About 46 percent of all West German households have insurance policies that cover legal expenses, and some have claimed that the very existence of such insurance encourages litigation, thus increasing court caseloads. This study examines the validity of two theses which, if true, could mutually reinforce the inducement effect of legal insurance: (1) the inducement thesis, which predicts that people who have legal insurance litigate more often because they do not fear any costs; and (2) the recruitment thesis, which predicts that those who litigate more often are more likely to buy legal insurance. In comparing the social characteristics of those who hold legal insurance with those of the West German general population, some evidence was found for the recruitment thesis. A representative sample from insurance claims files was analyzed to determine what kinds of cases legal insurance policies are used for and what kinds of services lawyers render when consulted by insured clients. It was found that in spite of prepaid insurance neither lawyers nor clients always go to court; they are still likely to seek solutions which avoid courts. A stronger test of the inducement hypothesis was obtained by comparing insurance claims with court case data. This study examined whether (1) those whose costs are covered by insurance take higher risks of losing a lawsuit, (2) they are less inclined to accept a settlement and more likely to seek judgment, and (3) they more often appeal judgments. In no case were insurance policyholders more likely to pursue litigation. Ten footnotes and 16 references are provided.