After The Event (‘ATE’) insurance is an insurance policy which as the name suggests, is purchased after a legal dispute has arisen. The policy provides cover for legal costs incurred in the pursuit or defence of litigation and arbitration.
In nearly all cases (save for the rare few excepted), premiums incurred in purchasing ATE insurance cover are not recoverable, meaning that even if you win your case, you will nearly always have to pay the premium.
With that in mind, a few of the key advantages and disadvantages of ATE insurance are summarised below:
- It removes the risk of having to pay the other side’s costs if you lose your case.
- If a contingent policy is written, the premium will not be payable at all if you lose your case (though it will be payable if you win).
- The insurer will analyse the merits of the case or defence when insurance is taken out and if this is disclosed to the other side, it could incentivise them to settle. It shows that you are serious about litigation having already minimised your litigation costs risk.
- Policies can be arranged at any stage of the case, though they may be more difficult and expensive to secure during later stages.
- The premiums can be very expensive and unsurprisingly, insurers will not fund cases that are unlikely to succeed, or where prospects are slim.
- The fact that a separate assessment of the merits of the case is required by the insurer can be a downside in the sense that you would bear the cost of such assessment.
- The policy will contain a number of exclusion clauses and should therefore be negotiated with care.
- Not only are insurers unlikely to offer cover in the first place if the chances of success are slim, but if at any time during the course of the proceedings the likelihood of success falls below the insurer’s minimum percentage (often 60%), they may withdraw the cover. It is important that you check the wording and exclusions contained within the insurance policy in relation to this.
If you wish to discuss any of the issues raised in this article with one of our litigation specialists, please contact: