Why Bother Insuring a Commercial Case?
5th June 2014
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.