Insurance for losing court case
An investor had purchased an off-plan apartment. To this end, the investor had paid the deposit to Solicitor Firm X. Solicitor X was only supposed to pay the constructor by installments subject to the agreement and completion of staged work. However, without any completion of the contractual stage work, solicitor X released the money. The apartment is on hold and will possibly be sold to a third party altogether.
The investor wants to place a charge of negligence and damages against the solicitor X for releasing the money and not advising correctly about the risks.
To place a charge against Solicitor Firm X, the investor had hired their own (another) solicitor Y.
Solicitor Y thinks that the investor is likely to win.
However, it is also possible that the investor could lose the case.
If the investor loses the case, they will have to pay Solicitor X between £100,000 to £150,000.
To protect themselves, the investor wants to insure themselves against this huge bill.
In this situation, would it be permissible to take out insurance to protect them from double losses?
بِسْمِ اللهِ الرَّحْمنِ الرَّحِيْم
In the name of Allah, the Most Gracious, the Most Merciful
The agreement between the investor and solicitor firm is “a promise that is suspended upon a condition.” In other words, when the condition is found, the promise must be fulfilled. Assuming what you mentioned is correct and accurate, the solicitor firm would be liable if any losses were incurred due to him not adhering to the terms mentioned in the contract. (Al-Qawaid Al-Fiqhiya: p. 92 [Dar At-Tirmidhi])
In essence, the insurance referenced is prohibited due to possessing elements of interest and gambling. However, if the investor genuinely feels that he would not be able to afford the large sum of money mentioned in the query should he lose the case, and it would be a means of great hardship, then based on the principle “There is no harm no reciprocation of harm,” it would exclusively be permissible for him to take out this type of insurance. When the need for taking out insurance ceases, the investor should immediately terminate the insurance. (Al-Qawaid Al-Fiqhiya: p. 28 [Dar At-Tirmidhi])
Only Allah knows best
Written by Maulana Mohammad Ahsan Osmani
Checked and approved by Mufti Mohammed Tosir Miah
Darul Ifta Birmingham