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Legal Cost Insurance as a Strategic Device in Settlement Negotiations

  • Kirstein, Roland

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.

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Paper provided by Saarland University, CSLE - Center for the Study of Law and Economics in its series CSLE Discussion Paper Series with number 99-01.

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Date of creation: 1999
Date of revision:
Handle: RePEc:zbw:csledp:9901
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