During the hectic lead up to implementation of the LASPO Act on 1st April 2013, some insurers are said to have written a year’s worth of business in the space of a month, as solicitors and clients rushed to take advantage of the old cost rules whereby the ATE insurance premium was a recoverable cost.
However, whilst it was accepted that, from 1st April 2013, ATE insurance premiums and CFA success fees would have to be paid from the client’s pocket (or, most often, their damages recovery) in most areas of law, the changes were introduced on the basis that they would not be retrospective. Yet, in an unexpected turn of events, it emerged at the Law Society’s recent civil justice section conference that pre-April ATE policies could have time limits imposed on them so far as recoverability is concerned.
It is understood that Lord Justice Jackson was dismayed by the number of policies underwritten immediately before 1st April and, as a result, the Society’s Law Management Section co-chair Stephen Mason discussed the possibility of imposing a time limit by which proceedings must be issued post inception of the policy, in order to benefit from the old recoverability rules. The plans are said to be in the early stages, although a time limit of six months in which to issue proceedings after having taken out the cover has been suggested.
It is of course fairly surprising that the pre-LASPO rush of ATE insurance applications came as a shock to Lord Justice Jackson, as the entire industry was fully prepared for such a spike in applications and indeed it was discussed and anticipated in legal press for several months leading up to the deadline. The suggestion of having to issue proceedings within a certain timeframe of incepting a policy will surely encourage defendants to delay responding to letters of claim, artifically agree to pre-proceedings settlement discussions etc. simply to remove the burden of having to pay the ATE insurance premium. Besides, a six month period is almost certainly unacheivable for many cases, regardless of whether they were insured within the “pre-April rush” or otherwise.
Should the plan to include retrospective impact become more concrete then there will no doubt be uproar, as clients will have taken out policies on one understanding only to find themselves with an unexpected, and potentially large, liability. And whilst in some cases there will be sufficient damages to pay any premium (albeit the client didn’t factor that in to its considerations initially, having been under the impression it would recover the premium), there will be other cases where the ratio of costs : damages means that the premium would engulf the majority or all of the client’s proceeds. The unsatisfactory alternative, should the proposed changes take place, is for cases to be issued prematurely which of course will only serve to increase the costs involved in the litigation as later amendments will be required causing spats between the parties etc.
Nevertheless, at this point in time, the position remains as previously understood – successful clients with ATE insurance policies taken out prior to 1st April 2013 can seek to recover the cost of the premium from the losing party, whilst successful clients with policies taken on or after 1st April 2013 must pay the premium themselves, with some exceptions (the primary one being insolvency litigation).
If you have any queries regarding the likely cost of ATE insurance premiums post-LASPO, or any cases which you would like to talk through in general, please do not hesitate to contact us. Our brokers are more than happy to discuss the suitability of ATE insurance and litigation funding in a post-LASPO regime.