Under cover?

In the mid-1990s the government slashed the availability of legal aid to fund claims and instead permitted the use of conditional fee agreements (CFAs). The retention of the “loser pays all” costs principle and the potential exposure of unsuccessful claimants to adverse costs awards led to the development of after-the-event (ATE) insurance cover to work alongside CFAs. The Access to Justice Act 1999 introduced ATE insurance and allowed its recoverability. Claimants could now litigate without cost or risk to themselves. Further endorsement of the recoverability of the ATE premium came in the landmark case of Callery v Gray [2001] EWCA Civ 1117, [2001] 3 All ER (D) which allowed recovery of an ATE premium at the settlement stage. This led to a proliferation of claims backed by an ATE policy.

Over the ensuing decade a range of problems and additional burdens have been imposed upon defendants as a result of the increase in the use of ATE insurance.