The High Court has recently seen its decision regarding a 2016 case overturned by the Court of Appeal, leaving many in the dark over whether After The Event (ATE) insurance is as protective as first thought. 

For some time, ATE insurance has been seen as a quick-fix to gain complete protection for any applications brought forward or defended by individuals or companies who may find it difficult to evidence their ability to meet their opponents’ legal costs if they are to lose.  

In the past, many with potentially strong and genuine claims have been left restricted by applications requiring those parties bringing claims to provide “security for costs”. 

Commonly, ATE insurance was secured with the aim of insuring against the risk of paying the other party’s court costs; leaving this burden with the insurer, and therefore providing those defending themselves with some security.

However, this recent case has sparked new uncertainties over the capabilities of this popular type of insurance; leaving many to question whether it can be relied upon for complete security in court.

Background: Premier Motorauctions Ltd v PricewaterhouseCoopers LLP (PWC)

Initially, it had been decided that the insurance secured by car auction firm Premier Motorauctions Ltd was sufficient enough to cover the costs of PWC, unless proved otherwise. However, The Court of Appeal saw that many judges are far too quick to accept ATE insurance for cost security purposes.

Instead, they ruled that the insurance, which was avoidable after the car firm had made factually incorrect statements, was not protecting enough of PWC’s costs. In their view, this meant that Premier Motorauctions Ltd would be unable to pay the defending firm’s costs if ordered to do so. 

£2m in security was issued to each to side; hoping to create a level playing field in which any costs can be paid by the loser once the case is settled.

Obtaining ATE Insurance in the future

Although it identifies flaws, this case isn’t a call to completely abandon the use of ATE insurance. 

There will continue to be cases in which the insurance provides sufficient protection, so it shouldn’t be forgotten as an option by those pursuing claims. 

Instead, individuals and companies should move forward with care; considering a number of key factors when deciding whether it’s suitable to obtain ATE insurance.

For more information on this or any insolvency issue, please contact Oliver Spence on 0115 9 100 206 or click here to send an email.

Posted on Wed, 31st January 2018

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