The beginnings of After the Event Insurance

In 1999, the Access to Justice Act was bought into force. The Act bought about huge change in the legal landscape, and was intended to offer an alterative to the traditional way of funding litigation, which up to that point, had been Legal Aid. The Act did 3 main things;

1. It introduced the use of ‘Conditional Fee Agreements’, or ‘no win no fee’ agreements in most civil court cases.
2. It replaced the Legal Aid Board with 2 new schemes.  The Criminal Defence Service for criminal cases, and Community Legal Service to fund civil and family cases.
3. The Act created a limit on the amount spent on Legal Aid.

The Act also introduced After the Event Insurance or ATE Insurance.  Many people often mistakenly think that a ‘No Win No Fee’ agreement means that they do not have to pay any legal fees, regardless of the outcome of the case.  This is incorrect.  The ‘No Win No Fee’ Agreement itself is simply an agreement between a client and their Solicitor, which states that if they lose their case, they will not have to pay their Solicitors Legal fees.  However at that time, it was likely that if you lost your case, you would be responsible for the legal costs of the Defendant, which could run into thousands of pounds.  The Access to Justice Act allowed client’s to insure against the risk of having to pay the Defendant’s costs, should their case be unsuccessful, with an ATE insurance policy.  At that time, the cost of an ATE insurance premium was recoverable from the Defendant as part of the client’s legal costs.  And so the market for After the Event Insurance was born.

Challenges faced by ATE Insurance

Over the years that followed, there were many challenges and hurdles in relation to After the Event Insurance and the recoverability of the premiums.

Reams of satellite litigation ensued regarding ATE insurance, while Solicitors attempted to understand what was required in order to be compliant and ensure that the ATE Insurance premium was recoverable from the Defendant.  Some important cases which followed are referred to below;

• Avril v Boultby (2008) This case held that the cost of an ATE Insurance policy taken out following an admission of liability is recoverable.
• Callery v Gray (2002)  In this case it was held that the purchase of insurance at commencement of claim was acceptable.  It also allowed a passenger to recover an ATE insurance premium, and a premium of £367.50 for an RTA case was approved.
• Sharratt v London Central Bus Company (The Accident Group Test Cases) (2003) The Judge in this case held that the Defendant was not entitled to breakdown of calculation of ATE Insurance premium, except in exceptional circumstances.
• Sarwar v Alam (2001) In this case it was held that the duty of passenger in a vehicle, to use the driver's BTE policy was limited and not absolute.

However, just when it seemed as though the dust had settled and there was a degree of certainly in terms of After the Event Insurance and recoverability of the premiums, the proposed reforms suggested by Lord Justice Jackson loomed on the horizon.

The ‘Jackson’ reforms and ATE Insurance

In April 2013, the Legal Aid, Sentencing and Punishment of Offenders Act 2012 was introduced, which implemented the reforms of Lord Justice Jackson. The Act introduced many changes in relation to the funding of civil litigation.  The most pertinent changes were as follows;

1. ATE Insurance: Any After the Event Insurance policy purchased after 1 April 2013 will not be recoverable by the Claimant from the Defendant.
2. Success Fee: If a CFA is signed after the 1 April 2013, the claimant cannot recover any success fee which he has agreed to pay his solicitor.
3. QOCS: Qualified One-way Costs Shifting (“QOCS”) will apply to all CFAs signed after the 31st March 2013. An unsuccessful claimant will not have to pay the defendant costs unless they fall under one of the exceptions to the rule.

Is there still a need for After the Event Insurance?

Following the Jackson reforms, many questions were raised with regard to After the Event Insurance, not least the question as to whether there is there still a need for ATE insurance if the risk of paying the Defendant’s costs has disappeared?

The answer the yes.  Simply put, we believe that Solicitors could be negligent if they do not discuss the provision of After the Event Insurance with their client.  Under the Code of Conduct, Solicitors are required to discuss all available insurance options with their clients, and to advise them on whether it should be obtained.  Failure to do this can result in a negligence action being bought against the Solicitor, a position that no Solicitor wants to find themselves in.

Box Legal After the Event Insurance

At Box Legal, we believe that we provide a comprehensive ATE Insurance policy which covers the risks that the client will continue to face, at a price that the client will be happy with.  We understand that the cost of the premium is now being paid for by the client, and that they need to know they are receiving the cover that they need to give them the peace of mind to conduct their litigation, at fair price.  Our ClaimSafe Policy, which provides cover for Motor, Non Motor, Industrial Disease and Clinical Negligence claims, provides just that.

Benefits to the client of ClaimSafe ATE Insurance

Despite the introduction of Qualified One Way Costs Shifting (QOCS), there are still many situations during the course of litigation, which give rise to the need of the protection an After the Event Insurance policy.  The salient points of the ClaimSafe policy in relation to client benefits are as follows;

All adverse costs and your own disbursements are covered under the policy where:

• Part 36

Your client recovers less than the defendant has previously offered (fails to "beat a Part 36 offer").

• Interlocutory Costs

You make an unsuccessful interlocutory application and, in the same way as now, costs are awarded against your client.

• Pre-action Disclosure

Costs are awarded against your client as a result of a pre-action disclosure application – payable immediately if the application is unsuccessful or otherwise at the end of your claim if it is ultimately unsuccessful.

• Appeals

Either party appeals and costs are awarded against your client – new Rule 52.9A

• Detailed Assessment

Detailed Assessment costs are awarded against your client.

• Counsel’s Success Fee

If you instruct Counsel on a CFA, his success fee is not recoverable, and must therefore be deducted from any damages successfully recovered. This may appreciably reduce the net damages which the client receives. Since however the ClaimSafe policy pays Counsel’s fees if a claim fails, there is no need for Counsel to be instructed on a CFA, and the need to deduct Counsel’s success fee from client damages is avoided.  

Benefits to the Solicitor of the ClaimSafe ATE Insurance

• Your disbursements

Your disbursements are paid. In the last 9 years, disbursements on lost and abandoned cases have formed 41% (by value) of all claims paid under the ClaimSafe policy. 

• Marketing Fee

The policy will also normally make an ex gratia payment:

1. Up to £400 inc. VAT for any lawful fee1 you have paid to a Claims Management Company for the work they have properly carried out if you cannot obtain a refund from them or
2. Otherwise simply £250 to compensate you for the notional marketing cost of the case.

1 N.B. Under Section 56 of LASPO 2012 you cannot of course pay a referral fee, but you can make a lawful payment for work properly carried out by a CMC at a reasonable hourly rate - SRA Consultation on Referral Fee Ban, (Closed 18th December 2012) Part 3, Paras. 24 to 27: www.sra.org.uk/sra/consultations/referral-fees-2012.page

• Your Costs

* If the claim is unsuccessful – the policy will pay your own costs up to a maximum of £300 plus VAT.

• Interest on Your Disbursements

Any interest charged by a pre-approved lender which specifically relates to the disbursements in a failed claim.

• Your Pre-Part 36 costs

The defendant obtains an order under Section 44.12 of the Civil Procedure (Amendment) Rules 2013 allowing it to set off its costs against the costs awarded in your client’s favour – the policy will pay the defendant’s costs so that they will not be deducted from the costs you are due to receive.

The client has acted on your advice but adverse costs have been awarded (which your firm will probably have to pay) because:

1. The Court considers there were no reasonable grounds for bringing the proceedings.
2. The proceedings were an abuse of process.
3. The claimant’s conduct of the proceedings was likely to obstruct a just outcome.

• Preventing Complaints

• Retaining Clients

The ClaimSafe policy offers better cover than almost all BTE policies, so you can advise your client not to utilise his BTE policy. This is important to you because if your client uses his BTE policy he will normally have to instruct alternative solicitors on the BTE provider’s panel, rather than your firm.

• Damages – Part 36

* You advise your client to reject a Part 36 offer and your client eventually recovers less than the sum rejected. The policy will pay 75% of the extra damages your client would have received by accepting the offer, up to a maximum of £5,000.

• Damages Small Track

*If your client’s claim settles for less than the current personal injury Small Track limit of £1,000, and you receive only Small Track costs, the policy will pay your client’s damages so that your client receives a minimum of £1,000 on a full liability basis.

* Available where the policy has a Secondary Fund

For full details of the policies that box legal can offer, including our MoveSafe  (conveyancing) and FeeSafe (Employment)  policies, please see our website of contact us for further information.

The future for After the Event Insurance

Following the introduction of the Legal Aid, Sentencing and Punishment of Offenders Act 2012, many felt it signalled the end for the ATE industry.  Why do you need a policy of insurance, when there is no longer any risk that Claimant will end up paying the Defendant’s costs?  The answer is because of the innate nature of litigation.  The risk of paying the Defendant’s costs if you lose is not the only risk.  Part 36 Offers, Interlocutory costs, the small claims limit, and the very changeable nature of litigation are just some of the reasons why an After the Event Insurance policy is still going to be your best friend as you embark on litigation.  For the Solicitor, funding for your disbursements should the case fail, has to be the most sensible reason to advise your client to take out an ATE Insurance policy.  Either that, or you’ll be asking them for a large amount of cash on account of costs.  Something we are sure your client will be non to pleased about, and may just give them that push to visit the firm down the road who offer reasonable After the Event Insurance policies.

"To insure or not to insure?", that is the question.  And we think the answer is a resounding "yes".