Many of you will not yet have come across Judgment Preservation Insurance, however it may just be the next hot topic in post-trial litigation.

After perhaps years of dispute, being awarded a damages sum at trial as a claimant is often the pinnacle of bringing a successful claim. However, the use and potential recoverability of the judgment award instantly becomes at risk if an appeal is granted. The claimant becomes the respondent to the appeal and subsequently takes on the risk of that sum being reduced or reversed.

Whilst the litigation world is well versed in the use of litigation finance and adverse events insurance, a very specific insurance product known as Judgment Preservation Insurance is now becoming more prevalent. It is designed to protect a claimant already in possession of a favourable judgment against the financial risks of that judgment being reversed in part or in full, subsequently impacting the damages ultimately recoverable.

Whilst this can obviously provide more certainty over ultimate recoveries, it may also be relevant where the claimant is looking to release funds. For example, in a scenario where an insolvency officeholder has been successful in bringing a claim at trial for the benefit of an estate’s creditors, the officeholder may in fact rely on the receipt of damages to meet future litigation costs in relation to the appeal. However, the risk of drawing down such funds without adequate protection could ultimately leave that officeholder exposed if the decision was to be reversed.

The key questions to consider for any such policy seeker include how much cover to look for, and the likely costs of doing so. For the insurer, in the same manner as litigation funders and adverse events insurance, they need to understand the merits of the appeal for the respondent, to assess their risk in providing such a policy, and therefore the terms they may be able to offer. The risk level in particular is determined by how binary the outcome of the appeal is likely to be; for example, is it possible that the claim could be reversed from judgment value to zero, or could there be an alternative result in between? This would of course very much be subject to the grounds of appeal being sought, and the consequential impact on quantum if those grounds were successful.

The potential for further appeals should not also be ignored, as the policy may only pay out when it is considered a final adverse determination has been achieved and no further litigation is possible or being sought. Settlement would not be considered an adverse determination and therefore would not be covered under this type of policy.

In circumstances where such a policy could and is now being offered in the UK, this could change the ability of successful claimants being able to respond to an appeal, and perhaps the appetite of an appeal even being sought. Whilst there are hurdles to overcome in meeting the requirements of achieving insurance cover, including the ability to meet the costs of such a policy, or indeed the appetite of insurers to provide such an opportunity, this could be a game-changer for appellant litigation.