After the Event Insurance also known as ATE insurance is a policy taken out to protect against the risks of litigation to cover the insured for all or some of the potential costs liability where a case is lost. In addition to ATE Insurance it is possible to enter into a Conditional Fee Agreement with solicitors (CFA) providing for a success fee, which is an additional amount payable for the legal services over and above the amount that would normally be payable if there was no CFA and is payable in the event of a successful outcome to the litigation.
Prior to April 2013 it was possible to recover both the cost of the premium paid for ATE insurance and the success fee from the other party in the event that the claim was successful. Following the introduction of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO) in April 2013 it was no longer possible to recover either the success fee or the premium for the ATE insurance from the other party. However Insolvency Proceedings were provided with an exemption so that Insolvency Practitioners bringing claims under the Insolvency Act 1986 could obtain insurance and still seek to recover the premium from the other party together with the success fee under any CFA in the event of a successful outcome to the insolvency litigation. The reason behind this exemption in insolvency proceedings was because it was considered that the inability to recover the success fee and ATE premium could significantly reduce the availability of funding to insolvency practitioners seeking to recover assets of the insolvent company or individuals and that it would reduce the net recoveries for distribution to creditors.
Unfortunately despite much lobbying of the Government to retain this exemption in Insolvency Proceedings it was reported on the 15 September 2014 that the LASPO reforms would apply to insolvency proceedings as from April 2015.
Therefore if you have any claims that you are considering bringing within the Insolvency Act it is important to consider them now and if possible enter into CFA’s and / or obtain insurance prior to the April 2015 deadline as any cases with CFA’s and ATE insurance in place prior to this date will be covered by the exemption and as such any success fee and premium payable following a successful case will be recoverable from the other party.
Should you wish to obtain an informal view on a potential insolvency litigation case please contact Leanne Schneider-Rose on 0121 698 2200 or email: l.schneider-rose@sydneymitchell.co.uk
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