Unsuccessful parties to litigation will normally be required to pay a proportion of the winner’s costs as well as their own. 'After the event' insurance (ATE) offers a safeguard against all or part of this risk.
Consideration should be given as to whether you have any existing insurance for legal costs, known as 'before the event' (BTE) legal expenses insurance. The existence of BTE may affect the ability to recover an ATE insurance premium from an opponent in the event of success.
Where ATE insurance is taken it will be necessary to keep the insurer informed about the progress of the claim and as to all material matters.
What cover is available?
ATE is available to meet either the other side’s costs only, or the other side’s costs and an element of your own costs, subject to the level and terms of indemnity of the policy. ATE can include costs incurred before inception of a policy and the amount of cover available ranges from a few thousand pounds up to £10m or more.
ATE is usually available only to claimants but some insurers can provide cover for defendants. ATE cover does not extend to the insured’s own management time and expenses, but may cover an element of expenses incurred by solicitors, such as counsel fees, in investigating and pursuing the claim.
How is ATE cover obtained?
It can be obtained through lawyers or via your own broker or insurer.
At what stage should ATE be purchased?
ATE can be purchased before proceedings have been issued or at any time after they have been issued, although the later the date of purchase, the more expensive the premium is likely to be. Delay in taking ATE may make the obtaining of cover more difficult.
What is the procedure for purchasing ATE?
A proposal form and your solicitor's risk assessment of the case, addressing merits and the likely costs, will be provided to insurers. The proposal form will attach any pleadings, counsel’s opinions or other relevant documents. The insurer will then assess the information provided and decide whether to offer the insurance and at what premium.
Can the level of cover be increased as a matter progresses?
Subject to the circumstances of the matter and the type of ATE policy entered into, it may be possible to increase the level of cover in stages, with an additional premium being incurred on each increase in cover.
What level of premium is payable?
The level of premium payable depends on the type and level of cover sought and assessment of the risk, can typically be 30% to 45% of the sum insured, or may be calculated as a percentage of the costs incurred at the date a claim is successfully concluded by negotiation and/or in court proceedings.
Some insurers may be willing to offer ATE at lower premiums if the insured is willing to accept a high insurance excess.
When is the premium payable?
For ATE policies taken out prior to 1 April 2013, payment of the premium was usually deferred until the outcome of the case, with the premium only payable in the event of the case being successful.
For ATE policies taken from 1 April 2013 not all premiums will be deferred until the outcome of the case is determined, and as with other insurance products, in respect of commercial disputes ATE insurers may seek payment of an element of the premium when the policy is taken out.
Is the premium recoverable if the case is won?
For ATE policies taken out before 1 April 2013, the ATE premium may in whole or in part be recoverable from the losing party in litigation. The level of recovery will depend on the reasonableness and proportionality of the insurance premium and ATE cover.
For ATE policies taken out from 1 April 2013, the ATE premium will not save for limited exceptions relating to insolvency, publication and privacy proceedings (defamation), mesothelioma cases and for an initial expert’s report on liability and causation in clinical negligence claims, be recoverable from the losing party in the litigation.
Where a claim is successfully settled for a sum without or including costs, any ATE premium due will be payable to the insurer.
Damages recovered and costs payable under ATE
In the event of the insured recovering damages but having to pay all or an element of its opponent’s costs (e.g. for a substantial period following the date of an opponents Part 36 ‘without prejudice except as to costs’ offer), costs payable to an opponent may only be contributed to by the insurer for such sum in excess of damages recovered i.e. the insured’s damages may, subject to the terms of the ATE policy, have to be taken to pay the opponents costs prior to the insurer paying out under the policy.