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Legal Cost Insurance as a Strategic Device in Settlement Negotiations

Author

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  • Kirstein, Roland

Abstract

The papers show that Legal Cost Insurance (LCI) is a device to enhance potential litigants' bargaining position rather than to re-allocate risk. Being insured decreases the cost an insured party has to bear if settlement negotiations fail and the case goes to trial. This shifts the threat points, which has an impact on the bargaining result. In negative expected value suits, LCI can make the threat to sue credible and motivate potential defendants to make positive settlement offers. Hence, even risk-neutral agents may find it beneficial to insure.

Suggested Citation

  • Kirstein, Roland, 1999. "Legal Cost Insurance as a Strategic Device in Settlement Negotiations," CSLE Discussion Paper Series 99-01, Saarland University, CSLE - Center for the Study of Law and Economics.
  • Handle: RePEc:zbw:csledp:9901
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    File URL: https://www.econstor.eu/bitstream/10419/23056/1/9901sett.pdf
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    More about this item

    Keywords

    Civil Procedure; Bargaining; Settlement; Negative Expected Value Suits;

    JEL classification:

    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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