What is after the event insurance, and do I need it?

There are various different types of insurance products on the market, so it’s not always easy to know immediately which is the right kind for your situation.

In this edition of Ask the Expert, our business disputes solicitors explain what after the event insurance is and how it works so you know whether it might be a good option for your circumstances.

What is after the event insurance?

After the event insurance (sometimes referred to as ‘ATE’ insurance) is a specialised, tailored type of policy that’s put in place either after or before a legal dispute has started.

How does after the event insurance work?

The aim of after the event insurance is to provide cover for the adverse costs associated with litigation and arbitration. It’s often the case with litigation that the losing party is subject to an ‘adverse costs order’, which means that they have to pay the other side’s legal costs as well as their own. After the event insurance usually covers the other side’s costs and sometimes, depending on the terms of the policy, might cover part of your own costs and your disbursements if you’re unsuccessful in litigation or arbitration.

Who typically purchases after the event insurance?

After the event insurance is usually purchased through a specialist broker. We can liaise with the broker on your behalf to explain the options, terms and cost.

What are the benefits of after the event insurance?

The main benefit of having an after the event insurance policy in place is that it gives you peace of mind that the other side’s costs (and potentially your own costs and disbursements if they’re covered) will be taken care of if the dispute isn’t resolved in your favour.

What legal expenses does after the event insurance cover?

While the policy will be bespoke to your needs and most will only cover the other side’s costs, event insurance policies usually cover the following legal expenses, subject to the policy’s terms and conditions:

• Your opponent’s legal costs: These include the fees charged by their lawyers (solicitors and barristers), court fees and other disbursements that they’ve incurred throughout the litigation or arbitration process.
• Your disbursements: These include court fees, expert witness fees and other expenses that relate to the case.

When is after the event insurance usually purchased?

After the event insurance can be purchased at any stage of the legal process, including before or after proceedings have formally been issued. It’s advisable to purchase it at the earliest possible stage you can, this is because a delay may mean it’s likely that the insurance will be more expensive and/or more difficult to obtain.

How is the premium calculated and when is it payable?

The calculation of the premium will be dependent upon factors such as the outcome of the insurer’s risk assessment (the insurer will need confirmation that your case has at least a 60% chance of success) and the type and level of cover you’ve applied for. Your insurer might charge a percentage of the sum insured (often somewhere in the region of 30% to 45%) or they may calculate them as a percentage of the costs incurred when a claim is successfully concluded – this might be after a trial or successful settlement negotiations.

The premium will usually either be payable when the outcome of the case is finalised or, as is sometimes the case with commercial disputes, your insurer might seek payment of some of the premium when you take the policy out. If you lose, the premium is often self-insured (i.e. you have nothing further to pay).

What if the case settles before trial?

If your claim is settled before trial (for a sum that either does or doesn’t include costs), any premium due will still be payable by you to your insurer. It’s important to check the terms of the individual policy to be certain what costs are covered if your case settles before trial.

What happens to the insurance if my claim or defence is successful?

If your claim or defence is successful, you will have to pay the premium to your insurer. It won’t be recoverable from your opponent – subject to the dispute falling into one of a few very limited categories of cases.

Your liability to pay the premium out of any financial recovery where you win the case could significantly reduce your net return.

Summary

After the event insurance can prove very valuable as a financial safeguard to many businesses involved in a dispute. Taking legal advice before deciding on the type of policy that best suits your needs is recommended, particularly as not all types of disputes that your company may face can be covered by after the event insurance.