Litigation is a fact of business life and as the country recovers from the Great Depression the growth in the economy will probably see a corresponding rise is disputes, the more business there is the more that can go wrong.  We argue that ATE insurance is an important tool in the kitbag.

As I sit here sucking on my pencil and scratching my rather grey hair, I have never understood why companies don’t make more use of ATE insurance as a sensible tool and purchase it to protect a company from exposure to costs?  Historically it is underutilised and underwriters get to have long lunches.  Well brokers should get to have long lunches (with clients of course!) not underwriters. So we are on a constant mission to work with solicitors and their clients over awareness of ATE.

Perhaps one of the reasons that ATE is underutilised is that clients always think their case is a sure fire winner.  However, commercial litigation is never straight forward and if a case gets anywhere near court statistically the odds of winning are evens at best.  Insurance is a safety net and the premium, for the deep pocketed protection of an insurer, is a lot cheaper than paying an opponent’s costs especially if the premium is deferred until successful conclusion.  Buy now but pay later, probably as close to a free lunch as you can get!  Even large companies should worry about the cost impact that litigation can make on profits.  It is prudent to mitigate potential costs, it is better and cheaper to obtain cover at the outset before it is too late.  We have seen the high hopes of even the best cases with time turn into uninsurable losers, not pretty.  So the message is to get insurance while you can.

Insurance is not just about protection it also sends a clear message of support to both the solicitor and their client, even though ‘I am a classic risk adverse underwriter thinks your case is good and I want to support it’.  The confidence and ‘swagger’ this imparts should give the opponents a seed of doubt in their mind that their position is perhaps untenable in the long run. On a practical basis, if you are a small firm fighting a ‘big boy’ then this is priceless because it gives you the means to fight particularly as the first hurdle in commercial litigation is to deal with a security for costs application.  ATE insurance can be cheaply endorsed to act as a bond to satisfy a costs application.  Job done.

I always am surprised at the continuing lack of understanding of ATE insurance and its scope, we commission hungry sales people spend a surprising amount of time educating others on the basics, a role which is quite satisfying as we take pride in the uniqueness of ATE in comparison to other areas of insurance.

As I was discussing with a barrister over a glass, insurance is never going to be sexy, unless you are insuring some film star’s legs, but it can at least be useful.

Reading a well known periodical recently, I noticed that the Nigerian economy had neared doubled in size!  Reading on, it seems that the old method did not take everything into account.  This system of improving, or more properly ‘adjusting’, the figures is known as ‘re-basing’ the economy.

Looking more closely, whole industries had developed since the last rebasing, telecoms and the movie industry either did not exist or where very small at the time.  These industries now form a large part of the Nigerian economy.

At the same time I heard a snippet on the Today programme (radio 4), the European Union is looking into local economies’ Gross Domestic Product (GDP) and has found there are things that do not appear in official figures, prostitution and drugs for example (I kid you not).  According to the EU, these are part of the local economy and should be included in GDP.  It seems that individual country’s contribution to the EU depends on GDP, so increasing the size of economies means that the EU coffers grow even larger, without a headline increase in contribution levels, cunning or what?

Focusing for a moment on our particular industry, legal services, the LASPO Act has rebased the claimant litigation economy, introducing the need for an economics ‘test’, what are the costs of pursuing an action against the likely rewards?  As the saying goes ‘some people need a reality cheque’ (pun intended) both in terms of the risk of litigation and the likely outcome in respect of damages.  It maybe a little unfair, but it’s not uncommon for clients to think their case is more promising and worth more than experience tells us.

So before we trot off to see underwriters and funders we help you by going through a ‘re-basing’ of sorts with any proposal that we see.  We cast a critical eye over the proposal, is the case really worth £5M?  Does it make sense to run a case worth £50,000 when costs are likely to be in excess of £100,000?  Whilst this critique is more likely to ‘deflate’ a case, the exact opposite of what tends to happen when GDP is ‘re-based’.  Through a spot of positive criticism (may not be needed!) we can get a proposal into the best possible shape before going to the market.

Keep an eye out for our future ‘blogs’ in which we give handy tips on applying for insurance and funding.

Though I had better check to see if I had created a new word for the English ‘reasonableness’, fortunately I had not, it’s a noun (The Chambers Dictionary (1995))  Must get around to updating soon!

The ‘Mitchell’ judgement sent shock waves through the legal world.  A failure to comply with the regulations had serious consequences in regards to costs.  However a second case before Mr Justice Leggatt, Summit Navigation Ltd, has provided another view.

In this case the defendant argued that the failure to meet a deadline in a consent order meant that the case was permanently stayed and that an application for relief from sanctions would need to be made and that it would be resisted.

The application was made and indeed vigorously resisted.

Mr  Justice Leggatt found for the claimant.  He noted that in the Mitchell case a Court date was vacated and re-listed, causing another case to be vacated, causing others outside the actual case to be inconvenienced.  In the Summit case no one was inconvenienced by the default, the case was not disrupted, indeed the cause of delay was the defendant’s response to the default.  Further, the need to apply for the lifting of sanctions in this case caused others to be inconvenienced as Court time was required.  This was solely due to the defendant’s stance which was ultimately found to be unreasonable.

The defendants were ordered to pay the claimant’s costs for both applications with the exception of the costs incurred by the claimant in issuing their application necessitated by their default.

So we have two judgements for what appear to be similar circumstances but with very different outcomes.  All we can say is that there will be more litigation and so far we are none the wiser.

Generally solicitors take on the costs of clinical negligence cases by funding medical reports and expenses from their overdraft facility.  This can have an adverse effect on the balance sheet especially in these times of austerity.   So, what options are out there?

We provide a disbursement loan facility that doesn’t require you and your firm to provide a guarantee or service the loan.  Great news to put to your partners at the next finance meeting!  Our package combines insurance as well, so clients are fully protected from the slings and arrows of defendants.  The loan element of our package has a simple interest rate of 15% per annum.  Is this expensive?

To answer that question we have to decide what factors affect the price of money.  Among others, the availability of money, lenders willingness to lend, loan period, security, credit history and general market conditions all feed into the rates we pay for money.  Most lenders don’t understand or like litigation business because the borrower’s ability to pay is linked to winning a case which is inherently uncertain.

So what currently has been available to litigant clients to pay their disbursements?

Payday loans, ludicrously high interest rates and very short term loans, monthly payments required and fixed loan terms.

Personal loans, interest rates from around 5% and above, monthly payments required and fixed loan period.  A client would also have to have a satisfactory credit history and maybe also provide security.

Credit cards, APR around 29% (rate may vary) and above, monthly payments required, compound interest and no fixed loan period.

These products are not suitable for litigants because no one knows how long their case is going to last, how much money is needed or indeed if they will win.  This is why latterly most firms have seen the need to accept the disbursements cost burden on behalf of their clients.  Working with our partners, QLP provides funding which relieves firms of this burden by lending money to clients through a regulated CCA.  These loans are not serviced or secured, can run for five years, and monies are drawn down as and when needed.  Interest is deferred and only paid if your client’s claim is successful.  The disbursements including interest are insured so if the claim is lost the client has nothing to pay.

So what appears to be expensive can turn out to be ‘cheap’.

(There are alternative funding arrangements not mentioned in this article.)

In our modern world we all use technology without a thought.  We buy and sell, check facts, look for bargains and so on.  For most people the internet forms the backbone to our lives, holidays, nights out, that late birthday card or present all can be sorted using the internet.

This level of interaction is not continued into our business lives, tablets, smart phone, Wifi etc.  We rely on these devices in our personal lives but are more reluctant in business, why?

If asked most of us would cite security, we have all read about mistakes made, (the embarrassing photos that can and have led to a P45), and using technology these mistakes run around the world to most peoples’ amusement.

But, rest assured it will come and those at the forefront of this revolution will reap the benefit.

Here at QLP we are embracing this brave new world.  Our stamp bill is about 10% of what it was, the time taken to process a case has reduced by up to 75%.  Admin has been greatly reduced enabling us to take on more work without increasing the staffing levels.

A drawback to this new situation is people come to expect this level of service, if you are not in the game you will lose business.

So where do we go from here?  The future seems to be a streamlined business model, everything can be sorted so much more quickly on the internet.  Time will come, in the not too distant future, where papers will be served via the net.  We already transfer them via the net.  Just a thought, will court fees reduce?  I think we know the answer to that!

Looking further ahead, Wi-Fi is everywhere, we do not even have to be in the office to access our network, and the cloud is gaining pace, offering more options.  How soon before we downsize our office space?

What could be better than on a nice summer’s day sitting outside a coffee shop working on our tablets?  Will formal office space just be there for meetings or will meeting end up on the tablet?  Using services like VOIP and Skype mean no phone charges, even international calls are free.

We can reduce costs and in many ways improve the quality of our working lives, win win?

From a personal view point, I hope the office environment does not disappear altogether, after all, homo sapiens are programmed to interact with its own.  Will costs reduction prove too much?  I will leave you to decide.