Funding for Litigation
Becoming embroiled in a legal dispute can be an expensive process. Cost may be the deciding factor in whether an individual or a business takes action when faced with a problem. However, there are alternative methods of funding, and cost need not be an insurmountable hurdle:
1) Before the event insurance
Before the event insurance (“BTE”), or legal expenses insurance as it is often known, is taken out in advance of the legal dispute. A large number of clients already have it – often without realising they do – as often it is purchased as an additional option under building, household contents or motor insurance policies. If a dispute arises, the first thing you should do is check whether you have BTE insurance to cover the costs of the case. If you do, you will then need to submit a claim form to your insurer, and they will take it from there. They may require you to use a solicitor chosen by them, as they have panels of solicitors acting for them. Most policies will provide at least £50,000 worth of cover.
2) After the event insurance
After the event insurance (“ATE”) is taken out after the dispute has arisen. An application is made to a specialist insurer, who requires a legal assessment of the case and prospects of success of at least 70%. If the insurer is prepared to provide cover, a premium will be payable. Normally the premium will be deferred to the end of the case, and will only be payable if the case is successful, when your opponent will be asked to pay it. Therefore, ATE insurance may be available without any actual layout on your part. ATE insurers will let you choose your own solicitor. The amount of cover provided will depend on the case, but can be significantly more than is available under BTE insurance.
3) Third party funding
Third party funding (“TPF”) comes in different forms, but essentially, it involves a commercial third party providing financial support in a dispute in return for a percentage of the sums recovered if the claim succeeds, but nothing if it fails. Such funding provides payment of your own costs as the dispute progresses, but you are still required to take out ATE insurance in case you lose and need to pay your opponent’s costs at the end of the case (in which case the ATE policy covers those). TPF is generally only available in high value claims – e.g. £150,000+.
4) Conditional Fee Agreement
A Conditional Fee Agreement ("CFA"), or 'No Win No Fee' agreement as it is often known, is an agreement between you and your solicitor that the solicitor's costs will only be paid if the case succeeds, and in that instance, by your opponent. The solicitor gets paid an uplift on those costs, to reflect the risk he or she is taking of not getting paid at all. If the case is unsuccessful, the solicitor's costs are written off. As with TPF above, when entering into a CFA you may still be required to take out ATE insurance in case you lose and need to pay your opponent’s costs (in which case the ATE policy covers those).
5) Self funding
If no other method of funding is available to you - or if you prefer it - traditional self funding is always available, where you pay your solicitor's costs on the basis of his or her hourly rate, together with any expenses associated with the case. Your solicitor will give you an estimate of those costs for each stage of the process, and payment schedules can be agreed to help you to budget for the expense.
We can advise you of the funding options available in your case, and your prospects of recovering costs from your opponent. If applicable, we can help you submit a claim form to BTE insurers or apply to ATE insurers. Sometimes a combination of funding methods can be used. Whatever the case, the first step is to talk to us so that we can help you work out whether and how you can afford to proceed.
For further information contact: Rachel Stewart