U.S. Litigation and Insurance Risk Management
This article was original published on Funder in March 2026.
For many Israeli companies, the greatest shock upon entering the U.S. market is not regulation, but litigation. The United States is a jurisdiction where the burden of legal claims is uniquely heavy—not only because lawsuits are common, but because they are expensive, invasive, and slow to resolve. Even meritless claims can exert immense pressure through Discovery procedures, Motion practice, and reputational risks.
Israeli executives often assume that if they act reasonably, litigation risk will remain low. In the U.S., however, passing the “reasonableness test” does not grant immunity. Exposure arises from product failures, data security breaches, labor disputes, breaches of contract, shareholder suits, and regulatory investigations. The question is not if claims will arise, but whether the company is prepared when they do.
Insurance is the first line of defense, but it is frequently misunderstood. Directors and Officers (D&O) insurance protects management against claims alleging mismanagement or breach of fiduciary duties. Errors and Omissions (E&O) insurance covers failures in professional services or technology products. Cyber policies address data breaches and ransomware events. Product Liability insurance protects against claims stemming from physical or software-based products. Every policy contains exclusions, notice requirements, and coverage gaps that can silently nullify protection if not handled correctly.
Israeli companies regularly under-insure, purchase policies that do not align with their actual risk profile, or fail to provide timely notice when a problem first emerges. In the U.S., Late Notice alone can void coverage, even if the insurer suffered no prejudice from the delay. Attempting informal problem-solving can be disastrous if it delays formal reporting to the carrier.
Beyond insurance, litigation risk can be structurally mitigated through clear contracts, well-drafted limitation of liability and indemnity clauses, forum selection clauses, arbitration agreements, and disciplined internal communication. Equally important is training management to operate under the assumption that emails and messages may one day be read aloud in a courtroom.
The key insight is this: U.S. litigation is not merely a legal event; it is a business risk that must be managed like any other. Companies that plan for this early reduce both the cost and the disruption to their operations. Those who ignore it learn the rules under pressure.
Michael Ehrenstein, Esq. is a founding partner at the U.S. law firm Ehrenstein | Sager, specializing in commercial law, complex litigation, and high-stakes international arbitration.
Legal Disclaimer: This article does not constitute legal or tax advice. Its purpose is to raise awareness regarding U.S. compliance issues. Israeli businesses should consult with qualified U.S. legal and tax professionals for advice tailored to their specific operations.
