Abstract
In this paper we consider the effects of legal-expenses insurance on settlement. Using a one-shot asymmetric information model of litigation, we scrutinize the litigants' interactions under the situations that the plaintiff is before-the-event insured, after-the-event insured or self-funded. We investigate the effects of insurance on settlement probabilities, settlement amounts, care levels and the plaintiff's welfare. We also show how the model can be amended to include a "recoverable" element of the insurance. Our results exhibit that insurance increases the plaintiff's expectation on settlement amount but its effects on settlement probabilities and care levels depend on the distribution of the accident loss. This is partly because asymmetric information distorts the litigants' negotiation power. Insurance can either increase or decrease welfare.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
