Posted on 22 Sep 2011
Contract disputes and litigation are rising trends seen by real estate companies, which is why Zurich, a leading provider of property and casualty insurance in North America and globally, now offers Contract Litigation Insurance (CLI).
According to the Bureau of Justice Statistics, the most common form of civil litigation in the U.S. is contract litigation. Further, civil litigation in the U.S. has increased by an average of over five percent for the last three years. The risk of paying an adversary’s attorneys’ fees is a key risk real estate companies involved in litigation face.
In response, Zurich North America Commercial’s real estate practice has collaborated with Sonoma Risk Insurance Agency to offer CLI to help reduce litigation exposure and costs for real estate businesses.
''Contract Litigation Insurance can help reduce the financial risk exposure in litigation and allows business owners to budget litigation costs more effectively,'' said Dan Kleiman, head of Zurich North America's real estate practice group. "We believe this new coverage will help alleviate a common risk exposure for commercial real estate developers and contractors.''
''In the current economic climate, multiple issues threaten to reduce a development's profitability, including high material costs, terminated or delayed projects and availability of financing," said Kevin Martin, CEO of Sonoma Risk Insurance Agency in Los Angeles. "Sometimes, owners with dwindling funds and doubts about the future of the economy may simply fail to pay as agreed, leaving real estate companies few options other than contract litigation."
Zurich’s CLI program is designed to help remove some of the risks faced by contractors and real estate developers involved in contract litigation.
The risk of paying an adversary's attorneys' fees typically arises from a provision in a contract agreement between the two parties, Martin said, adding that this provision is typically part of purchase and sale agreements, construction agreements and development agreements.
"The added risk of 'loser pays' provisions in contract litigation can prove devastating," Martin said. "Developers can help protect themselves against this type of exposure through Zurich's CLI product."
Zurich in North America's real estate practice offers a team of underwriting specialists across the U.S. along with insurance solutions for property & casualty to help real estate owners and managers reduce their risk of coverage gaps. With a dedicated real estate underwriting staff of 22 underwriters and 2 practice leaders geographical spread across nine locations in the U.S., Zurich understands regional real estate issues and risks.