After-the-event insurance is a simple concept that has been complicated by the English legal system. The DAS 80e Justice Solutions team explain why
'Traditional before-the-event (BTE) insurance is taken out against the possibility of a claim. Now, it is possible to insure after-the-event (ATE), primarily against the costs arising in pursuit of compensation. There is insurance for defence actions, but it is unusual.
The differences in the legal systems in England and Wales, Scotland and Northern Ireland means there is no uniform approach to the situation. This has a subtle but significant effect when discussing the provision of ATE in the UK and makes what is basically a simple premise, very complicated. So the focus here is on the system in place in England and Wales.
Since 1995, solicitors in England and Wales may enter into conditional fee arrangements (CFAs) with their clients. This is the origin of 'no-win, no-fee' cases.
In this way, solicitors agree not to charge fees to their clients unless they are successful. If the claim is successful, solicitors may 'uplift' their fees in recognition of their success. Most actions for compensation can be pursued through CFAs.
However, it still leaves the client exposed to paying significant charges for disbursements - the costs involved in bringing an action. Typically these might include expert witnesses and medical reports. What is more, they may have to pay their opponent's legal fees and disbursements if they lose. There is also the possibility that they may not recover their own costs and expenses in full even if they win.
ATE cover insures the claimant against having to pay any costs arising from the case. A premium is assessed according to the nature of the claim (for example, personal injury or medical negligence), the merits of the case and the appropriate limit of indemnity.
The latest business models rate the premium depending at what point in the proceedings the insurance is incepted and when the action is commenced. The premium may not be due until the claim is completed. IT
Test yourself on ATE
Q1:
Some impecunious claimants are asked to use a consumer credit agreement to borrow funds for an insurance premium and other disbursements so that their case can be funded. In such cases, can the claimant recover the interest on the loan from their opponents if they win the case?
A Yes
B No
Q2: Who regulates ATE policies sold by brokers?
A The Law Society
B Personal Injuries Assessment Board (PIAB)
C Financial Services Authority (FSA)
Q3: Who regulates ATE policies sold by solicitors?
A The Law Society
B Personal Injuries Assessment Board (PIAB)
C Financial Services Authority (FSA)
Q4: Is ATE available in criminal cases?
A Yes, prosecution and defence
B Defence only
C No
Q5: Which of the following fees and disbursements would NOT be covered by most ATE policies? (Disbursements are costs associated with an action, other than solicitors' fees.)
A Barrister's fees
B Witness expenses
C Court costs
D Opponent's legal fees
E Opponents' disbursements
F Expert witness costs
G Insurance premium
H Own solicitor's success fee (uplift)
Q6: If a case organised only on a no-win, no-fee basis is lost, the claimant is not liable for the other side's costs. True or False?
A True
B False
Q7: Is commission paid for arranging an ATE for a motor client's personal injury claim, and can it be reclaimed as part of the premium?
A Yes
B No
C Depends on the avenue of sale
Q8: Who is responsible for payment of the ATE premium if the case is won?
A The claimant's solicitor
B The claimant
C The ATE provider
D The defendant
Q9: What is the success fee?
A Percentage of compensation awarded
B Percentage of solicitor's fees
C Percentage of ATE premium
D Flat rate bonus
Q10: According to the law, what is the maximum uplift (success fee) a solicitor may receive under a conditional fee arrangement?
A 7.5%
B 15%
C 25%
D 50%
E 100%
Answers to ATE quiz
Q1. B. No.
Q2. C. All activities of insurance intermediaries are regulated by the FSA.
Q3. A. All activities of solicitor firms are regulated by the Law Society. For the record, PIAB is not a regulatory authority, but the organisation to which all injury claims in the Republic of Ireland must first be sent.
Q4. C. No CFAs can be entered into for criminal cases, hence no ATE cover.
Q5. H. The solicitor's success fee is not insured. One interesting point is that not all ATE policies cover the insurance premium.
Q6. B. False. On its own, a CFA leaves the claimant liable for all costs, including disbursements, except his own solicitor's fees. However, add an ATE policy and it is the ATE insurer who picks up all the bills.
Q7. C. A solicitor does not receive commission but if the policy is sold through a broker then they may get an introducer fee.
Q8. D. The defendant is liable for the ATE premium. If there is BTE insurance in place which should have been utilised then the claimant could be held liable for the payment of the ATE premium.
Q9. B. The claimant's solicitor is entitled to uplift its fee if it wins a CFA case. It is not permitted to arrange a contingency fee, where fees would be a proportion of the compensation award.
Q10. E. In theory, solicitors may double their fees when successful. In practice, the courts have allowed far more modest uplifts, except in highly complex cases. There are fixed success fees for road traffic accidents and employers' liability.
