After the Event (ATE) insurance, also known as litigation insurance, is a specialized type of insurance designed to protect individuals or businesses from the financial risks associated with pursuing legal action. It essentially acts as a safety net, covering the opponent's legal costs and sometimes even the policyholder's own disbursements if the case is lost. This allows claimants to pursue legitimate claims without the fear of crippling financial consequences should the litigation prove unsuccessful.
This article delves into the specifics of ATE insurance, outlining what it covers, the types of cases it's typically used for, and the key considerations involved in obtaining a policy. Understanding the scope of ATE insurance is crucial for anyone contemplating legal action, enabling them to make informed decisions about managing the financial risks involved.
| Coverage Area | Description | Example |
|---|---|---|
| Opponent's Legal Costs | Covers the legal fees and expenses that the insured party would be required to pay to the opposing side if they lose the case. | If a claimant loses a personal injury claim and is ordered to pay the defendant's legal costs, the ATE insurance would cover these costs up to the policy limit. |
| Own Disbursements (Expenses) | Covers the insured party's own out-of-pocket expenses incurred during the litigation, such as court fees, expert witness fees, and barrister fees. | The costs of hiring a medical expert to provide evidence in a medical negligence claim can be covered under the policy if the case is lost. |
| Adverse Judgment | Some policies may cover the actual damages awarded to the opponent if the case is lost. This is less common and often subject to significant limitations. | If a claimant loses a commercial dispute and is ordered to pay damages to the defendant, some ATE policies might contribute to covering these damages. |
| Appeals | Coverage can extend to the costs associated with appealing a court decision, either by the insured party or the opponent. | If a claimant loses their initial trial and decides to appeal, the ATE policy can cover the costs of the appeal process, including further legal fees and court expenses. |
| Specific Case Types | ATE insurance is commonly used in personal injury, clinical negligence, commercial litigation, defamation, insolvency, and property disputes. | A company facing a breach of contract lawsuit might obtain ATE insurance to protect against the risk of paying the opponent's legal fees if they lose the case. |
| Policy Exclusions | Typical exclusions include cases involving fraud, deliberate misrepresentation, pre-existing disputes not disclosed, and breaches of policy terms. | If a claimant knowingly provides false information in their claim, the ATE insurer may refuse to provide cover. |
| Premium Payment | Premiums are typically contingent, meaning they are only payable if the case is successful. The premium is often a percentage of the damages recovered. | A claimant wins their personal injury claim and receives £50,000 in damages. The ATE premium is 25% of the damages, so they pay £12,500 to the insurer. |
| Timing of Policy Purchase | Policies are typically purchased after a solicitor has assessed the merits of the case but before significant legal costs are incurred. It's often more expensive to obtain ATE insurance later in the litigation process. | A solicitor advises their client to take out ATE insurance immediately after reviewing the initial evidence and determining that the case has a reasonable prospect of success. |
| Level of Cover | The amount of cover required depends on the estimated costs of the litigation, including the opponent's costs and the insured party's own disbursements. | A solicitor estimates that the opponent's legal costs in a commercial dispute could reach £100,000. The ATE policy should provide at least this level of cover. |
| Policy Terms and Conditions | Policies contain specific terms and conditions that must be adhered to, such as notifying the insurer of any changes in the case and following the solicitor's advice. | A claimant changes solicitors without notifying the ATE insurer. This could invalidate the policy if the terms require prior notification of any changes in legal representation. |
| Funding Options for ATE Premium | Options include funding the premium from the damages recovered, taking out a loan, or using third-party funding. | A claimant uses a portion of their damages award to pay the ATE premium and the remaining amount to cover their other losses. |
| Benefits of ATE Insurance | ATE insurance enables access to justice, provides peace of mind, and protects against catastrophic financial losses. | An individual with limited financial resources is able to pursue a legitimate claim against a large corporation because ATE insurance mitigates the risk of having to pay the corporation's substantial legal fees if they lose. |
| Solicitor's Role | Solicitors play a crucial role in advising clients on the need for ATE insurance, sourcing appropriate policies, and ensuring compliance with policy terms. | A solicitor advises their client on the benefits of ATE insurance and helps them complete the application process. |
| Due Diligence | It is essential to carefully review the policy terms and conditions and seek professional advice before purchasing ATE insurance. | A claimant carefully reads the policy wording and asks their solicitor to explain any clauses they do not understand before signing the ATE agreement. |
Detailed Explanations
Opponent's Legal Costs: This is the core coverage of ATE insurance. It protects the insured party from having to pay the legal fees and expenses of the opposing side if they lose the case. These costs can be substantial, potentially running into tens or hundreds of thousands of pounds, depending on the complexity and duration of the litigation. Without ATE insurance, this risk can deter many individuals and businesses from pursuing legitimate claims.
Own Disbursements (Expenses): In addition to the opponent's costs, litigation involves various expenses for the claimant, such as court fees, expert witness fees, barrister fees, and other administrative costs. ATE insurance can cover these disbursements if the case is lost, providing further financial protection. The specific expenses covered will vary depending on the policy terms.
Adverse Judgment: In some cases, ATE insurance can extend to cover the actual damages awarded to the opponent if the insured party loses the case. However, this is less common and often subject to significant limitations, such as a cap on the amount covered and a higher premium. It's crucial to carefully review the policy wording to understand the extent of this coverage.
Appeals: Litigation can involve multiple stages, including appeals. ATE insurance can be extended to cover the costs associated with appealing a court decision, whether the appeal is brought by the insured party or the opponent. This can provide valuable protection against the ongoing financial risks of litigation.
Specific Case Types: ATE insurance is commonly used in a variety of legal areas, including personal injury, clinical negligence, commercial litigation, defamation, insolvency, and property disputes. The availability and terms of ATE insurance will vary depending on the type of case and the perceived risk involved.
Policy Exclusions: ATE insurance policies contain specific exclusions, which are situations where coverage will not be provided. Common exclusions include cases involving fraud, deliberate misrepresentation, pre-existing disputes not disclosed, and breaches of policy terms. It is essential to carefully review the policy wording to understand these exclusions.
Premium Payment: ATE insurance premiums are typically contingent, meaning they are only payable if the case is successful. This makes ATE insurance more accessible, as claimants do not have to pay the premium upfront. The premium is usually calculated as a percentage of the damages recovered.
Timing of Policy Purchase: The timing of purchasing ATE insurance is crucial. Policies are typically purchased after a solicitor has assessed the merits of the case but before significant legal costs are incurred. It's often more expensive to obtain ATE insurance later in the litigation process, as the risk to the insurer increases.
Level of Cover: The amount of cover required depends on the estimated costs of the litigation, including the opponent's costs and the insured party's own disbursements. It is important to obtain a policy that provides sufficient cover to protect against these potential costs. Your solicitor can help you estimate the appropriate level of cover.
Policy Terms and Conditions: ATE insurance policies contain specific terms and conditions that must be adhered to. These may include notifying the insurer of any changes in the case, following the solicitor's advice, and providing regular updates on the progress of the litigation. Failure to comply with these terms can invalidate the policy.
Funding Options for ATE Premium: While the premium is typically contingent on success, there are still options for funding it. These include paying the premium from the damages recovered, taking out a loan, or using third-party funding. The best option will depend on the claimant's individual circumstances.
Benefits of ATE Insurance: ATE insurance offers several key benefits. It enables access to justice for individuals and businesses who may not otherwise be able to afford to pursue legal action. It provides peace of mind by protecting against catastrophic financial losses. And it levels the playing field by allowing claimants to compete with better-resourced opponents.
Solicitor's Role: Solicitors play a crucial role in advising clients on the need for ATE insurance, sourcing appropriate policies, and ensuring compliance with policy terms. They can help clients understand the risks involved in litigation and determine whether ATE insurance is the right option for them.
Due Diligence: Before purchasing ATE insurance, it is essential to carefully review the policy terms and conditions and seek professional advice. This will ensure that you understand the scope of the coverage and your obligations under the policy. Don't hesitate to ask your solicitor to explain any clauses you don't understand.
Frequently Asked Questions
What is ATE insurance? ATE insurance is a policy that covers legal costs if you lose a court case, protecting you from financial risk.
Who needs ATE insurance? Anyone pursuing litigation who wants to protect themselves from the financial consequences of losing.
When should I buy ATE insurance? Ideally, after your solicitor has assessed your case's merits but before incurring significant legal costs.
How much does ATE insurance cost? The premium is usually a percentage of the damages recovered, payable only if you win the case.
What if I change solicitors during the case? You must notify your ATE insurer, as it could affect your policy's validity.
Does ATE cover all legal costs? It primarily covers the opponent's legal fees and sometimes your own disbursements, depending on the policy.
What happens if I win the case? You will typically pay the ATE premium from the damages you recover.
Are there exclusions to ATE coverage? Yes, common exclusions include fraud, misrepresentation, and breaches of policy terms.
Conclusion
ATE insurance provides a valuable mechanism for mitigating the financial risks associated with litigation. By covering the opponent's legal costs and sometimes the claimant's own disbursements, it enables access to justice and provides peace of mind. Careful consideration of the policy terms and professional advice are essential before purchasing ATE insurance.