A judge has cleared up any ambiguity regarding the lawfulness of after the event insurance after an investigation into the practice, deeming it a legitimate and legal practice.
Judge Hogan of the High Court has taken steps for after the event insurance (ATE insurance) to be offered to plaintiffs to help protect them from exposure to legal costs while making a claim for compensation for personal injuries. ATE insurance is a policy taken out when plaintiffs make a personal injury claim as a means of protection from the legal costs involved in the case should their claim prove unsuccessful. No premium is charged until the result of the case is established, and only if the plaintiff is successful in their claim is the premium paid. If this premium is paid, it is usually deducted from the settlement of compensation claimed by the plaintiff.
In recent times, the provision of ATE insurance was challenged in court, when the defendant claimed that it was unlawful due to being contrary to the “law of champerty”. The law of champerty makes it illegal for a third party to provide financial support to either party in a court case when the third party has no direct or legitimate interest, or to provide financial support in return for a share of any resulting compensation settlement.
When ATE insurance was challenged, it was alleged that by providing such insurance against the potentially staggering legal costs-and by deducting the insurance premium from any compensation received-insurance companies and solicitors offering ATE insurance were breaking this law.
Judge Hogan reviewed the case, and the manner in which ATE insurance works. He found that the provision of such insurance did not contravene laws relating to the “trafficking in litigation”. This is where the third party’s only motive in supporting the litigation was to derive profit. The judge concluded that ATE insurance is vital in allowing access to justice to persons who might otherwise be denied that justice.
Judge Hogan’s decision has cleared up any confusion or debate about the lawfulness of such a service when taken out to protect a claimant from exposure to legal costs, and also that solicitors who fail to offer claimants the option of ATE insurance could subsequently be sued for malpractice if adverse orders for costs are made against uninsured plaintiffs.