By David Pipkin, Non-Executive Director
(Estimated reading time: 2 minutes 41 seconds)
For commercial disputes there is a perception that ATE/litigation insurance is only for claimants – and not for insuring defendants. Here at Temple, whilst the vast majority of our insured are claimants, we are only occasionally asked about insuring defendants. In this article we get under the skin of why that perception exists with commercial litigators.
It’s time to dispel the myth. Litigation insurance works as well for defendants as it does for claimants. Each faces an adverse costs risk. Each wants to mitigate and off-set that risk to have a freer hand in the conduct of the litigation.
It is easy to think that the adverse costs risk only arises once proceedings are issued. The reality is that unsuccessful claimants and defendants both have to pay adverse costs. This will include significant costs incurred by the successful party before any claim was issued.
Subject to its terms, litigation insurance meets all the adverse costs an unsuccessful party is liable to pay following a detailed assessment or as agreed, along with that party’s own disbursements. That cover is available for defendants as well as claimants.
After all, many defendants are there because they didn’t issue first; for example, when there are cross disputes. If a defendant can show a meritable defence and viable counterclaim, why shouldn’t they have the benefit of the protection of litigation insurance?
How and when does a defendant pay for litigation insurance?
In common with all our litigation insurance, it is only payable in the event of a win. When insuring a defendant, the Temple policy provides that the premium is only payable if the insured is successful. The policy further provides that they are only successful “Where the Legal Action is settled on terms substantially in favour of the Insured or the Insured obtains judgment substantially in its favour.” If a more closely defined term needs to be incorporated into the policy, just ask.
A successful defendant does not have a pot of damages out of which to pay the premium and that can make litigation insurance less attractive to defendants. Some see it as just another bill to pay at the end of an expensive and, at times, exhausting process.
The key is to understand the saving an insured defendant makes by insuring their case and it’s easy to calculate: it’s simply the difference between the premium the defendant has to pay (but only if they win) and the adverse costs they would have paid – had they lost uninsured.
Modern commercial clients understand the need to hedge, manage and mitigate risk and that’s exactly what litigation insurance does. Defendants often have less control than claimants – they have to roll with the punches. Litigation insurance gives them control over their adverse costs exposure. It also allows a sensible defendant to deploy its resources to fund the work you need to do for them to get the best outcome.
Temple underwriters have considerable experience of tailoring litigation insurance to the needs of the customer; we are happy to discuss the options available and the insurance premiums that might be payable in any given circumstances.
To find out more about our flexible approach for defendant cases, please contact our please contact our commercial underwriting team by phone on 01483 577877 or by email to email@example.com
David was Director of Temple’s Underwriting Division for 14 years during which time he supported Temple’s coverholders with his exceptional knowledge, expert guidance and friendly countenance.
He is now a Non-Executive member of the board supporting the strategic direction of the company and attending key events and meetings with our customers.
David has spent over 40 years as a Legal Executive specialising in personal injury litigation. Initially, he was a claimant litigator pursuing leading industrial accident and disease cases.
As an Associate at Davies Arnold Cooper for over a decade he managed a team of lawyers and acted for defendants in personal injury and general insurance litigation. In this role, he became involved in the early development of the ATE market, assisting the ABI in their involvement in the Court of Appeal test cases such as Callery v Gray.
As the London representative for FOIL he was involved in the liability insurers’ approach to ATE and worked with the government and judiciary in several key consultations. He was a member of the CILEX National Council for over 15 years and was CILEX President in 1995/6.
Read articles by David Pipkin