

  • 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;
  • 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; or
  • removal of a balance sheet provision in situations where an insured’s independent accountants are satisfied that AppealGap® Contingency Insurance adequately eliminates or reduces the need for a financial provision or reserve.

Recognizing that the requirements and concerns of each potential insured vary, the scope and definition of loss can be flexibly tailored and extended to address specific concerns. Some examples of this include:

  • Judicial or Administrative Delay Coverage which addresses the financial impact of a judicial or administrative delay in an insured appeal beyond a time-period reasonably expected;
  • Lender Protection Extension to address the financial impact to one or more lenders to an insured in the event that the borrower does not prevail on the insured appeal;
  • Investor Protection Extension to address the financial impact to one or more investors in an insured in the event that the investee company does not prevail on the insured appeal or does not prevail within a specified time period; and
  • Third Party Protection Extension to address the concerns of an insured that is not a party to the insured appeal, but might be negatively financially impacted by the adverse outcome of such appeal. This might involve an unrelated entity in a similar situation to the insured that could be negatively impacted by new case law or a precedent adverse to its position. It might also include a professional adviser working on a contingent fee arrangement.

Of course, a combination of one or more of the above is possible.

Uses by Deal Point

Some examples of where AppealGap® Contingency Insurance is responsive include:

  • Pending appeal prevents auction of company from commencing
    The investors in Defendant Company X, which is the defendant in proceedings 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 products that involve the alleged patent infringement do not generate significant revenue for Defendant X, the potential damages associated with the reversal of the judgment on appeal are significant in relation to the enterprise value of Company X. Until the appeal is resolved, the auction process cannot be commenced.
  • Pending appeal prevents inventors from obtaining a loan
    The inventors of a computer coding 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 utilize 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 judgment against Company A in the amount of €10,000,000. Company A immediately applies for permission to appeal. The inventors are concerned about their ability to survive the appeal given their limited financial resources, the downturn in the economy, and the threat that an adverse decision on appeal will serve to deter new licensees from entering into licensing 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.
  • Pending appeal prevents the closing of a company purchase
    Company Z, a close company specializing 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 refused to issue an injunction preventing the sale and dismisses the case against Company Z. Founder A subsequently appeals the court’s decision. A prospective buyer of Company Z is unwilling to proceed with potential acquisition unless the downside risk associated with a successful appeal by Founder A can be eliminated.
  • Solicitor’s firm and client exposed to risk of significant damages
    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 threatening they will 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. Both parties appeal the decision of the court. The solicitors firm and Company B seek coverage for costs awards 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 their solicitors seek cover for a wasted costs award.
  • Pending appeal of a tax decision prevents raising of capital required
    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 its concerns regarding the financial impact of a successful appeal by HMRC.
Uses by Transaction Type

Potential uses of the product include:

  • Financings and Investments

    Pending appeal prevents funding for alternative energy plant


    The builder and operator of alternative energy plants wins a bid to build a plant in a largely undeveloped area. All necessary federal, state and local permits needed to build the alternative energy plant have been received by the company. A group of individuals owning upscale homes several miles away commence an action before the relevant federal administrative agency to block construction of the plant. The owners' bid to block construction of the plant at the administrative level is rebuffed, but with ample funds with which to litigate, it is clear that the group will continue to pursue an appeal to prevent the company's construction of the plant. Prior to commencement of an appeal, an investment fund offers to make a significant investment in the company. Despite the positive outcome for the company in the first round of litigation before the agency, the investment fund is concerned that it will lose its investment if the property owners group prevails on its appeal, or if the company is ordered to pay significant damages to the property owners for diminution in the value of their property. As a condition to making the investment, the investment fund requires that the company purchase an AppealGap® policy to respond if the property owners prevail on the appeal.
  • Licensing Agreements

    Pending appeal prevents inventors from obtaining a loan


    The inventors of a patented computer coding process license the process to clients. During the term of one of the licensing agreements a licensee terminates its licensing agreement. Upon discovering that the licensee is infringing their patent by continuing to sell products which utilize the inventors' process, the inventors sue the licensee for patent infringement. After extensive litigation the court finds in favor of the inventors. The judge enters judgment against the licensee in the amount of $19,600,000. The licensee immediately files an appeal. The inventors are concerned about their ability to survive the appeal given their limited financial resources, the downturn in the economy, and the threat that an adverse decision on appeal will serve to deter new potential licensees. A bank is prepared to offer financing to the inventors, but conditions its offer on the ability of the inventors to provide an indemnity protection in the event the judgment is reversed and the inventors are unable to to repay the loan. The inventors purchase an AppealGap® policy, with the lender as a "loss payee," to cover the outstanding loan payments in the event the judgment is reversed.
  • Liquidations
    Under construction / Coming soon
  • Mergers and Acquisitions

    Pending appeal prevents the closing of a company purchase


    A closely held company buys back the shares of one of its founders 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, the company is approached by an interested buyer willing to purchase the company at a valuation that would attribute a value of $5,000,000 to the founders shares (had he not sold). The founder becomes aware of the pending purchase and sues the company and its directors and officers claiming that the company misled 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 refused to issue an injunction preventing the sale and dismisses the case against the defendants. The founder then appeals the court's decision. The prospective buyer of the company is unwilling to proceed with potential acquisition unless the downside risk associated with a successful appeal by the founder can be eliminated. As a condition to completing the acquisition, the buyer requires the company to purchase an AppealGap® policy (with the buyer as an additional insured) to respond to losses in the event the founder successfully appeals the case.

    Pending appeal prevents auction of company from commencing a loan


    The investors in a company, which is the defendant in a lawsuit 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 favor of the defendant. The inventors immediately file for an appeal of the judgment. While the products that involve the alleged patent infringement do not generate significant revenue for the defendant, the potential damages associated with the reversal of the judgment on appeal are significant in relation to the enterprise value of the company. Until the appeal is resolved, the auction process cannot be commenced. An AppealGap® policy is issued to the company, with the ability for it to be assigned to the buyer, to respond to losses payable by the company if the judgment is reversed.

    Pending appeal prevents inventors from obtaining a loan


    The inventors of a patented computer coding process license the process to clients. During the term of one of the licensing agreements a licensee terminates its licensing agreement. Upon discovering that the licensee is infringing their patent by continuing to sell products which utilize the inventors' process, the inventors sue the licensee for patent infringement. After extensive litigation the court finds in favor of the inventors. The judge enters judgment against the licensee in the amount of $19,600,000. The licensee immediately files an appeal. The inventors are concerned about their ability to survive the appeal given their limited financial resources, the downturn in the economy, and the threat that an adverse decision on appeal will serve to deter new potential licensees. A bank is prepared to offer financing to the inventors, but conditions its offer on the ability of the inventors to provide an indemnity protection in the event the judgment is reversed and the inventors are unable to repay the loan. The inventors purchase an AppealGap® policy, with the lendor as a "loss payee," to cover the outstanding loan payments in the event the judgment is reversed.
  • Restructurings and Workouts
    Under construction / Coming soon
FAQs

FAQs:

  • Is Ambridge’s AppealGap® policy available for appeals in all types of litigation or proceedings?
    Ambridge's AppealGap® policy is available in connection with virtually any commercial dispute or litigation with the exception of insurance coverage, personal injury, environmental, toxic-tort, any class action litigation or securities litigation involving public companies. In addition, we have limited appetite for the underwriting of appeals of arbitration decisions.
  • Can Ambridge’s AppealGap® Contingency Insurance be used to insure the party that has lost the initial appeal?
    While this is not the focus of Ambridge's AppealGap® Contingency 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.
  • What type of underwriting submission does Ambridge need in order to consider an AppealGap® Contingency Insurance risk?
    For appeals of United States federal court decisions, Ambridge typically requires a case caption and can obtain the balance of the documents for the purposes of a preliminary review of your AppealGap® Contingency Insurance risk through public sources. To perform a preliminary review of your AppealGap® Contingency Insurance risk which involves any other type of appeal, we ask that you provide:

    ● the docket for the matter;
    ● copies of key pleadings and motions (with briefs) or claim/dispute documents (with briefs); and
    ● copies of any decisions, orders, awards, etc. issued in the underlying litigation or proceeding,
    including the decision which has been or may be, appealed.
  • Can Ambridge’s AppealGap® Contingency Insurance be considered for litigation or a proceeding for which a verdict, judgment, arbitration award or agency determination has not yet been issued?
    Although every piece of litigation and dispute is considered on its own merits, Ambridge can underwrite an AppealGap® Contingency 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 associated with the same. 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.
  • Will Ambridge underwrite AppealGap® Contingency Insurance risks where the underlying verdict, judgment, arbitration proceeding for which a verdict, judgment, arbitration awarded an agency determination has been issued outside of the United States?
    Ambridge's primary focus is on AppealGap® Contingency Insurance risks that involve disputes in the United States, the European Union, 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.
  • How long does it take Ambridge to perform a preliminary review of an AppealGap® Contingency Insurance submission?
    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 adviser(s) may be necessary in order for Ambridge to complete a preliminary review of a matter in litigation or arbitration.
  • Certain provisions of Ambridge’s template AppealGap® policy are not applicable to my client’s circumstances. Can the template policy be amended to remove or amend these provisions?
    Each Ambridge AppealGap® 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.