After-the-event insurance — universally shortened to ATE — is a form of legal expenses cover taken out by a claimant after a dispute has arisen. It sits alongside conditional fee agreements and damages-based agreements as one of the funding tools that make professional negligence litigation commercially viable for claimants who cannot, or will not, bankroll a claim from their own resources. In claims against solicitors, accountants, surveyors, financial advisers and other regulated professionals, ATE often determines whether a meritorious case is actually pursued.
Before-the-event (BTE) legal expenses cover is bought speculatively, usually as an add-on to a home, motor or commercial policy, before any dispute is contemplated. ATE is the opposite: the dispute has already happened, and the claimant approaches an underwriter with a case that already has legal merit. The Court of Appeal in Sarwar v Alam [2001] EWCA Civ 1401 confirmed that solicitors have a duty to investigate whether a client already has BTE cover before recommending ATE.
The core cover is adverse costs — the defendant's legal costs that a losing claimant would otherwise be ordered to pay under CPR 44.2. Most policies also indemnify the claimant's own disbursements: counsel's fees, expert reports, court fees and mediator fees. Some extend to cover the claimant's solicitor's work-in-progress if the claim fails, effectively backstopping a conditional fee agreement. Limits are underwritten case by case; £100,000 to £500,000 of adverse costs cover is common in commercial PI claims, with higher limits available for larger disputes.
Before 1 April 2013 an ATE premium was, in principle, recoverable from a losing defendant as an item of costs. The House of Lords set out the recoverability framework in Callery v Gray [2002] UKHL 28, and CPR 44.3B (as then in force) provided the procedural anchor. That regime made ATE almost universal in PI claims because the successful claimant paid nothing net.
Sections 44 and 46 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO) abolished recoverability for policies incepted on or after 1 April 2013, save for three narrow categories: mesothelioma claims, insolvency-related proceedings during the initial transition, and publication and privacy proceedings. Professional negligence claims fall outside those exceptions. The premium is therefore borne by the claimant out of damages, subject to whatever arrangement has been agreed with the ATE insurer — deferred, staged, or self-insured premium structures are common.
Even without recoverability, ATE remains valuable because it removes the largest deterrent to litigation against a professional: the risk of paying the defendant's costs if the claim fails. A commercial claimant with a strong case but limited appetite for costs exposure can transfer that risk to an underwriter for a premium priced against the strength of the case. Solicitors on a conditional fee agreement will often make ATE a condition of taking a case on, because without it the client has an unhedged adverse-costs exposure that can dwarf the underlying damages.
A regulated professional's PI policy is a separate contract on the other side of the dispute. It responds to claims made against the insured, indemnifying for damages and defence costs subject to policy terms and the excess. The claimant's ATE policy sits behind the claimant; the defendant's PI policy sits behind the defendant. They do not, in the ordinary case, ever meet. Adverse costs against a losing claimant are not paid by the defendant's PI insurer — they are recovered from the claimant, and if the claimant has ATE the claimant's insurer pays.
The following is an illustrative worked example, not a live case. A commercial claimant brings a professional negligence claim against an accountant valued at £800,000. Before issue, the claimant takes out an ATE policy with a £250,000 adverse costs limit at a premium of £15,000. The claim settles at mediation for £600,000 plus reasonable costs. Because the claimant has succeeded, the ATE policy is not called upon and the £15,000 premium is not recoverable from the accountant under LASPO. The accountant's PI insurer pays the £600,000 settlement and defence costs, subject to the policy excess. The claimant nets the settlement less the ATE premium and any success fee.
For the fee arrangement between claimant and solicitor see conditional fee agreements in PI claims post-LASPO and damages-based agreements in PI claims. The interaction between ATE and the defendant's PI programme is discussed in Apex's sector guides for solicitors PI insurance, accountants PI insurance, surveyors PI insurance and IFA PI insurance.
A defendant professional will rarely see the claimant's ATE policy itself, but its existence often shapes the tactical posture of a claim. Claimants with ATE tend to be less susceptible to costs pressure. Early notification to the PI insurer, careful reserving, and considered use of Part 36 offers become correspondingly more important. Apex Insurance Brokers works with insured professionals to make sure the PI programme responds properly to claim notifications and that defence strategy is coordinated with the insurer from the outset.
Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Firm reference number 724952. This entry is general information, not advice on any particular policy.