As the name suggests, after the event insurance is cover purchased after a specific event. The more common use of after the event insurance cover relates to personal injury claims. It offers a means of limiting any potential exposure to disbursements or additional legal fees and when used correctly can be extremely helpful. This type of insurance cover is perfect for personal injury claims and is often used in conjunction with No Win No Fee arrangements which are said to account for around 75% of personal injury claims.
Defining A No Win No Fee Arrangement
A stereotypical No Win No Fee arrangement (often referred to as a Conditional Fee Arrangement) is a means of securing the services of a solicitor where the claimant has insufficient funds to cover legal expenses. There is a common misconception that a No Win No Fee arrangement effectively protects the claimant from any expenses. In reality, a No Win No Fee arrangement only includes the direct costs of the solicitor. It does not cover disbursements such as:
- Medical examination expenses
- Defendant legal expenses in failed prosecutions
- Third-party specialist advice
- Additional costs associated with the personal injury claim
This will surprise many people and thankfully it is something which the Legal Ombudsman recognised some time ago, resulting in new guidelines and an increase in the number of prosecutions for misleading advice. Over the years we have seen claimants hit with “surprise” defendant’s legal fees even though they were under the assumption that pursuing the case would not leave them with any financial liabilities.
It is also worth noting that solicitors operate what is known as a “success fee” arrangement whereby not only will they be reimbursed with their direct legal costs from any compensation awarded but they will also receive an additional payment based on a successful prosecution. The fact that legal costs and success payments are paid out of compensation, which would not otherwise have been available to the claimant without such an arrangement, seems to work well for all parties.
After The Event Insurance
After the event (also known as ATE) insurance is an arrangement between the claimant and an insurance company which will cover any additional costs above and beyond the “No Win No Fee” arrangement with a solicitor. Obviously, the vast majority of solicitors will make their clients fully aware of the terms of a No Win No Fee arrangement and the potential requirement for ATE insurance to limit any financial liabilities going forward. However, a number of rogue operators in the industry have been heavily censored by the Legal Ombudsman with many forced to cover tens of thousands of pounds in disbursements as well as compensation to clients.
Traditionally, ATE insurance will be acquired at the same time as a No Win No Fee arrangement is agreed. In many cases these two particular arrangements go hand-in-hand and while many people might question the need for such cover, if the case is watertight, it can be a very useful safety net.
Obviously specific ATE insurance premiums will reflect the underlying personal injury claim, chances of success and potential legal fees and disbursements. If the underlying case is relatively strong and ATE insurance cover is acquired at an early stage then the premium is likely to be relatively low. In some cases it may be required to arrange ATE insurance cover further down the line, perhaps when the outcome is a little less certain, although this could lead to an increase in the cost of the cover.
Aside from the insurance benefits of ATE cover it is worth noting that no premium payment is expected upfront. You will only pay the relevant premium if you win the case and this will be paid out of any compensation you receive. In the event that you lose the case, and all terms and conditions of the cover have been respected, you will pay nothing. This type of “self-insuring” policy obviously depends upon very strong cases traditionally with a minimum 60% chance of success. If the case is successful then the insurance premium is paid out of compensation.
Checking The Small Print
The ATE insurance system works extremely well in relation to personal injury claims as the vast majority of claims will have relatively low expenses and the ability to claim premiums from successful prosecutions. There will be occasions where a more complicated claim has the potential to take years to conclude rather than months incurring possible significant legal expenses. As a general rule of thumb, the longer the duration of the case in many instances the less certain the eventual outcome. However, if ATE insurance is arranged side-by-side a No Win No Fee arrangement then it is safe to assume that the solicitor is relatively certain of a positive outcome.
There is little likelihood a solicitor would risk a potentially long winded claim which may rack up tens of thousands of pounds in their own legal expenses. There is also the not so small matter of excessive disbursements and potential reimbursement of the legal costs of the defendant in the event of failure. When negotiating an ATE policy a maximum liability exposure will need to be included to avoid limitless financial exposure.
How To Obtain An ATE Insurance Policy
After a review of your personal injury claim has concluded and the likelihood of a successful prosecution defined, this is the time to discuss a No Win No Fee arrangement and ATE insurance cover.