12 Feb 2016 / Back to latest updates

ATE premiums & Success Fees to become irrecoverable in Insolvency Claims

Time is rapidly running out for any insolvency professional who wants to pursue claims under the Insolvency Act using the popular combination of an After-The-Event (ATE) insurance policy and Conditional Fee Agreement (CFA) and benefit from recoverable costs.

An ATE insurance policy enables litigation without exposure to the risk of paying the other party’s costs if you lose. Under the existing regime, if the case is won then the premium is recoverable from the other party, and if the case is lost then no premium is payable and the ATE insurer meets the other sides’ costs.

ATE cover is often obtained alongside a Conditional Fee Agreement (CFA), in which we as solicitors agree to receive fees only if your claim is successful. CFAs provide for a ‘success fee’, which is an additional fee payable only if the claim is won. Again, under the existing regime, this is ordinarily recoverable from the losing party.

Therefore, taken together, CFAs and ATE cover often provide the perfect solution to getting a claim off the ground at minimum cost and risk.

However, reforms to the ATE and CFA systems contained within the Legal Aid, Sentencing and Punishment of Offenders Act 2012 mean that from 1 April 2016 neither ATE premiums nor CFA success fees will be recoverable from the losing party in insolvency claims.

These changes have already come into force across other areas of the law and it is only as a result of substantial lobbying by the insolvency sector that an exemption for claims under the Insolvency Act has been retained until now.

So, if you are considering an insolvency claim then do not delay taking action.

If you have a strong claim then we can agree to a CFA in short order, however ATE cover usually requires a barrister to give an independent opinion on the case to the ATE insurer directly. This can take some time so it is best to move as quickly as possible if you believe you have a claim. An alternative would be to issue protective proceedings in advance of the deadline and then enter into ATE and CFA arrangements at a later date.

Call us now to speak with one of our team who will be happy to discuss how we can assist your business.