Pursuing legal action can be costly, and many people simply do not start a claim for fear that costs will become unwieldly or uncontrollable. However, insurance products are available to mitigate the financial risks associated with legal action.
When taking out home, building or vehicle insurance, you may see that this includes Legal Expenses Insurance (LEI). Many insurance providers include LEI as an optional “add on”. LEI usually covers you if you are involved in a legal dispute requiring a solicitor in the future. It is therefore known as Before The Event (BTE) Insurance as it insures you before legal action is contemplated due to an event. If your policy conditions are met, your insurer may pay out LEI to cover legal costs and compensation.
In comparison, After The Event (ATE) is also a form of LEI but taken out after you have already begun legal action. We will explain below how BTE and ATE work.
BTE Insurance
Depending on your individual policy, your BTE insurance may be limited to a specific amount and to certain types of claims, such as personal injury or contract disputes. Your policy may also recommend certain solicitors to represent you, often referred to as “panel” solicitors, but you may be able to choose your own.
It is extremely important to abide by any terms in your policy as failure to do so may result in your insurer cancelling your cover. A common mistake is failing to notify your insurer as soon as the event which gives rise to your claim occurs. An insurer may also withdraw cover at a later point if your claim has no reasonable prospects of success or the legal costs become disproportionate to any amount that could be won.
It is important to check your policy to see if LEI is included and what the terms of your individual cover are before making a claim. If you do not have LEI included in your policy, BTE is a special insurance product that can be taken out on its own by certain providers. It is vital you do your own research and find a policy that suits you.
ATE Insurance
Your solicitors will advise you whether you require ATE. The purpose of ATE is to cover you for significant costs and expenses that are anticipated should you claim proceed or be taken to Court.
If you are on a Condition Fee Agreement (also known as a no win, no fee), it is likely that ATE would be sought if your claim is likely to go to Court. This is to cover you if you lose your claim and will be liable for your own legal costs and those of your opponent which are likely to be significant. You may also be advised to apply for ATE if you are on a private fee agreement or before any significant costs are incurred.
The process usually involves your solicitor preparing an application along with documents and information regarding your claim to the insurer, known as a proposal. This includes information on the merits of the claim, incurred and anticipated costs, offers made and advice of a barrister. The insurer will review this and decide whether to offer cover, how much and the premium.
The cover offered and premium is a commercial decision on behalf of the insurer and will reflect the risk that you may lose your claim. A premium may also be payable before or after the litigation concludes. Depending on the type of claim, a premium may be recoverable from your opponent.
ATE insurance can also be relatively flexible and some insurers offer the ability to increase cover over time (subject to a premium).
It is important that your solicitor takes your instructions and sources several quotes for ATE insurance to provide a bespoke policy for you. They should also be careful to advise you on the terms of your policy and any personal liabilities you may have if ATE is taken out.
Contact us
If you are contemplating a claim within one of our expert areas, then reach out to our expert team by making an enquiry, or by calling us on 0300 303 3629.
Written by Eren Kara, Litigation Assistant at Specters
