Construction insurance types

Litigation insurance comes in 2 forms: before the event (BTE) litigation insurance and after the event (ATE) litigation insurance.

BTE litigation insurance is an annual policy taken out to pay for any potential legal action that may arise during the period of cover. It is available for both claimants and respondents and will pay for the legal costs of the insured and any costs order that may be made against the insured. Once the policy is in place, the insured has to demonstrate that they have a greater than 51% chance of success in any litigation, in order to activate the policy. It is available to both claimants and respondents.

These policies are themselves a powerful means of assisting settlement. A party that is paying its own legal costs, faced by another that is covered by BTE litigation insurance, will be well advised to actively seek an early resolution to the matter.

ATE litigation insurance is a policy taken out in respect of a known issue. Such policies are usually taken out by claimants, but are available to respondents too. ATE litigation insurance does not fund an action, but protects the insured from a costs order (requiring it to pay the legal costs of the other party) in the event that it loses the action. It is therefore most common to find such policies in use alongside conditional fee arrangements (CFAs) with lawyers. ATE litigation insurance premiums are recoverable as a legal expense, as is the CFA uplift charged by the lawyers. Therefore, if a party covered by such an arrangement wins their case, they will be able to recover their additional expense as part of the recovery of legal costs from the losing party. If, on the other hand, the insured party loses the case, the insurance premium will be far less than her liability for legal costs would have been.