Commercial Litigation

In the current economic climate and as the market place becomes more global, competition is fierce and margins are squeezed. It is becoming increasingly vital for businesses to protect their commercial interests.

Consequently commercial disputes are becoming more frequent and businesses are forced into litigation. Large sums of money are spent on legal fees rather than invested in the growth of the business.

Litigation can cause severe disruption to a business and its cash flow, particularly if the dispute becomes drawn out and lasts a number of years. Even alternative methods of resolving disputes such as arbitration can involve vast costs being incurred.

We have insurance solutions to remove the risk and cost from the dispute resolution process. Using our solution businesses can pursue their dispute without it affecting their cash flow or being exposed to adverse cost risks.

WHAT WE DO

Commercial litigation 

Our litigation risk management team based in London has in-house expertise including experienced solicitors and individuals with more than 20 years of underwriting experience.

As part of JLT Specialty's restructuring and recovery team, we have real strength in insolvency, as well as commercial issues. The strength and experience of our in-house team means that, unlike other adverse cost insurance and funding brokers, we conduct detailed case assessments in house prior to approaching any markets.

Commercial litigation 

We provide our clients:

  • Adverse cost insurance
  • Arbitration cost insurance
  • Arbitration funding
  • Third party funding
  • Cross undertaking in damages cover

FAQs

ATE is generally available for all types of litigation. Whilst not an exhaustive list, examples of the sectors we generally cover are listed below:

  • Insolvency litigation
  • Intellectual property
  • Commercial litigation
  • Financial mis-selling and banking claims
  • Contractual disputes
  • Competition claims
  • Group actions
  • Professional indemnity
  • Cross jurisdiction litigation
  • High court employment disputes.

ATE insurance will cover the opponent’s costs and disbursements. However, dependant on the case, cover can also be sought for own side solicitor and counsels fees.

Arbitration can be an effective method of resolving disputes. Indeed there is now usually an arbitration clause written in to most commercial disputes. Whilst arbitration is frequently seen as a cheaper alternative to litigation, the costs can still be prohibitive. Particularly for a small organisation taking on a much larger organisation in a contractual dispute.

In much the same way as Third Party litigation funding, arbitration can also benefit from funding. Funding can be secured in arbitration to pay but not limited to:

  • Own side legal fees
  • Disbursements such as expert fees
  • The costs of the arbitrator

The level of remuneration that the funder receives will vary. Funders have their own preferred methods of remuneration. Further, the assessed risk of the matter may determine which remuneration method the funder is comfortable with.

Arbitration funding is a useful tool for all, not just impecunious claimants. For claimants without means to finance their own case, then arbitration funding has obvious benefits.

However, for claimants able to pay such as an SME with £30 million turnover, the question must be, why would I not use arbitration funding. The use of funding allows the claimant to maintain cash flow and to use such funds to grow and run their business rather than use it to pay lawyers’ fees.

The cost of the CUDC will very much depend on the case specific facts. However, typically, CUDC can be 15% - 30% of the level of cover sought. Where within that scale the matter sits depends on the risk presented to insurers.

Sometimes, the ATE can provide cover for interim injunctions such as freezing orders. However, more often than not, separate cover will be required. The main reason for this is that ATE is priced based on the risk of the case and it’s likelihood to succeed at trial. However, the CUDC is granted based on the need for relief and not the strength of the overall case.

WHY JLT

Commercial litigation 

We push ourselves to do more for our clients – making sure their risk and insurance programmes help them achieve their business ambitions. Still not sure if we’re the right broker for you? Here are three more reasons to trust our team:

In-house knowledge and expertise

Our litigation risk management team offers in-house expertise including experienced solicitors and individuals with more than 20 years’ underwriting experience. The strength and depth of our in-house team means that, unlike other adverse costing insurance and funding brokers, we conduct detailed case assessments prior to approaching any markets. This unparalleled mix of legal and insurance expertise means we can identify any potential problems and present each case to the markets in the best possible way.

Commercial litigation 

Adding value

We aim to take the pain out of the process for instructing solicitors. We will deal with all queries where possible and work with our instructing solicitors to ensure that we understand and then meet their needs.

Cost effective solutions

We work with leading funders and insurers to find our clients the most effective solution for their specific needs. We are remunerated by the insurer/funder without an increase in the premium by the client going direct. This is one of our key differentiators. There are many insurers and funders currently in the market, and it is our role to identify the right solution for each case – taking into account the insurer, funder appetite, geographic location and risk profile. Obtaining quotations from multiple insurers and the introduction of a panel of funders ensures a competitive environment to obtain the most beneficial terms possible.

Insurance solutions

We can provide risk transfer solutions for litigation and arbitration. Using our solutions you can transfer the risk of adverse costs in the event of an unsuccessful outcome. Additionally you can pursue your case with a non-recourse funding option meaning that your money can be invested in your business rather than the dispute. Our solutions include:

After the event insurance

Litigation is fraught with uncertainty. Even the most well prepared of cases can come unstuck during the litigation process. Therefore the risk of an adverse costs order can be significant and costly. Commercial litigation is expensive. Funding one’s own legal costs can often be difficult; therefore, having to pay one’s opponents costs can be perilous.

After the event (ATE) insurance is a risk transfer mechanism that protects clients’ interests in the event of an unsuccessful case. Knowing the perils of unsuccessfully litigating the existence of ATE leaves one asking, “why carry the risk?”

ATE can provide a number of benefits to our clients, including but not limited to:

  • Protection from adverse costs orders
  • Clients can pursue a meritorious claim with greater confidence
  • Can be leveraged to encourage the opponent to settle.

The price of the premium depends on the facts of the case. There area number of factors that will impact pricing. However, there are three pricing models for ATE.

  • A staged premium. This means that the pricing increases the further the matter progresses. So for example, for matters that are pre-issue the premium will generally be less than 10% of the level of cover sought. For matters post issue the premium will be between 25% - 60% of the cover sought depending on the stage at whioch the matter settles
  • A fixed premium. This means that the premium will be a set amount regardless of when the matter settles. SO for example, for £100,000 of adverse costs cover, the premium maybe a fixed fee of £35,000 plus IPT (insurance premium tax). This can be beneficial if the matter goes to trial as £35,000 would invariably be less than the trial premium under a staged policy. However, if the matter settles immediately after the issue of proceedings then £35,000 is perhaps more than the premium that would have been payable for a settlement at the same point under a staged premium
  • A percentage of damages. This can be staged also or a fixed level of damages. This is becoming increasingly popular, in insolvency litigation. This model allows clarity and certainty of price of the ATE premium in relation to the damages recovered.

There are 3 methods of paying the ATE Premium.

  • Fully deferred until the conclusion of the claim. The Premium will only become payable one the matter has settled and a recovery made as payment
  • Paid in full up front. This will generally obtain the cheapest pricing. However, if the premium is paid in full at the beginning, the fee is not recoverable in the event of an unsuccessful claim.
  • A deposit premium with the remainder deferred until successful conclusion of the claim. The deposit premium will usually be between 10% - 20% of the full premium. The paid element of the premium is not refundable in the event of an unsuccessful claim. However, the deferred element will not be payable should the case lose.
  • There are a number of payment structures for ATE that are set out below. However, the premium will be deducted from the Claimant’s damages.

Insurers need to be confident that a case satisfies two key criteria:

  • That the legal case has good prospects of success
  • That the opponent has suitable means to satisfy any judgement against them.

Insurers will generally require that the prospects of success are at least 60%. Dependant on the value of the claim, cover sought and the complexities of the matter, insurers will often require this confirmation from Counsel.

The factual merits of a claim are important however, if the opponent cannot satisfy any judgement against them then there is little value in pursuing a claim. Therefore, insurers are keen to understand that a recovery will be made and the premium paid in the event of a successful claim.

In order to demonstrate that a case fulfils the above criteria insurers will expect to see various documents. The specific documents required will be dependent on the specific facts of the case. However, below are some examples;

  • Letter before action
  • Response
  • Pleadings
  • Details of any settlement offers
  • Counsel’s opinion
  • Proof of Opponents assets, property etc.
  • If the opponents main assets are property then valuation evidence and any information pertaining to the level of equity available.

JLT will always conduct a thorough review of any case in order to present the matter in an attractive way to the appropriate markets. We pride ourselves on being able to add value for our clients and making the process as straight forward as possible.

However, below are some key hints and tips to assist with obtaining cover:

  • Provide a good synopsis of the case. Detail the key issues involved and advise on any strategy to be used in anticipation of any proposed defence. JLT will always present the strengths of a case to the insurers / funders. However, it is also useful if we can highlight some of the weaknesses in the case but also clearly outline the proposed course of action so that any possible weaknesses do not hinder the case.
  • Submit any relevant supporting documents. Counsel’s opinion is often quite valuable. Whilst the solicitors have an interest in the claim, insurers / funders appreciate the view of Counsel to confirm the solicitor’s opinion. Further LBA’s and the subsequent response will also be useful. If we can give insurers / funders an idea of how a claim is likely to be contested we can persuade them of how any issues raised can be overcome.
  • Enclose all relevant information pertaining to the Respondents ability to satisfy a judgement. Regardless of the factual position, a claim is simply not viable if there is no financial recovery to be made. Such evidence can include details of any property owned by the respondent, it’s purchase price and current value.
  • Seek insurance early. Insurers prefer claims to be presented early, preferably pre-issue. The closer to trial the more expensive the premium is likely to be. In some instances insurers will not consider a case if it is too close to trial, this period could even be within 3 months of trial.
  • Be clear on the level of cover required. Insurers do not like matters that are clearly under insured or providing top-up insurance. Insurance can be topped up where a material change in facts has occurred, but on the whole, insurers like the solicitor to be clear on the level of cover sought.
  • Engage the JLT case assessment team. We know the underwriters / funders and understand their risk appetites. We also understand how to present a matter so that It is attractive. Therefore, do contact our team and to discuss the case so that we can provide you with advice specific to that specific matter.

Arbitration costs insurance

As well as litigation, risk transfer solutions also exist for arbitration. This can be through the use of either arbitration costs insurance, arbitration funding or a combination of the two.

In much the same way as litigation insurance and funding, arbitration costs insurance and funding aim to de-risk the claimant from any costs exposure in the event of an unsuccessful arbitration.
Costs do not always follow the case in an arbitration. However, in the event of an unsuccessful arbitration there is still potential exposure to:

  • Own side legal fees
  • Expert fees
  • The arbitrator's fees

Arbitration costs insurance can provide protection against these exposures as well as against any adverse costs award.

The payment of the premium will be in much the same way as convention ATE. It can be paid in whole, part up front or fully deferred until the conclusion of the matter.

Cross undertaking in damages cover

Interim injunctions can be an effective tool in a claimant’s armoury. Particularly in matters such as insolvency proceedings where there is a real concern that a respondent may dissipate funds or dispose of assets in order to frustrate any litigation. There will not always be time to fully evaluate the full circumstances; therefore, the risk of an adverse costs order can be very real.

In the eventuality that the injunction is lifted or found to have been wrongly granted, the claimant can face a costly bill. Consequently, the applying party will be asked to provide a cross undertaking in damages, and this will often need to be fortified.

However, there is an insurance product in the market that can protect the claimant from the exposure to any adverse costs resulting from an interim injunction. This is called cross undertaking in damages cover (CUDC).

Third parting litigation funding

Third parting litigation funding (TPLF) is an agreement whereby a party unconnected to a dispute offers to fund all or some of a party's fees (usually the claimant) in exchange for a share of the damages recovered.

TPLF are becoming more widely used in litigation and also in alternative dispute resolution. The parties who make use of TPLF are also becoming more diverse; it is not just for those that have no means to pay legal fees, but also businesses and wealthy individuals. Rather than paying lawyers, TPLF ensures cash flow is not tied up in the dispute.

TPLF is generally available for all types of litigation. Whilst not an exhaustive list, examples of the sectors we generally cover are listed below:

  • Insolvency litigation
  • Assignment of claims
  • Intellectual property
  • Commercial litigation
  • Financial mis-selling and banking claims
  • Contractual disputes
  • Competition claims
  • Group actions
  • Professional indemnity
  • Cross jurisdiction litigation
  • Arbitration - both domestic and international

There are now a significant number of litigation funders available, with most having specific preferences for types of litigation, the amount of funding they are looking to provide or the geographic location of the client and legal action.

With offices worldwide, JLT Specialty work with a wide range of leading funders and our knowledge of the funding market allows us to be able to provide a panel of funders to introduce to our clients, with choice, which in turn and that should create competition in meeting clients requirements.

The funder’s remuneration is paid for from damages. However, funders each have different methods of remuneration. The main methods of remuneration that funders currently use are:

  • A fixed multiple
  • A staged multiple
  • A percentage of damages and recovered costs
  • A percentage of interest.

Do also note that the funders remuneration is not recoverable and thus payable from the recovered damages. We work with the client and funder to determine a commercially viable solution. 

TPLF is a non-recourse method of funding meaning that in the event of the case being unsuccessful, the funder will write off their investment.

If ATE is taken out some of the funders investment can be protected under the policy but otherwise the funding is simply written off.

Insurers need to be confident that a case satisfies three key criteria:

  • That the legal case has good prospects of success
  • That the opponent has suitable means to satisfy any judgement against them
  • That the costs of the action (including the funders success fee) are proportionate to the value of the claim

Funders will generally require that the prospects of success are at least 60%. Generally speaking, funders will have their own in house team made to assess the case. This in-house team will usually comprise experienced litigation solicitors. Funders may even have their own in-house Counsel or a preferred external Counsel to assess the case. Therefore a positive opinion from Counsel usually assists any application for funding.

The factual merits of a claim are important however, if the opponent cannot satisfy any judgement against them then there is little value in pursuing a claim. Therefore, funders are keen to understand that a recovery will be made in the event of a successful claim.

It is important for all involved that the costs of pursuing an action remain proportionate to the anticipated level of damages. Post Jackson, the ATE premium, the solicitors success fee are both payable from damages and the funders success fee is also recoverable from damages. Therefore, the damages and recoverable costs must ensure firstly that all costs are covered and secondly, that the claim is commercially attractive

In order to demonstrate that a case fulfils the above criteria funders will expect to see various documents. The specific documents required will be dependent on the specific facts of the case. However, below are some examples;

  • Letter before action
  • Response
  • Pleadings.
  • Details of any settlement offers
  • Counsel’s opinion
  • Proof of Opponents assets, property etc.
  • If the opponents main assets are property then valuation evidence and any information pertaining to the level of equity available.

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