After the event insurance information

It is important that a party to prospective or actual court litigation or arbitration considers and discusses with their lawyers whether they have insurance in place covering their potential liability for another party's costs. 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).
• The insurance premium, often between 20% and 40% of the amount of costs being insured (but can be higher), is "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, in which case, it can then be recoverable from the opposing losing party as part of an adverse costs order against that party. If the insured party loses the case, there is no premium to pay and the insurer pays out under the policy.
• ATE insurance with the benefit of a premium which is deferred and contingent upon success is generally applicable to litigation or arbitration in the UK and other jurisdictions which apply a "costs follow the event" approach (i.e. the winner pays the losing party's legal costs) such as Commonwealth countries. Such insurance is also available for proceedings in other jurisdictions (e.g. the USA or continental Europe) but the premium may more often be payable up front and will not be recoverable from the opponent.
• 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.