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From 1st April CFA success fees & ATE premiums will no longer be recoverable for insolvency cases
By: Katie Armstrong 14 Jan 2016
From the 1st April 2016 CFA success fees and ATE premiums will no longer be recoverable for insolvency cases. Act quickly to take advantage of the existing rules.
The effects of this legislative change will inevitably be most acute in relation to smaller-value insolvency cases. By ‘smaller-value’, we are typically talking about cases where the damages are less than £500k and where legal costs are lower than £200k. Whether or not new cases of this size will be economically viable after 1st April 2016 remains to be seen. The ratio of realistic claim value to estimated legal costs of pursuing the claim (including the premium for insuring the risk of adverse costs in order to avoid personal exposure for the insolvency practitioner) will be key when considering whether or not to pursue litigation on behalf of creditors.
Larger cases where the likely recovery runs into the millions will typically allow more headroom for alternative funding costs, however in such cases, the legal costs are likely to be significant and the level of adverse costs cover required may be of a similar scale. As such, the difference between being able to recover the cost of the ATE premium as part of costs, as opposed to paying for the premium out of the damages or settlement, can have a significant impact on the net recovery for creditors.
Act now to protect your existing clients:
With only 10 weeks left until the changes take effect, time really is of the essence. Insolvency practitioners must act quickly in order to ensure that any existing cases are presented to insurers in time to obtain the benefit of the existing rules.
ATE Insurers will need time to assess any new insurance applications and an allowance of time must be given to agree premiums and cover limits and execute policy documents. As the volume of applications increases in the run up to 1st April, underwriters will inevitably start to apply “rough justice” when assessing cases, leading to higher than normal rejection rates. Insurers will also likely close their doors entirely to new applications some weeks in advance of 1st April, in order to allow time to work through the backlog of applications already submitted.
As such, the message is clear – good potential claims for which adverse costs insurance is likely to required and/or where security for costs is likely to be sought, should be presented to insurers as soon as possible in order to give the best possible chance to secure insurance under the current favourable costs regime.
Why apply to TheJudge?
- We are the most experienced and largest specialist ATE insurance broker in this market.
- During the run up to 1st April 2013 when recoverability of ATE premiums ceased for other case types, TheJudge arranged more urgent commercial policies in the market than any other broker – put simply, we know how to manage the rush.
- Our bargaining power with underwriters enables us to get preferential terms faster than other brokers.
- We access more insurance providers than any other broker.