After the Event Insurance Survey

Many thanks for your willingness to take part in this survey!
The introduction by Mark Harvey below explains the background of our request.

Use of after the event insurance (ATE) in the courts of England and Wales by Mark Harvey, Hugh James, England & Wales

History
The concept of a legal expense insurance policy that is purchased after an event to enable a personal injury claim to be brought (rather than the more conventional before the event policy) was first pioneered in the courts of England and Wales in 1995. It accompanied the new concept of funding, a form of “no win no fee” arrangement. Its arrival was linked to the with the removal of state funded legal assistance (legal aid).
A personal injury claimant could be represented by their solicitor under a Conditional Fee Agreement (CFA). If the claim was unsuccessful the claimant’s lawyers would not charge for their time, but the claimant would still be liable to pay their lawyers’ disbursements (expenses[1]) and if court proceedings had started, the successful defendant’s costs and disbursements as well. To protect the claimant against this they would be advised to take out an ATE policy. This would pay off their opponent’s costs and disbursements as well as their lawyers’ disbursements.
If the claim was successful, their lawyers would be able to recover from the defendant the time costs, a success fee, the disbursements and the ATE premium.

Present
In 2013 the government reformed this means of funding and in personal injury cases introduced Qualified One-way Costs Shifting (QOCS); so that absent some very limited exceptions (including the claimant’s fundamental dishonesty), the winning defendant could not recover their legal costs and disbursements from the claimant. In return for this the government removed the burden of the losing defendant paying the success fee and the ATE premium.
The benefit now of taking out these policies is that it principally provides protection to the client against paying their lawyer’s disbursements if the claim fails but will also indemnify them against any cost orders that might arise during the course of the case including formal offers to settle which carry cost consequences.[2]

If the claim fails
Commonly these policies have premiums that are deferred until the conclusion of the claim. If the claim fails then the policy pays off the lawyer’s disbursements and its own premium so that the client is left with nothing to pay. Under the terms of the CFA the lawyer is not charging their time costs in any event.

If the claim is successful
If the claim is successful, the defendant pays the claimant lawyer’s fees and disbursements. Then the claimant will pay the ATE premium out of their damages. In a limited number of cases and at the option of the lawyer they might decide to pay the premium themselves to secure the benefit of the insurance. By far the majority of cases however, the client is content to bear the premium themselves at the conclusion of the case.

Under the law of England and Wales the lawyer may still seek to charge their success fee and in common arrangements the client is told that the deductions for the success fee and premium if successful, will be capped at 25% or thereabouts of the value of the claim. Some solicitors will cap their success fee at up to 25% and still charge the premium. This is very much at the option of the lawyer in conjunction with their client.

The sales pitch is to be able to reassure the client that if the claim loses, they will not have to pay a penny to anyone. Their lawyers act under a no win no fee arrangement; their opponent cannot recover their costs if successful and the insurance policy pays off the disbursements. This usually gives total peace of mind to a client entering into a claim. The second part of the pitch is the knowledge that if the claim is successful they will receive a guaranteed percentage of their compensation. These arrangements are usually taken without challenge by a client.

However, like all insurance as “the many pay for the few”, it is important that insurance is offered to all personal injury claimants in all cases and one does not “cherry pick” only the risky cases. In this way it keeps the premiums at manageable levels.

[1] Commonly such items as court fees and expert reports

[2] Part 36 offers: a formal offer to settle with costs consequences if the claimant rejects and fails to be awarded more at trial.