TheJudge can arrange insurance protection for the risk of having to pay out under a cross-undertaking in damages provided by a claimant in order to obtain a freezing order against a defendant or some other form of injunctive relief.
Claimants who ask the court to freeze their opponent’s assets or prevent them from trading in some way via an injunction, in order to protect their own legal rights or recovery prospects in the litigation, may be required by the court to provide an undertaking that they will pay the opponent any losses they have suffered because of the injunction.
If it transpires that the Claimant’s claim is not meritorious, then the undertaking is designed to compensate the opponent for suffering losses they should not have incurred because their assets or activity should not have been interfered with.
Such an undertaking requires security where the court feels that there is a risk the claimant would not be able to pay the compensation. The obligation to provide security for a cross-undertaking in damages can therefore frustrate valid claims where the claimant is impecunious or illiquid.
Cross-undertaking insurance policies can act as security and satisfy the court that the undertaking will be honoured if called upon.
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