Cover And Conflict: Tensions Rise Between Insurers And Litigation Funders

Burford’s clash with Chubb signals a deeper rift in the legal-financial ecosystem

A high-profile dispute between litigation finance heavyweight Burford Capital and global insurer Chubb has cast fresh light on growing tensions between two powerful players in the legal services market. At the heart of the confrontation is a stark question: who should hold the reins in high-stakes litigation—the financiers backing the claims or the insurers underwriting the risks?

Burford, one of the largest and most influential firms in the litigation funding industry, has accused Chubb of attempting to undermine the entire sector. According to Burford, Chubb has pressured peers, clients, and intermediaries to avoid working with litigation funders, engaging in what it characterises as anti-competitive conduct designed to protect its own interests. The accusation has reignited a simmering conflict over control, influence, and ideology in the increasingly complex intersection of legal finance and insurance.

A Shifting Landscape in Legal Risk

Litigation funding, once a niche mechanism used primarily in class actions or insolvency proceedings, has grown into a $15 billion global industry. Funders like Burford, Omni Bridgeway, and Therium provide capital to law firms and corporate plaintiffs in return for a share of the eventual award or settlement. This model enables claimants to pursue complex and costly cases without shouldering the financial risk.

Insurance, on the other hand, has long been embedded in the litigation process through after-the-event (ATE) cover and other legal expense insurance products. These policies protect claimants from adverse cost awards or fund specific elements of litigation expense.

Traditionally, funders and insurers coexisted, occasionally even collaborating. But as litigation finance has scaled up and become more assertive, insurers now perceive it not as a partner, but as a potential threat—both commercially and procedurally.

The Burford–Chubb Dispute

The current dispute centres on Burford’s claim that Chubb has been discouraging clients and counterparties from engaging with litigation funders. Although Chubb has not issued a formal public rebuttal, the implication is that it views litigation finance as either commercially undesirable or strategically disruptive.

Burford alleges that Chubb’s conduct goes beyond opinion into coordinated influence—an effort to damage the credibility and operability of the litigation finance sector. Such tactics, Burford argues, could amount to a misuse of market power, particularly given Chubb’s dominant position in commercial and corporate insurance lines.

This is not the first time insurers have expressed unease about litigation funding. Concerns include the possibility of funders prolonging proceedings to increase returns, encouraging speculative claims, or interfering with the insured party’s decision-making in settlement negotiations. But Burford’s claim elevates the issue to a new legal and reputational level, raising questions about the boundaries of influence in a shared market.

Conflicting Models, Diverging Incentives

At the core of the tension is a fundamental mismatch in business logic. Litigation funders are motivated by upside: their returns increase with claim size, complexity, and success. Insurers, by contrast, are risk-averse by design. Their aim is to minimise exposure, contain costs, and settle disputes predictably.

This creates friction when both actors are involved in the same dispute. Funders may resist early settlements if a higher award appears attainable. Insurers may balk at prolonged litigation that increases claim volatility. Disputes can also arise over control—who gets to approve strategy, appoint counsel, or sign off on offers.

These practical challenges are exacerbated by a broader philosophical divide. Insurers see litigation as a risk to be managed. Funders see it as an investment to be monetised. The result is growing mistrust and, in some cases, direct confrontation.

Legal and Regulatory Questions

Burford’s accusations raise potential competition law issues. If Chubb did, in fact, use its market position to dissuade clients from using alternative financing models, that could trigger scrutiny from competition regulators in the US or UK. However, proving abuse of dominance in the context of informal market behaviour is notoriously difficult.

More broadly, the episode highlights a regulatory vacuum in litigation finance. While insurers operate under well-established rules and capital requirements, litigation funders exist in a patchwork of partial oversight. In jurisdictions such as the UK and Australia, funders are subject to professional codes and disclosure obligations. In the US, regulation is fragmented and minimal.

This asymmetry fuels suspicion. Insurers argue that funders benefit from freedom without accountability. Funders counter that insurers are using their incumbency to stifle innovation and preserve outdated power structures.

Professional bodies and trade associations are increasingly calling for clearer rules governing disclosure, capital adequacy, and the respective rights of funders and insurers in shared litigation. But formal reform remains slow-moving.

Market Implications

The fallout from the Burford–Chubb conflict could reshape how litigation funding and insurance interact across sectors. If insurers take a harder line on litigation funders, clients may find it harder to secure comprehensive coverage when using third-party capital. That, in turn, could push some claimants away from funded litigation or prompt law firms to rethink risk-sharing structures.

Alternatively, the dispute could catalyze new hybrid models. Some funders are already exploring co-insurance arrangements or integrated risk products that blend funding with insurance protection. Others are building deeper relationships with institutional capital providers to reduce dependency on insurer cooperation altogether.

But the broader risk remains: a chilling effect. If the perception spreads that using a litigation funder will create conflict with insurers or undermine other aspects of legal risk management, it could inhibit claimants' access to funding—particularly in complex commercial disputes.

Conclusion: Towards a New Equilibrium?

The clash between Burford and Chubb is more than a commercial squabble. It reflects a deeper, structural conflict between two models of legal engagement. One sees litigation as a cost to be minimised. The other views it as an asset class.

As legal finance becomes more sophisticated and integrated into mainstream legal practice, this tension is unlikely to disappear. Instead, it will need to be managed—through clearer regulation, contractual innovation, and mutual recognition of roles.

Until then, disputes like this one will continue to surface, forcing the legal industry to grapple with an uncomfortable question: when justice is financed, who ultimately holds the power to shape its course?

Author: Ricardo Goulart