Insolvency practitioners may consider taking out after the event insurance when embarking on litigation. All litigation carries with it an element of risk, no matter how confident you are of your claim.
Serious consideration should be taken before entering into an insurance policy in order to protect you from your opponent’s costs should you lose. There are a number of providers out there and it pays to shop around.
The cover offer will vary from each provider but can range from no up front fees or costs to a sizeable fee being paid on day one. The deferred policy will usually mean a greater percentage of realisations should there be a successful outcome to the litigation.
An important point to remember is a win does not necessarily mean you will get paid out. Does the policy require a payment on a win or on a recovery? Again, the best policy will be one that does not require a payment until the insolvency practitioner is actually in funds.
Once and after the event insurance policy has been signed, the insurer must be kept informed at all stages of litigation. If an offer is made by the other side to settle, your insurer should be kept informed and their views sought on the offer made. The after the event policy can usually be recovered from the other side and may encourage your opponent to settle early. But be mindful of global settlements as all parties to the litigation, including the insolvency practitioner, the solicitor, counsellor and insurer will be sharing the same pot.