After the Event (ATE) Insurance Explained

Introduction: Why ATE Insurance Matters

In England and Wales the "loser pays" rule means an unsuccessful claimant can be ordered to pay the defendant's legal costs as well as their own. In a large commercial dispute those adverse costs can run into hundreds of thousands of pounds or more. ATE insurance is designed to take that risk off the claimant, and it is a standard part of most litigation finance arrangements.

What Is After the Event Insurance?

ATE insurance is a legal expenses policy taken out after a specific dispute has arisen, as distinct from before the event (BTE) insurance, which is bought in advance to cover disputes that may happen in future. It is sometimes simply called litigation insurance.

Because it is written for one identified claim, the insurer assesses that claim before offering cover, usually by reviewing the pleadings, counsel's or the solicitor's view on merits, the costs budget and the other side's likely costs.

What Does ATE Insurance Cover?

Cover depends on the policy, but ATE insurance commonly includes:

• Adverse costs: the opponent's legal costs you are ordered to pay if the case is lost, up to the limit of indemnity.
• Own disbursements: expert fees, court fees and similar expenses, in many policies.
• Own solicitor's fees: less common, and rarely needed where a funder or a CFA already deals with them.
• Staged cover: some policies increase the cover, and the premium, as the case moves through stages such as disclosure and trial.

Read the exclusions carefully. Policies typically cap cover at the limit of indemnity, and an insurer may be able to avoid or cancel a policy for non-disclosure or if the claim is not run in line with the policy terms, for example by rejecting a reasonable settlement against legal advice.

ATE vs BTE (Legal Expenses) Insurance

BTE insurance, often called legal expenses insurance, is bought before any dispute arises, frequently as an add-on to home, motor or business insurance. It usually covers your own legal costs for defined types of dispute, often with a limit on cover and a requirement to use the insurer's panel solicitors.

ATE insurance is bought once a dispute exists and is tailored to that claim, with the main focus on adverse costs. Before arranging ATE cover it is worth checking whether an existing BTE policy already responds, as it may cover some or all of the costs.

Who Pays for ATE Insurance?

The claimant is normally the policyholder. The premium can be dealt with in several ways:

• Upfront premium: paid when the policy starts, or in stages.
• Deferred premium: payment is postponed until the case ends, usually out of the damages.
• Contingent (self-insured) premium: payable only if the claim succeeds, so nothing is owed if it fails.
• Funded premium: in funded cases, the litigation funder often arranges the policy and pays or guarantees the premium as part of the funding.

How Much Does ATE Insurance Cost?

There is no standard rate. Insurers price each policy individually, and the main factors are:

• The merits: the stronger the claim, the lower the risk to the insurer.
• The limit of indemnity: how much cover is needed, based on the other side's likely costs.
• The stage of the case: cover bought early, before the risks are clear, is priced differently from cover bought after key evidence is in.
• How the premium is paid: deferred and contingent premiums usually cost more than upfront premiums, because the insurer waits for payment and may never be paid.

Premiums are often expressed as a percentage of the cover. The only reliable way to know the cost for a particular claim is to get quotes from specialist insurers or a broker.

Can You Recover the ATE Premium From the Other Side?

For most policies taken out on or after 1 April 2013, no. The Legal Aid, Sentencing and Punishment of Offenders Act 2012 ended the general recoverability of ATE premiums from the losing party, so the premium is normally a cost for the claimant or funder, commonly paid out of the damages.

A limited exception remains in clinical negligence claims, where the part of the premium covering expert reports on liability and causation can still be recovered. Insolvency proceedings kept recoverable premiums for a period after 2013, but that exemption ended in April 2016.

How Does ATE Insurance Work With Litigation Funding?

ATE insurance and litigation funding cover different risks:

• The funder pays the claimant's own legal costs (solicitors, counsel, experts) on a non-recourse basis.
• The ATE insurer covers the defendant's costs if the case is unsuccessful, up to the policy limit.
• Together they greatly reduce the claimant's financial exposure, subject to the terms and limits of both agreements.

Funders also have their own reason to insist on ATE cover: in England and Wales a court can order a commercial funder to pay the other side's costs if a funded claim fails. The premium is usually built into the litigation budget and, if deferred, is paid from the proceeds in the order set out in the litigation funding agreement.

ATE Insurance and Security for Costs

Defendants can ask the court to order a claimant to provide security for their costs in certain circumstances, for example where there is reason to believe the claimant could not pay a costs order. An ATE policy may be offered in response. Whether the court accepts it depends on how confident it can be that the insurer will actually pay, which is why policies used for this purpose often include an anti-avoidance endorsement limiting the insurer's right to avoid the policy.

In opt-out collective proceedings, the Competition Appeal Tribunal considers whether the proposed class representative could pay the defendant's costs if ordered to, and ATE insurance is commonly part of the answer.

Is ATE Insurance Worth It?

It depends on the size of the adverse costs risk compared with the premium, and on whether you could absorb those costs if the claim failed. For many commercial claimants facing a well-resourced opponent, the downside without cover is large enough that ATE is treated as essential, and funders commonly require it. It matters less where the potential adverse costs are small, where another policy already provides cover, or where costs protection rules limit what a losing claimant can be ordered to pay.

Capital protection insurance is a different product that protects a funder's investment rather than the claimant's costs exposure; see ATE vs capital protection insurance.

Audley Capital can review commercial disputes for ATE and capital protection cover alongside litigation funding. Apply for litigation insurance, submit a funding case or contact our team. This page is general information, not legal or insurance advice.