How to reduce the risk of litigation

09 August 2017

Worried about the cost of litigation and daunted by the consequences of losing? ‘After the Event’ insurance could be the answer

Before beginning legal action the question should be asked: How will we fare in a court dispute? 

Disputes will always be a hazard in construction, especially during an economic downturn. The ability to bring court action is increasingly essential for construction businesses. 

Savvy contractors are de-risking the process before they set foot in a courtroom by reducing their up-front and on-going costs with insurance, which allows them to place litigation on the asset side of the balance sheet.

It’s called ‘after the event’ (ATE) insurance and litigation funding. ATE insures against the opponent’s costs, and funding covers your costs during a legal dispute.

What is ATE insurance and litigation funding? How can they work for you? 

An ATE policy is purchased after a legal dispute has arisen and is specific to that individual case. The cover normally includes disbursements, security for costs indemnities, and adverse costs orders in the event of discontinuance, abandonment or a loss at trial. 

Even the best case has risk. But you can de-risk the litigation process, with ATE insurance and litigation funding. 

An ATE policy pays the other side’s costs should a case be lost. Litigation funding is where an investment company pays your own legal costs in return for a share of the damages. A funder only gets their money back, plus an agreed share of the damages, if the claim be successful.

Every year, UK construction companies write off up to GBP 3.1 billion in bad debt. A 2016 survey by Bibby Financial Services found that UK subcontractors are forced to write-off more than GBP 16,000 each per year, due to unpaid work. 

In 2016, more than a third of firms said construction contracts are too complex to understand, which can lead to disputes arising. 

ATE premiums can be deferred, or paid by a litigation funding, meaning the cost and risk of litigation being transferred at the earliest stage. 

What price peace of mind? It’s a business decision as to whether it can carry the risk of disputes. Finance directors are often quick to see the benefit and advantages of de-risking the process

How to reduce the risk of litigation

For further information, please contact Jim Driver, Account Executive for Restructuring and Recovery Risk Management on +44 20 7466 6937 or email jim_driver@jltgroup.com


contact Dave Cahill
Senior Partner, Construction