Using Insurance to Deter Lawsuits

The conventional wisdom (my anecdotal experience, anyway) is that the availability of insurance fuels lawsuits. People that otherwise might not sue would use litigation to access insurance funds. I'm sure there's a literature on this. But most insurance covers both defense and indemnity – that is, litigation costs and settlements. But what if the insurance covered the defense and not any settlement costs? Would that serve as a disincentive to bring suit? It surely would change the litigation dynamic.In The Effect of Patent Litigation Insurance: Theory and Evidence from NPEs, Bernhard Ganglmair (University of Mannheim – Economics), Christian Helmers (Santa Clara – Economics), Brian J. Love (Santa Clara – Law) explore this question with respect to NPE patent litigation insurance. The draft is on SSRN, and the abstract is here:We analyze the extent to which private defensive litigation insurance deters patent assertion by non-practicing entities (NPEs). We do so by…

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