Claimants often have to pay the defendant’s costs if their cases are unsuccessful. This is known as Adverse Costs risks. ATE Insurance (After the Event Insurance) protects the the Claimant from Adverse Costs risks. Therefore, if they do claim, they carry no further financial liability risk.
How does ATE insurance work?
Claimants who successfully secure ATE Insurance do so because the insurer shares the view that the claim has good prospects of success over 60%.
The insurer will therefore charge a premium to cover the claimant up to a maximum agreed indemnity limit. This will cover any Adverse Costs (and in some cases own disbursement costs incurred).
However, two features about the policies stand out from other general insurance policies.
1) The premium may be deferred, and so it is only payable upon the conclusion of the insured claim.
2) The premium itself is insured by the policy, meaning that if the claim is lost, then the premium itself is also recovered.
Therefore, in the scenario that the claimant wins his claim, the premium becomes payable. But if the case loses, the Claimant is not required to pay the premium and the Adverse Costs (and disbursements costs if applicable) are paid by the insurer.
Who regulates ATE insurance?
The Financial Conduct Authority regulate ATE insurers in the UK.
The SRA do not have any regulation over the legal expenses insurance market. However, in England and Wales solicitors are obliged to make their clients aware of the availability of ATE Insurance. This is set out in the Code of Conduct from the Solicitors Regulation Authority.