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Much analysis has followed the Court of Appeal’s decision in Premier Motorauctions and the impact it may have on impecunious or nominal claimants (including Insolvency Practitioners (“IPs”) who have had their claims stifled by an inability to satisfy a security for costs order.

For the most part, however, this analysis has not extended to the steps an IP can take to overcome the inevitable security for costs applications that they are likely to face, and how they can identify the most cost effective solution.

Security for costs applications are becoming more common. As a result, the method with which any given insurer chooses to defeat security, and the way that insurer charges for any financial instruments above and beyond the ATE policy alone, have become a fierce area of competition between insurers.

In the past 4 months we have had significant successes in securing adverse costs policies with additional security for costs protection at no extra cost. Non-avoidance policies and deeds of indemnity are commonly deployed tools to defeat such applications. However, there are several pitfalls to be mindful of when considering these options.  The following are a few do’s and don’ts.

 

Do:

Do consider multiple carriers.  While some insurers will charge an upfront cost for such an extension, others may not.

Do ensure you make it clear to insurers from the outset if you think it is likely a security for cost application might be made. In so doing, you should seek as much certainty as possible as to how the insurer will approach such a scenario should it arise.  

 

Don’t:

Don’t roll the dice by only seeking adverse costs insurance once a security for costs application has been made – it might be too late to convince insurers.

Don’t leave it until the last minute to notify the insurer of an imminent security for costs hearing. It may well be that the insurer (and broker) can help provide supportive comment which can give the opponent the necessary comfort that such an application is unnecessary.

Don’t liaise with litigation funders as the first port of call for such an issue. Funding will rarely, if ever, be the most effective solution.

 

About TheJudge

With the benefit of our independent, whole of market broking approach, TheJudge are able to access insurers that can provide the necessary financial instruments to defeat security for costs applications on a fully contingent premium basis (i.e. with no payment upfront). We have even secured an exclusive agreement with a leading ‘A-rated’ insurer to provide our IP clients with a costs-free solution to security for costs issues, provided that no other insurer has previously been approached to offer terms.