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UKELA London Meeting

Substantial Environmental Disputes & Their Funding

Matt Little & James Delaney12th July 2011

What is ATE?• Legal Expenses Insurance (‘LEI’)• Insurance taken out after the event giving rise to a

legal dispute has occurred

• Policy of indemnity – Opponent’s costs (and potentially interlocutory costs orders)

– Own disbursements (incl. Counsel’s fees)

– Own solicitors’ fees (requires risk alignment)

• ATE is not…– Interim financing for own costs

– Credit risk cover

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ATE Insurance Today

• Current market:

• Relatively stable

• Differing Capacities / ‘Footprints’

• Security

• “Do I need to be acting on a CFA?”

• Indemnity parameters?

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Policy Structure• Deferred until conclusion

• Contingent upon success / self-insured

• Stepped / Increasing / Discounted• Cost increases with insurer’s financial risk

• Allows early settlement

• Recoverability

• Tactical considerations (Notice of Funding)

• How much?

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Issues to consider• Searching the markets

– Maximise the chances of securing terms– Recoverability – First mover advantage?– How much cover? (Too much v. ‘top up’)– Timing (Kris Motor Spares Ltd v Fox Williams LLP [2010] EWHC

1008 )

• Defining “success”• Claimant or Defendant?• Multiple policyholders • Unusual cases, non-monetary remedies etc

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Issues to consider (cont.)• Partial Success

• Part 36 risk • Multiple Opponents / Heads of Claim (Offsets?)

• Security for costs• Al-Koronky and another v Time Life Entertainment Group Ltd

and another [2006] EWCA Civ 1123• Michael Phillips Architects Limited v Riklin and another [2010]

EWHC 834 (TCC)

• Premium recoverability– Currently recoverable in England & Wales subject to test of

reasonableness - Access to Justice Act 1999 s.29 [ but Jackson LJ’s Recommendations]

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ExampleCase – Explosion at manufacturing plant. Toxic chemicals released causing

various alleged claims by local businesses/citizens.

Damages claim - £50m

Legal Cost estimates: Adverse costs £5m Own Side Disbursements £2m Own Side Solicitors’ fees £3m

Insurance cover (a): adverse + disbursements = £7m limit of indemnityPremium: 45% of insured sum = £3.15m. NB: Discounts up to 90% for

early settlement

Insurance cover (b): adverse + disbursements + 50% own fees = £8.5m LOIPremium: 45% of insured sum = £3.825m. Discounts up to 90%

Premium only payable if case succeeds. Case loses no premium and insurer indemnifies costs.

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Litigation Buyout Insurance

Key Features • Covers damages and legal defence costs

• Caps Defendant’s liability at certain level

• Insured’s retained element of risk (retention / excess)

• Upfront premium (not ‘contingent’)

• Example: • Defendant in case example facing £60m risk (£50m claim

and £10m costs for both sides if lost) • [‘Win’ = settling for less than £40m inclusive]• LBO excess of £40m with premium of £1.5m• Worst case outcome reduced from £60m to £40m• (Insurer’s risk = £20m with £1.5m premium)

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Third Party Funding • What is it?

– Professional Funder with no prior interest in case– Share of proceeds

• Cost to the client – Multiple of amount invested or % of damages? or commonly a

combination of both– Increasingly competitive – market adjustment occurring

• Ingredients?– Good prospects of success – Substantial (monetary?) value (not necessarily)– Financially stable Defendant

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The Future of ATE?

• MOJ’s Recommendations• ATE insurance premiums no longer to be recovered from

paying party • Abolition of CFA success fees

• Consequences if implemented

• Greater focus on economics i.e. cost to claim value ratio• Increased pressure to ‘shop around’ to ensure client is not

over paying for funding/insurance

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