’After the Event’ insurance

Insurance which covers the legal costs and expenses involved in litigation.

What are the origins of ‘After the Event’ insurance and what sort of claims is it intended for?

In 1999, the Access to Justice Act was brought into force. The Act brought about huge change in the legal landscape, and was intended to offer an alternative to the traditional way of litigation funding, which up to that point had solely been Legal Aid.

ATE insurance is a type of legal expenses insurance that covers the costs associated with losing a case, such as the opponent’s legal fees and disbursements.

The Access to Justice Act 1999 significantly altered the landscape of litigation funding. The act aimed to expand access to justice while reducing the financial burden on the state.

The Act brought about three key changes:

Introduction of ‘Conditional Fee Agreements’ (CFAs)

Commonly known as ‘no win, no fee’ agreements, CFAs allowed lawyers to take on cases with the understanding that their fees would only be paid if the case was successful. This mechanism became a widespread alternative to traditional funding methods in civil litigation.

Reformation of Legal Aid

The Act replaced the Legal Aid Board with two new schemes: the Criminal Defence Service, which provides funding for criminal cases, and the Community Legal Service, which supports civil and family law cases. This restructuring aimed to better allocate resources and streamline the provision of legal aid.

Imposition of Limits on Legal Aid Spending

To control public expenditure, the Act introduced caps on the amount that could be spent on Legal Aid, making alternative funding methods like CFAs and ATE insurance more critical for individuals pursuing litigation.

ATE insurance is typically purchased after a legal dispute has arisen and is intended to protect claimants from the financial risk of losing their case, covering costs such as opponent’s legal fees, court costs and expert witness fees.

A Common Misconception About ATE

There is a common misconception that a “No Win, No Fee” agreement means clients do not have to pay any legal fees, regardless of the outcome of their case. This is not entirely correct.

A “No Win, No Fee” agreement, also known as a Conditional Fee Agreement (CFA), is an arrangement between a client and their solicitor. Under this agreement, if the client loses their case, they will not have to pay their solicitor’s legal fees. However, at the time this arrangement became popular, losing the case often meant that the client would still be responsible for paying the defendant’s legal costs, which could amount to thousands of pounds.

The Access to Justice Act introduced a solution to this risk by allowing clients to take out an ATE insurance policy. This policy insures against the possibility of having to pay the defendant’s costs if the case is unsuccessful. Initially, the cost of the ATE insurance premium was recoverable from the defendant as part of the client’s legal costs, which led to the growth of the ATE insurance market.

The market for legal expenses insurance, which includes both Before the Event (BTE) insurance and After the Event (ATE) insurance, has grown substantially in the UK over recent years. In 2009, the latest year for which figures are available, the market generated a combined premium income of €654 million (€583 million). Despite this growth, legal expenses insurance still represents only a small fraction—less than 2%—of the total non-life insurance market. However, on average, the legal expenses insurance sector has grown faster than the insurance market as a whole.

Types of claims covered

After The Event insurance policies are available for a large range of cases such as:

  • Road traffic accidents
  • Housing disrepair
  • Financial mis-selling
  • and more…