If not, or if such cover is insufficient, serious consideration should be given to purchasing "after the event" insurance ("ATE insurance"), which we would be happy to discuss.
ATE insurance can substantially reduce a litigating party's exposure to risk as to legal costs should it not succeed in the case. This financial risk can include the opponent's legal costs as well as the lost opportunity to recover one's own legal costs from the opponent.
Subject to variations and exceptions on a case by case basis, the following is an outline of the basic general principles on how ATE insurance works:
- It is triggered when an insured party loses a court or arbitration case.
- The insurance covers: (1) adverse costs orders requiring the insured losing party to pay the winning party's costs; (2) the insured losing party's own disbursements (including barristers' and expert's fees); and (3) a portion of the insured losing party's own solicitors' fees.
- The insured party could be bringing or defending the claim.
- The insurance is available regardless of the subject matter of the dispute and regardless of the type of relief or remedy being sought (monetary or otherwise).
- The main requirement for obtaining ATE insurance is to satisfy the insurers that the applicant's chance of success on the merits of the case is at least 60% (this minimum threshold can be higher) and that the applicant will be able to pay the premium if it is required to do so.
- The insurance premium, often between 20% and 50% of the amount of costs being insured, may be "deferred and contingent upon success". This means that the insured party need not pay the premium up front and is only liable to pay it if the insured party wins the case.. If the insured party loses the case, there is no premium to pay and the insurer pays out under the policy.
- The level of premium can also be staged, increasing in amount the further the litigation/arbitration progresses, so that if the case settles early less of the full premium is payable.