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Insolvency update: Move fast and settle things – CIGA and ATE/Litigation Insurance

By Nicholas Ellor, Senior Underwriter

(Estimated reading time: 3 minutes, 22 seconds)

In the onset of the Covid-19 pandemic, the business world was subject to huge disruption – with numerous companies ‘going to the wall’ and many others teetering on the brink.  In the insolvency and restructuring arena, the government, insolvency practitioners and solicitors had to adapt fast. We take a look at developments.

In times of crisis, for some businesses cashflow alone is not enough – but remains vitally important.  The Corporate Insolvency and Governance Act 2020 (CIGA) put in place new procedures and measures on 26th June to try and rescue companies in financial distress resulting from the pandemic and subsequent economic crisis.

Time will tell whether these more “debtor-friendly” measures have the desired effect. There is a perception that if available funds are generally going to be lower after a crisis, then settlements should be lower and should be arrived at more quickly; this is to protect against the risk of not achieving a recovery at all.

Protect your settlement potential with litigation insurance

If cases are settled early and pre-issue without an approach being made to the litigation insurance market, even for an indicative price, then, inevitably – if cover is purchased later – the premium will need to be higher to reflect the increased risk, or there may not be any cover offered.  The chance of achieving a settlement with the benefit of both protection and paying a lower premium may have passed.

The sooner a case can arrive for underwriting assessment for the merits to reasonably be assessed, the better it is.  Having litigation insurance and disbursement funding sends a clear message to the opponent – that there are sufficient funds to fully pursue the case and clients need not be pressured into dropping the case or settling it for less than it is worth.

Insolvency cases – litigation insurance at work

Here at Temple, the insolvency cases we are typically asked to insure include allegations of breaches of duty by company directors, misfeasance, fraudulent trading, wrongful trading, transactions at an undervalue (TUVs), preference claims and transactions allegedly defrauding creditors.

Litigation insurance for insolvency litigation is used by liquidators, administrators and trustees in bankruptcy. Here’s some reasons why Temple is one of the leading providers –

  • Our litigation insurance premiums are deferred until conclusion and contingent upon success. There is no need to pay upfront.
  • Insurance premiums for insolvency cases are staged, with the advantage of a lower premium to be paid if the case settles pre-issue.
  • The insurance cover is comprehensive and also fully retrospective, and backed by A-rated insurance capacity from RSA.
  • In addition, whilst we are confident that our policy wordings should deal with the threat of an application for security for costs, we are also prepared to consider providing an anti-avoidance endorsement for cases too.
  • For each case insured with Temple, the client is also eligible to apply for disbursement funding from Temple Funding, a subsidiary of Temple Legal Protection. This is a bit of a ‘no-brainer’, as Court fees and other disbursements can mount up, particularly where a higher-value case or volume of cases is being progressed.

If you have a particular insolvency case or are interested in a delegated authority scheme for your insolvency litigation, please do call me on 01483 514 815 or send an email to nicholas.ellor@temple-legal.co.uk.

Nicholas Ellor

Senior Underwriter
Read articles by Nicholas Ellor

Nicholas Ellor

Nicholas is a Senior Underwriter within the commercial underwriting team.

Prior to joining Temple, Nicholas had over twenty years’ experience working as a solicitor in London on both contentious and non-contentious company commercial and corporate matters. Having been a practitioner, he is fully aware of the pressure and time constraints a commercial litigator has to operate under and brings that expertise insights to the table and provides a fast, highly professional service.

His experience and knowledge enhance our teams’ abilities to quickly and expertly assess claims and to provide intelligent and timely support throughout the legal process.

 

 

Read articles by Nicholas Ellor