By David Chase, Deputy Underwriting Manager, Temple Legal Protection 
In the onset of the Covid-19 pandemic, the business world was subject to huge disruption – with numerous companies ‘going to the wall’ and many others teetering on the brink. In the insolvency and restructuring arena, the government, insolvency practitioners and solicitors had to adapt fast. We take a look at developments.
In times of crisis, for some businesses cashflow alone is not enough – but remains vitally important. The Corporate Insolvency and Governance Act 2020 (CIGA) put in place new procedures and measures on 26th June to try and rescue companies in financial distress resulting from the pandemic and subsequent economic crisis.
Time will tell whether these more “debtor-friendly” measures have the desired effect. There is a perception that if available funds are generally going to be lower after a crisis, then settlements should be lower and should be arrived at more quickly; this is to protect against the risk of not achieving a recovery at all.
Protect your settlement potential with litigation insurance
If cases are settled early and pre-issue without an approach being made to the litigation insurance market, even for an indicative price, then, inevitably – if cover is purchased later – the premium will need to be higher to reflect the increased risk, or there may not be any cover offered. The chance of achieving a settlement with the benefit of both protection and paying a lower premium may have passed.
The sooner a case can arrive for underwriting assessment for the merits to reasonably be assessed, the better it is. Having litigation insurance and disbursement funding sends a clear message to the opponent – that there are sufficient funds to fully pursue the case and clients need not be pressured into dropping the case or settling it for less than it is worth.
Insolvency cases – litigation insurance at work
Here at Temple, the insolvency cases we are typically asked to insure include allegations of breaches of duty by company directors, misfeasance, fraudulent trading, wrongful trading, transactions at an undervalue (TUVs), preference claims and transactions allegedly defrauding creditors.
Litigation insurance for insolvency litigation is used by liquidators, administrators and trustees in bankruptcy. Here’s some reasons why Temple is one of the leading providers –
- Our litigation insurance premiums are deferred until conclusion and contingent upon success. There is no need to pay upfront.
- Insurance premiums for insolvency cases are staged, with the advantage of a lower premium to be paid if the case settles pre-issue.
- The insurance cover is comprehensive and also fully retrospective, and backed by A-rated insurance capacity from RSA.
- In addition, whilst we are confident that our policy wordings should deal with the threat of an application for security for costs, we are also prepared to consider providing an anti-avoidance endorsement for cases too.
- For each case insured with Temple, the client is also eligible to apply for disbursement funding from Temple Funding, a subsidiary of Temple Legal Protection.
This is a bit of a ‘no-brainer’, as Court fees and other disbursements can mount up, particularly where a higher- value case or volume of cases is being progressed.
Temple Legal Protection out and about (virtually) with R3
You may have seen us at the recent R3 London & South East Regional (LASER) virtual event in August. For this we sponsored discussions on topics such as out of court insolvency appointments, equitable compensation claims and recent cases/developments.
Look out for us at the upcoming R3 North East (virtual) regional meeting on the 15th October 2020 and the R3 South West and Wales (virtual) regional meeting on the 19th November 2020, both of which Temple are sponsoring.
Topics to be discussed in these events include a technical update on the CIGA and an update on R3’s ongoing policy work via an interactive panel session with R3’s senior team. There will also be a focus on regional issues, FCA and insurance clauses, and the Bounce Back Loan Scheme – their use, abuse and subsequent litigation.
If you have a particular insolvency case or are interested in a delegated authority scheme for your insolvency litigation, please do call me on 01483 514 424 or send an email to email@example.com .