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After the event insurance PDF Print E-mail

Going to court can be expensive.  Some individuals and businesses have legal expenses insurance all year round.  Others may be able to insure against legal expenses “after the event” – when they need to bring or defend a claim.  The Senior Courts Costs Office has held that an after the event (ATE) insurance premium of more than £9 million was recoverable in full from the defendants.   This checklist explains what after the event insurance is and highlights its main advantages and disadvantages for your business.

What is ATE insurance?

 

·          ATE insurance is a type of legal expenses insurance policy that provides cover for the legal costs incurred in the pursuit or defence of litigation and arbitration. The policy is purchased after a legal dispute arises.

 

·          It is distinct from pre-purchased (before the event) insurance policies which are commonly purchased with, for example, house insurance or as part of your business liability cover.

 

·          ATE insurance can be purchased for nearly all areas of litigation, with the exception of matrimonial or criminal law.

 

·          ATE insurers offer a variety of cover tailored to the specific needs of the client. It typically covers your:

 

o    business’ own disbursements; and

 

o    liability to pay an opponent’s legal costs if the opponent wins.

 

When is ATE insurance available and appropriate?

 

Not all cases are appropriate for ATE insurance, nor will insurance always be available (at least not at a sensible price). ATE insurance is:

 

·          Available to claimants and defendants.

 

·          Generally only available where there is no fixed recovery rate.

 

·          Unlikely to be provided where the case involves novel issues (and if offered, premiums are likely to be very high given the additional risk).

 

·          Limited to English court litigation and domestic arbitrations and tribunal work. It cannot cover matters in other jurisdictions because of recoverability and regulatory or licence requirements.

 

What are the main advantages of ATE insurance for a business?

 

·          It removes the risk of your business having to pay the other side’s costs (and if covered, your own costs and disbursements) if you lose the case. You will have a good idea of the downside in the form of the cost of the insurance premium as soon as a quote is obtained.

 

·          Currently, the insurance premium should be recoverable from the losing side if the case is successful.

 

·          It provides an incentive for the other side to settle, as they will know the insurer conducted a separate analysis of the merits of the case or defence. Having ATE insurance in place also sends the message that your business is in the litigation for the duration, having already minimised the litigation costs risk.

 

·          ATE policies can be arranged at any stage of the case, although they may be more difficult and expensive to secure later in the process.

 

What are the main disadvantages of ATE insurance for a business?

 

·          Most insurers will require a separate assessment of your business’ case. The cost of that assessment will initially be borne by you, although if the insurance goes ahead, it will usually be absorbed by the premium. Insurers will not fund cases that are unlikely to succeed.  (This can also be an advantage, as it gives you an impartial assessment of your prospects of success early in the process).

 

·          If at any time during the course of the proceedings the likelihood of success falls below your insurer’s minimum percentage (often about 60%), the insurer will probably withdraw the cover.

 

·          The policy will contain a list of exclusions which you should read with care. Standard exclusions include:

 

o    misrepresentation or fraud;

 

o    discontinuance due to lack of funds; and

 

o    insolvency of your opponent.

 

·          Some insurers may insist on agreeing an acceptable settlement figure at the outset. This means that permission from your insurer would be required if you wanted to accept a sum below that figure. If your business decided to settle without your insurer’s approval, you may be forced to pay the full premium. Similarly, your insurer’s approval would usually be required before abandoning proceedings by consent or discontinuing the proceedings.

 

·          Achieving settlement generally can be more difficult where ATE insurance is in place. In addition to requiring consent, your insurer will be keen to ensure their interests are protected and may insist on being involved in the settlement process.

 

·          If your opponent is unable to pay the ATE premium or that premium is disallowed on taxation, your business will have to pay the ATE insurance premium; even if you win the case.

 

·          An ATE policy may not be sufficient to defeat an application for security for costs by itself (this is where the opponent insists that you prove you have the financial means to be able to take the case through to its conclusion.

 

 

 

More information

 

If you have any queries about the content of this checklist please contact Steve Anderson ( This e-mail address is being protected from spambots. You need JavaScript enabled to view it )

 

 

 

 

 

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