This fourth and final part of the blog series posted by Allianz Legal Protection was written by Steve Rowley, business development manager. For the previous blogs in the series, click here, here and here
Since the Jackson reforms of 2013, after-the-event (ATE) insurance has been suffering from something of an identity crisis. Some law firms question the value of ATE, believing they can in effect ‘self-insure’ the adverse cost risk, whilst customers question the need for ATE when the law firm is happy to run a case on a conditional fee agreement (CFA).
From the customer’s perspective, I fully understand this quandary; if the law firm is confident to run it under a CFA (with some continuing to use the phrase ‘no win, no fee’), then surely there is no risk to me?
In the heady pre-LASPO days, ATE was a simple sale because customers never paid for it, so it was a given that they would have this cover as part of the CFA. However, customers now have a financial interest in the ATE insurance policy, as they are now liable for the premium (in most cases).
Litigation continues to be a risky business, although the extent of risk depends on the nature of case types being run by a firm.
The general principle of insurance is to provide protection against fortuitous events, although ATE may differ slightly in that the event has already occurred. However, what continues to be true is the fortuitous nature of the financial risk to the customer. No matter how good a case looks in the beginning, this can soon change as the case progresses and new evidence materialises.
For law firms that decide not to advise their customers to insure early (or at all), there are real risks, both from a financial and regulatory perspective. The financial risk is the pressure on a law firm’s balance sheet by not insuring and having to fund the adverse cost risk. The regulatory issues include not being able to find insurance, accusations of under-settling cases and potential negligence claims brought by disgruntled claimants.
Law firms have a duty to discuss with their clients available insurance options and the risk faced by not insuring early in terms of the premium (or deduction from damages) that would be payable; if insurance can be found at all so late in the litigation process.
At Allianz Legal Protection we have moved away from a standard rating approach, tarring all firms with the same brush, whereby, through the law of averages you have good firms supporting poorer firms, although the premium they pay and the cover they receive is the same.
Our approach is to work in partnership with law firms to create ATE solutions that, first and foremost are designed around the needs of the customer – “right for me, hassle free” and priced according to the risk exposure by recognising the expertise of the law firm.
We are now in an environment where law firms and insurers need to work together to ensure that the appropriate risks are identified and solutions subsequently created for the benefit of the customer whilst supporting a firm’s long term needs and growth strategy.