IDEAS home Printed from
   My bibliography  Save this paper

Risk-Neutrality and Strategic Insurance


  • Kirstein, Roland


The paper shows 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. "Risk-Neutrality and Strategic Insurance," CSLE Discussion Paper Series 99-02, Saarland University, CSLE - Center for the Study of Law and Economics.
  • Handle: RePEc:zbw:csledp:9902

    Download full text from publisher

    File URL:
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    1. Gary S. Becker, 1974. "Crime and Punishment: An Economic Approach," NBER Chapters,in: Essays in the Economics of Crime and Punishment, pages 1-54 National Bureau of Economic Research, Inc.
    2. Schmidtchen, Dieter, 1993. "Time, uncertainty, and subjectivism: Giving more body to law and economics," International Review of Law and Economics, Elsevier, vol. 13(1), pages 61-84, March.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Anne Duchêne, 2015. "Patent Litigation Insurance," Working Papers 2015-621, Department of Research, Ipag Business School.
    2. Kirstein, Roland, 2004. "Anti-Teilen in Teams," CSLE Discussion Paper Series 2004-04, Saarland University, CSLE - Center for the Study of Law and Economics.
    3. Heyes, Anthony & Rickman, Neil & Tzavara, Dionisia, 2004. "Legal expenses insurance, risk aversion and litigation," International Review of Law and Economics, Elsevier, vol. 24(1), pages 107-119, March.
    4. Buzzacchi, Luigi & Scellato, Giuseppe, 2008. "Patent litigation insurance and R&D incentives," International Review of Law and Economics, Elsevier, vol. 28(4), pages 272-286, December.
    5. Kirstein, Roland & Gerhard, Hans, 2005. "The "Rainmaker's Dilemma": Bad Debt Loss Insurance in Settlement and Litigation," CSLE Discussion Paper Series 2005-02, Saarland University, CSLE - Center for the Study of Law and Economics.
    6. Kirstein, Roland & Rickman, Neil, 2001. "FORIS contracts: Litigation Cost Shifting and Contingent Fees in Germany," CSLE Discussion Paper Series 2001-04, Saarland University, CSLE - Center for the Study of Law and Economics.
    7. Qiao Yue, 2010. "Legal-Expenses Insurance and Settlement," Asian Journal of Law and Economics, De Gruyter, vol. 1(1), pages 1-19, July.
    8. Kirstein Annette & Kirstein Roland & Gerhard Hans, 2010. "Bad Debt Loss Insurance in Settlement and Litigation," Review of Law & Economics, De Gruyter, vol. 6(1), pages 107-124, May.
    9. Roland Kirstein & Neil Rickman, 2004. ""Third Party Contingency" Contracts in Settlement and Litigation," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 160(4), pages 555-555, December.
    10. Benito Arruñada, 2001. "The role of title insurance under recording and registration," Economics Working Papers 565, Department of Economics and Business, Universitat Pompeu Fabra, revised Sep 2002.
    11. Arrunada, Benito & Garoupa, Nuno, 2005. "The Choice of Titling System in Land," Journal of Law and Economics, University of Chicago Press, vol. 48(2), pages 709-727, October.
    12. Mattiacci, Giuseppe Dari & Parisi, Francesco, 2003. "The cost of delegated control: vicarious liability, secondary liability and mandatory insurance," International Review of Law and Economics, Elsevier, vol. 23(4), pages 453-475, December.
    13. Qiao, Yue, 2013. "Legal effort and optimal legal expenses insurance," Economic Modelling, Elsevier, vol. 32(C), pages 179-189.

    More about this item


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

    JEL classification:

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


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:csledp:9902. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.