Matthew Williams answers the following question: Can my commercial client get ATE legal expenses insurance for an appeal? (Their ‘solid’ claim most unexpectedly lost at trial – there is no policy currently in place.)

1. Small businesses – those
employing up to 50 people –
encounter a range of legal issues
as they start up and grow. Given
their small size, they will often need
to turn to external experts as they
won’t have all the knowledge and
skills they need in-house. Recent
research published by the Legal
Services Board suggests that when legal issues arise, small
businesses are not always getting the help they need.
The research is the largest ever survey of the legal
problems faced by small businesses with over 10,000
firms participating. The research also covered firms’
strategies and actions for dealing with legal problems. It
updates similar research from 2013.
The research suggests that significant market
opportunities for legal services providers exist. Half of
small businesses reporting a legal issue said it had a
negative impact. 26% of businesses reported loss of
income and 9% reported loss of a contract or customer.
In fact, total annual losses to small businesses due to legal
problems is estimated at £9.79bn. This is the equivalent of
one third of current turnover in the UK legal sector.
Fewer than one in 10 small businesses either
employed in-house lawyers or had a retainer with
an external provider. Over half of small businesses
experiencing a problem tried to resolve it themselves
and when advice was sought, accountants were
consulted more often than lawyers.
Cost, unfortunately, is a major deterrent for small
businesses. Just 13% of small businesses surveyed
viewed lawyers as cost effective - although this figure is
much higher amongst those small businesses who have
used a lawyer in the past. This suggests a potentially
large untapped market for law firms to access, if they
could present small businesses with affordable options.
The researchers, based at Kingston University, suggest
a number of strategies for law firms to consider. One
is greater market segmentation and targeting services
differently at business start-ups, firms with owners/
managers of differing ethnic minority origin or with
a disability, as well as sector specific offerings. They
also suggest law firms could focus more strongly on
portraying themselves as helping to anticipate and avoid
legal problems, rather than as advisers of last resort,
which is how they currently appear to be perceived.
Law firms undoubtedly face a challenge accessing
these potential customers and convincing them of the
value of their services. However, the potential rewards if
law firms can get this right surely makes this untapped
market an opportunity they cannot afford to miss.
The report can be found here: https://research.
legalservicesboard.org.uk/news/latest-research-small-
business/
Richard Moriarty, Chief Executive, Legal Services Board
(LSB).
The legal needs of small
businesses – New research
Q. Can my commercial client get
ATE legal expenses insurance for
an appeal? (Their ‘solid’ claim most
unexpectedly lost at trial – there is
no policy currently in place.)
A. Maybe…
1. The more usual time for an after the
event (ATE) legal expenses insurance
policy to be put in place, is at some
point prior to the first instance trial of a
claim. Cover is frequently taken out at
a relatively early stage. The majority of
disputes settle and the fact parties may
be able to negotiate at various points
prior to trial, is often assisted by the
‘staging’ of the insurance premium (so that the earlier the
settlement the less premium is payable).
2. Unfortunately, and as anyone involved in dispute
resolution knows, there are occasions when even a ‘dead
cert’ just doesn’t settle and worse, goes onto trial and
loses! At that point, appeal may seem the only option.
Even if the claim succeeds, there is always the risk the
other side will find someway of getting leave to appeal.
In either case, involvement in an appeal will involve
further cost/cost risk.
3. If an ATE policy is already in place, whether the further
risk will/can be covered depends on the policy. There are
policies which provide appeal cover subject to terms/
advice on merits etc and when underwriting a claim as a
whole, the process can factor in the appeal risk.
4. On an application for ‘stand-alone appeal’ cover, the
risk is a significantly different proposition. Such cover (if
available) is likely to be harder to find and the different
risk profile will inevitably be reflected in the premium.
The application process is likely to be more complicated
than following any required procedures under an
existing policy.
5. As to the extent of cover, in practical terms, appeal cover
is likely to be for exposure to future costs only (not
retrospective cover for first instance costs, and there is
case law on this in the context of recoverable premiums).
6. However ‘good’ a claim appears at the outset, a
claimant may be well advised to factor in to pre action
‘commercial deliberations’, the additional hassle and
expense involved should cover become desirable at a
later stage. If at the outset the claim appears as good
to underwriters as it does to the legal team it may be
possible to select a policy with appropriate staging
and appeal provisions and with a competitive and cost
effective premium. At a later date, the commercials,
merits and general viability could look very different…
Matthew Williams, Head of AmTrust Law.
If you have any further questions regarding this or would
like to discuss further with AmTrust, please visit our LinkedIn
Forum: www.linkedin.com/company/amtrust-law
ML // December 2015
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