After the event insurance, or ATE insurance, is a type of legal expenses insurance policy taken out to provide cover for legal costs incurred in litigation or arbitration. It is so called because the policy is purchased after a legal dispute arises.
Although it can be used either in pursuit or defence of a claim, in practice after the event insurance is mainly used by claimants. It can be used for most areas of litigation, except for matrimonial or criminal law.
After the event insurers will usually offer a variety of covers, which will be tailored to the specific needs of the client. Typically, the ATE insurance will cover an individual’s or business’ own disbursements as well as potential liability to pay an opponent’s legal costs if the opponent(s) wins.
There are several ways in which premiums can typically be structured, depending on the type of case and the limit of cover required, which include the following:
In the majority of cases, the premiums are contingent upon success. This is a fundamentally important distinction between ATE insurance and other forms of insurance. This means that the Insured only pays the premium (or some part of it), if the threshold for Success, as defined in the policy, is met.
This has two major benefits for persons and businesses considering ATE insurance. Firstly, it means there is no cash call to start the cover because the premium is only payable at the end when the outcome of the case is known. Secondly, if the case is lost, the Insured can make a claim on the ATE policy without having to pay a premium – because the premium is only payable on Success.
In most ATE policies, they will go as far as to say the premium is only payable to the extent that there are sufficient proceeds from which to pay the premium to the insurer. This protects Insured parties from owing more to the insurer than they were notionally entitled to in cases where the proceeds are ultimately disappointing compared to original expectations.
ATE insurance can theooretically be purchased at any stage in the litigation process but it is usually purchased before any significant legal costs have been incurred – usually at the point a claim is about to be notified to a court or arbitration.
Whether or not it is better to apply for ATE insurance early in the process or later in proceedings is a case-specific question. Our brokers can help explain the pros and cons over the timing of any application in the context of the case.
For instance, some cases will not attract competitive quotations from the market unless key information, such as expert reports on critical issues of liability or quantum, have been obtained.
Depending on an insurer’s appetite to cover the case, it is possible to obtain retrospective cover for costs already incurred.
The person making the application for ATE insurance is known as the Proposer.
It is strongly recommended that the application (including Proposal Form) is completed by the instructed legal representative on the Proposer’s behalf. This is because firstly, the legal representatives will more readily be able to answer the technical questions asked by underwriters, and also because legal representatives are considered to be more objective in answering questions about the merits of the claim than the individual or business seeking the cover.
Legal representatives with questions about ATE insurance, the application process or best practice when making an application should contact our experienced broking team to provide answers tailored to the situation.
The main advantage of after the event insurance for an individual or a business is that it removes the risk of having to pay the other sides’s costs – and it can also cover own solicitor’s fees and disbursements if the case is lost.
If the existence of ATE insurance is notified to the other side, with the insurer’s consent, the mere existence of the cover can strengthen a case in the eyes of the opponent because they will be aware that the insurer will have carried out their own assessment of the merits of the case before issuing the policy. This can lead to improved settlement leverage.
After the event insurance premiums are no longer recoverable from the losing opponent if the case is successful for policies commencing after 1st April 2013. Exceptions to this are:
Upfront Premium
Much like any other form of insurance, the policyholder pays a premium upfront in exchange for insurers providing the policy cover.
Deferred and Contingent Premium
Unique to the ATE market, a contingent premium means that you are only liable to pay insurers a premium if your case is successful.
If your case is unsuccessful, the insurer is liable to pay up to the agreed limit of indemnity and does not charge a premium.
Part Upfront/Part Deferred and Contingent
Essentially a balance between the two previous options. Insurers receive some premium upfront but with the balance (often being the majority portion) being deferred and contingent upon success.
These premiums are particularly commonplace for larger policies.
Staged and discounted premiums
Applicable to all premium mechanisms – it is usually possible to arrange for the amount of premium payable to be “staged” or “discounted” in order to help keep the premium due proportionate to the risk the insurers have taken.
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