Here at Temple, the vast majority of our insured are claimants and we are only occasionally asked to insure defendants. Why?
I think the answer lies in the perception the profession has of litigation insurance. It is seen as a claimant’s tool; a perspective rooted in the early days of CFA funded personal injury litigation. That probably explains why it has come to be seen as an option that is only available to claimants.
It’s time to dispel the myth. Litigation insurance (also known as after-the-event or ATE 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 give them 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 that 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.
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, we take care to agree the terms of the policy to define a win. In general terms we would expect a defendant to pay when the case settles or concludes at court in circumstances where the defendant has incurred no adverse costs liability. Of course, where they do incur such a liability, we step in to pay it – that’s why we are here.
A successful defendant does not have a pot of damages out of which to pay the premium and that undoubtedly makes 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.
To find out more about our premiums for defendant cases, please contact our commercial underwriting team by phone on 01483 577877 or by email to firstname.lastname@example.org