February 23, 2024

What is Adverse Judgment Insurance?

Subscribe to Our Newsletter

Newsletter


Kevin Skrzysowski

|

February 23, 2024

  • Adverse Judgment Insurance (AJI) is a type of policy that guarantees a certain amount of coverage in the event of a final, adverse judgment against a defendant. 

  • AJI is typically purchased by companies that are defending complex lawsuits where the potential damages are substantial and above the company’s existing insurance limits or risk tolerance.  

  • Think of it as a catastrophic commercial umbrella policy that is triggered after a final, non-appealable judgment. 

  • Adverse Judgment Insurance can be purchased at any stage of litigation prior to a settlement being reached between the parties.

  • Generally, AJI does not provide coverage for settlement or defense costs. However, it can provide leverage during settlement negotiations because knowing that it’s in place reduces the pressure from unreasonable plaintiffs or their attorneys, who have an unrealistic expectation of the case’s value.

  • To start the insurer will conduct an underwrite of the risk which usually requires substantial diligence.  This diligence includes looking for strong factual and legal issues, and also looking at the judge, the jurisdiction, the parties’ counsel as well as the appellate panel and the skill and experience of appellate counsel.
  • Once the insurer has completed the due diligence, it will usually engage in a Q&A with the insured for any items that might need clarification.

  • If the risk is insurable, the insurer will propose policy terms and pricing.

  • Then the insured pays a one-time premium transfers up to 100% of the aggregate liability to the carrier.

  • First of all, it mitigates the risk of a catastrophic adverse judgment by ensuring that there is sufficient insurance coverage in place to pay all of the ultimate damages awarded against the company.

  • Facilitates M&A and financing transactions that are jeopardize by pending litigation by ring-fencing the liability for a known, fixed cost.
  • As mentioned earlier it also provides an advantage in settlement negotiations by removing some of the undue pressures that may cause a defendant to settle on less than favorable terms.  

  • And lastly, it provides certainty to help with budgets, forecasts, and expenditures so that companies can get back to business. 

Certum Group Can Help

Get in touch to start discussing options.

Recent Content

Blurred view through glass of a meeting in a sunlit office.
By Certum Team January 12, 2026
Litigation finance has become an essential tool for modern litigation strategy — but with its growth has come a wave of discovery requests seeking information about funding arrangements. These requests are improper, burdensome, and legally unsupported. To help lawyers and litigants push back with confidence, Certum has released a new Model Brief Opposing Discovery of Litigation Funding—a comprehensive, practitioner-oriented document designed to equip litigators with the strongest arguments, cases, and frameworks available. This publication is now available for free download . The Model Brief is part of Certum’s growing library of thought leadership and practical guidance on litigation finance and insurance. That library includes Certum’s Guide to Litigation Funding and its annual survey of in-house counsel . Across federal and state courts, parties continue to seek discovery into litigation funding sources and materials, often as a tactic rather than a legitimate inquiry into claims or defenses. These efforts raise serious issues: Privilege and work-product concerns Chilling effects on access to justice Attempts to shift focus away from the merits Increased litigation costs and delays Yet for many lawyers, responding to these requests requires reinventing the wheel. Certum’s model brief solves that problem. It provides a structured, persuasive, and research-backed response that can be adapted swiftly to any case. Click here to download the brief.
By Certum Team January 6, 2026
Bloomberg recently interviewed Certum Group’s William Marra as part of its coverage of efforts by commercial liability insurers to require the disclosure of third-party litigation funding agreements. Marra explained to Bloomberg that “[t]he disclosure of litigation funding risks putting impecunious litigants at a systematic disadvantage in our legal system,” adding mandatory disclosure “can disclose to defendants very valuable information, including who has funding, and critically, who does not have funding.” Marra further responded to the argument that litigation funders might fuel frivolous litigation. “To the contrary, the evidence shows that funders serve as a very effective screen, only backing the most meritorious cases, and if anything, likely resulting in fewer weak cases getting filed,” Marra said. This statements builds on arguments Marra previously advantaged in a Vanderbilt Law Review article about litigation funding.  The Bloomberg article is available here .
Blurred view of a business meeting in progress through a glass door. People are seated around a table.
By Certum Team December 17, 2025
Certum’s William Marra has been elected to the Board of Directors of the International Legal Finance Association, the litigation finance industry’s leading advocacy group. Will joins five other new members of ILFA’s Board, including: Marcel Wegmüller, the co-founder and CEO of Nivalion; David Perla, the Vice Chair of Burford Capital; Erik Bomans, the CEO of Deminor Recovery Services; Kacey Wolmer, the CEO of Contingency Capital; Rob Rothkopf, the founder and Managing Partner of Balance Legal Capital. “We are honored to welcome Marcel, David, Erik, Kacey, Rob, and William to ILFA’s Board of Directors,” said Paul Kong, the Executive Director of ILFA. “Each brings exceptional expertise, deep industry insight, and a demonstrated commitment to the responsible growth of legal finance. Their leadership will strengthen ILFA’s work to promote transparency, expand access to justice, and support the continued global development of our industry.” “I am delighted to join ILFA’s Board and assist with its important public policy work,” Will Marra said. “Litigation finance helps level the playing field and ensures cases are resolved based on their merits, not the size of a party’s checkbook. LFA’s advocacy for claimholders who need litigation finance is more important now than ever before.” The International Legal Finance Association (ILFA) represents the global commercial legal finance community, and its mission is to engage, educate and influence legislative, regulatory and judicial landscapes as the voice of the commercial legal finance industry. It is the only global association of commercial legal finance companies and is an independent, non-profit trade association promoting the highest standards of operation and service for the commercial legal finance sector. ILFA has local chapter representation around the world.