Manage your costs risk exposure
It is very common when deciding whether to fight a dispute for prospective parties assess their risk of winning or losing. As part of that, they will also commonly consider the possibility of being liable to pay damages. Parties often forget to take into account that if they lose a case, in addition to having to pay potentially large damages and their own legal costs, they might have to pay the winning side's costs too.
Some companies will have insurance policies to cover their legal costs in the event that they get into certain types of dispute. This is known as "before the event" (BTE) insurance. BTE insurance might cover those companies for their own legal costs. They may even be covered for any adverse costs in the event that the case is lost. The premium for such policies is typically paid on a monthly or annual basis as part of a wider insurance package.
Since 1999, for those that do not have a BTE insurance policy, ATE insurance has been an option. ATE insurance is similar to a BTE policy except that it is entered into after the dispute is known. Typically, the premium is a one-off payment to cover a particular dispute, although the premium can be staged or even deferred and contingent (i.e. payable only at the conclusion of the litigation in the event the claim is successful).
Traditional ATE policies cover the risk of having to pay adverse costs in the event that you are unsuccessful in your claim. You would still however be liable for your own fees. Developments in the insurance market mean that it is now also possible to obtain "own costs" ATE policies to pay your own legal costs in the event that you are unsuccessful.
ATE insurance is commonly used in combination with other financing options. Policies can be tailored to meet your specific needs with an appropriate limits, staged cover and premiums and agreed triggers for the policy.
Similar to success fees under CFAs, since 2013, the premium payable in respect of ATE insurance is not recoverable from the losing party. Further, as an ATE policy is, at its core, an insurance product, cover should be arranged through an authorised broker. Through our network of market contacts, we can put you in touch with a broker.