Bloomberg Tax
April 13, 2023, 9:30 AM

Quinn Emanuel’s Juicy Obamacare Fee Tests Litigation Insurers

Roy Strom
Roy Strom

Welcome back to the Big Law Business column. I’m Roy Strom, and today we look at a pivotal case for the burgeoning litigation insurance market. Sign up to receive this column in your Inbox on Thursday mornings.

Everybody looked like a winner in Quinn Emanuel Urquhart & Sullivan’s long-running class-action over Obamacare payments—until January.

The firm in 2020 had won $3.7 billion for more than 150 health insurers stiffed when Congress decided not to pay them for offering risky Obamacare policies. Quinn Emanuel itself received a $185 million fee the following year for its work.

Then in January, the Federal Circuit placed the nine-figure fee award in jeopardy. The Circuit ordered a district court judge to re-calculate the award based on a procedure that wasn’t used the first time around.

If the award is knocked down, an insurer might be on the hook for much of the difference. And a young but growing litigation insurance market could suffer.

At issue is something called a judgment preservation insurance policy. Quinn Emanuel took out such a policy on its big award, court documents show.

The policies insure award judgments against the legal risk of being overturned on appeal. Brokers have said the policies are gaining popularity as litigation grows increasingly financialized.

The big advantage for law firms or companies that take out the policies is financial flexibility. In Quinn Emanuel’s case, the policy allowed the firm to distribute the fee to its partners before the appeal process concluded. Companies can also borrow money more easily when a highly-rated insurance company backs an award.

Policies typically carry a premium of about 10% to 15% of the judgment they’re insuring. So a $100 million judgment could cost a firm $10 million to $15 million.

Policies often cover only a portion of the judgment, and there’s plenty of wiggle-room in the pricing. Some deals provide insurers some upside in judgments that make it safely through an appeals process, according to industry insiders.

The details of Quinn’s policy have not been made public. A group of health insurers in the class have asked a judge for access to it.

The insurers have objected to the size of the fee award, arguing the firm should earn about $9 million—about 95% less than the court originally approved.

If the health insurers are successful, the firm’s unknown insurer will likely be on the hook for some portion of the difference.

Some fear that if the award is knocked down, the market for judgment preservation insurance will take a hit. Policies could become more expensive, or the business could become unpalatable for insurers, law firms or both.

“If there is a big loss where there is a sense within the insurance community that there has been some flawed underwriting or mispricing of the risk, at minimum, you’d see an adjustment in the pricing,” said Charles Agee, chief executive officer of litigation finance advisory firm Westfleet Advisors. “But it could really have a broader chilling effect.”

Quinn Emanuel has argued its $185 million award is justified by the positive result it obtained for the class-members, who received 100% of the claims they pursued against the federal government. The fee represented 5% of the total award, which is what Quinn Emanuel told prospective clients it would request from the judge.

The problem with the award, according to the Federal Circuit, was that Quinn Emanuel also promised clients its fee would be subject to a “lodestar cross-check,” which didn’t happen. Under the lodestar method, courts consider the hours lawyers worked on a case, applying a multiplier to reward lawyers for results and the risk they take on.

The Federal Circuit has required a district court judge to apply the formula to calculate the award. If the court strictly applies the lodestar method, the fee could be cut considerably.

Quinn Emanuel has said its lawyers worked nearly 10,000 hours on the case. Its original award represented a lodestar multiplier of around 18 to 19 times its normal billable rate.

A multiplier of two, which is closer to the historical average, would generate an award of about $20 million—or about $165 million less than the original amount.

Lodestar multipliers in a two-year study of rulings published in 2010 ranged from .07 to 10.3, with an average of 1.65. Still, they’d reached much higher in some cases, according to the study by Brian Fitzpatrick, a Vanderbilt Law School professor.

An award knockdown for Quinn Emanuel would trigger the next question in the development of the litigation insurance market: How readily will insurers pay claims?

While there have been no public losses for insurers yet, they are likely to pay claims early in the development of the market, said Tom Baker, a University of Pennsylvania Carey Law School professor who studies insurance.

“My view has been that they are definitely going to pay in the beginning because otherwise the market will go away,” he said.

More broadly, Baker sees potential for litigation insurance to grease the wheels for a more efficient litigation finance market.

For now, insurers are picking the “safest, easiest-to-price” situations where policy holders have strong business reasons for the insurance, Baker said.

“That’s getting their toe in the water,” he said. “We’ll see if it works.”

Worth Your Time

On Big Law Associates I: The disruption in the associate market continued this week, with Cooley delaying the start for first-year associates to January 2024, Meghan Tribe reports. They were set to start in November. Have a happy holiday.

On Big Law Associates II: Sometimes success comes early for Big Law associates. Former Skadden, Arps, Slate, Meagher & Flom associate Adeeb Sahar nabbed a top legal job at Twitter, Brian Baxter reports. Sahar had spent just four years as an associate at Skadden, but he has significant business experience.

On Accounting Firms: Ernst & Young scrapped a split of the firm’s consulting and audit practices, Amanda Iacone reports. The plan hit the skids after struggling to get consensus from partners over compensation and staffing issues. Might sound familiar to Big Law partners.

That’s it for this week! Thanks for reading and please send me your thoughts, critiques, and tips.

To contact the reporter on this story: Roy Strom in Chicago at

To contact the editors responsible for this story: Chris Opfer at; John Hughes at

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