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Comment by ef4 | Hacker News Reader

Is it possible to buy legal defense insurance? Not just insurance against civil liability, but insurance that will pay for legal defense in a criminal case?

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Sure, and in the corporate world it's standard already - director's and officer's insurance covers criminal charges as well. Naturally deliberate criminal acts are excluded, but it'll cover you against the sort of accidents people can make when conducting business.

The government gets around this by ousting their target from their companies prior to laying criminal charges. Once the target no longer has control over their business, the new management can be pressured into dropping / denying the target's D&O coverage.

How can such insurance exclude deliberate criminal acts? Wouldn't it be impossible to determine if such an act had been committed at all, let alone deliberately, until the trial had concluded? If it turned out to be deliberate, what then, do they send you a bill for the lawyer's fees?

While I'm not an expert here (thank god), I believe D&O insurance is one of those things where the insurance companies pays after the fact, when you file a claim. So instead of sending you a bill for the lawyer's fees, they likely would just dispute your claim and not reimburse you.

EDIT: Huh, it seems that although it's rare, yes, sometimes your D&O insurer will try to recoup costs by sending you a bill. Look at this: http://www.dandodiary.com/2012/11/articles/d-o-insurance/do-...

Interesting, the article says many (presumably non-criminal) securities cases settle because companies are afraid an adverse judgement would void their D&O insurance. I wonder if anyone ever pleads nolo contendere in a plea bargain just to maintain D&O coverage.

You can make a retainer contract with your attorney. If you had the money hidden or in the attorney's protection I suppose you could get around having your assets frozen, but it would be difficult to predict the cost before you've even been accused of a crime.

edit: Maybe it's time for lawyers to start accepting bitcoins for compensation?

Better idea: Get lawyers to accept retainers which are refunded if not used after a number of years, and which is meanwhile invested at interest in market securities. Then you just put a good chunk of your retirement fund into the "retainer" and get it back before you retire if all goes well.

Naturally the lawyers would have to figure out whether (or how best) you could do something like that in such a way that the money couldn't be seized.

The moral hazard would make it too difficult (read: impossible) to price the risk.

Good point.

If you make it a routine requirement of business deals it'd soften the moral hazard.

How so? Having your defense funded doesn't guarantee you immunity or a "not guilty" verdict. Where's the moral hazard?

In short, people would take out the insurance right before they commit a crime so they didn't have to pay for their own defense. It doesn't guarantee a verdict, but if you've decided you're going to go to trial anyway, you might as well take out the insurance, and I don't see how the insurance company could survive in that environment, since the principle of insurance is that most people won't need it.

The service exists, and presumably is profitable: http://en.wikipedia.org/wiki/Legal_expenses_insurance

To address your comment in detail:

1)>>>In short, people would take out the insurance right before they commit a crime so they didn't have to pay for their own defense.

2)>>>I don't see how the insurance company could survive in that environment, since the principle of insurance is that most people won't need it.

Point 1: Require the insurance to be delayed: you must pay into the insurance for X number of years before it can be used. In this case, "right before they commit a crime" will end up being long enough to recoup the costs of the defense. An actuary can help find what number of years is needed for the specific business.

http://en.wikipedia.org/wiki/Actuary

Point 2: All insurance companies are faced with the challenge of survival. They often overcome this challenge by increasing their pool of customers: "most people won't need it" and are profit centers, the few who do need it are the cost centers. Again, actuaries are the folks to call.

I imagine it might be difficult to structure in a way that isn't also seizable by the government.

Civil defense, yes. Criminal, no.

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