What’s the Difference Between Litigation Funding, Disbursement Funding and ATE Insurance?

By James Jobling, Senior Business Development Manager

Estimate read time 2 minutes 6 seconds

Funding and insuring litigation can take a number of different forms, each designed to address a particular cost or risk associated with pursuing a claim. Terms such as litigation funding, disbursement funding and After the Event (ATE) insurance are often used interchangeably, despite performing very different functions. This article explains the role each can play within a dispute and some of the key differences between them.

The terms litigation funding, disbursement funding and After the Event (ATE) insurance are often used together when discussing the funding of legal claims. As a result, it is easy to assume they perform the same role. In reality, each serves a different purpose and understanding those differences can help solicitors identify the most appropriate arrangements for their clients.

Litigation Funding

Litigation funding typically involves a third-party funder providing financial support for the costs of pursuing a claim. Depending on the circumstances, this may include funding a claimant’s legal fees, and, in some cases, other costs associated with the litigation.

In return, the funder will usually receive an agreed share of any damages recovered if the claim succeeds. If the claim is unsuccessful, the funder generally loses its investment.

Disbursement Funding

Disbursement funding is more specific. Rather than funding legal fees, it is designed to cover the cost of disbursements incurred during the claim. These may include court fees, expert reports, counsel’s fees, mediation costs and other expenses that arise as litigation progresses.

For some clients, disbursement funding can help manage cashflow and remove the need to pay significant costs upfront whilst a case is ongoing.

ATE Insurance

ATE insurance protects a claimant against certain litigation risks, most commonly an adverse costs order if the claim is unsuccessful.

Depending on the policy, cover may also extend to disbursements and other litigation-related costs. Unlike litigation funding or disbursement funding, however, ATE insurance does not provide funding. It provides insurance protection against specified risks.

This distinction is important. Funding provides access to money during the case, whereas insurance provides protection against defined costs exposures.

How Do They Work Together?

These arrangements are often complementary rather than alternatives. For example, a claimant may obtain disbursement funding to cover the cost of expert evidence whilst also securing ATE insurance to protect against adverse costs exposure. In larger disputes, litigation funding may also form part of the overall structure.

Funders will frequently require ATE insurance to be in place before agreeing to provide funding, reflecting the important role insurance can play in managing litigation risk.

Choosing the Right Approach

The most appropriate combination of litigation funding, disbursement funding and ATE insurance will depend on the nature of the dispute, the costs involved and the client’s objectives.

Understanding the different roles performed by each is often the first step in determining which arrangements may be appropriate for a particular case.

Where solicitors are considering the available options, an early discussion can often help clarify the funding and insurance arrangements that may be suitable.

If you would like to discuss ATE insurance or disbursement funding in relation to a specific matter, please call James on 01483 514423 or send an email james.jobling@temple-legal.co.uk