Can my client get a ‘top up’ to extend cover under its commercial ATE policy? MLM 15
1. Levelling the playing field
On 10 December, the Legal Services Board (LSB)
launched a consultation on its strategic plan for 2015-18
and its business plan for 2015/16.
The consultation comes at a time
when the legal services market
continues to grow. Turnover is up 15
percent in the past six years to £29.2
billion and here is plenty of evidence
of the increasingly rapid pace of
change. New ways of doing business
are emerging with new investment,
new ideas and new choices for
consumers. Many of these changes are positive, and
demonstrate innovation and growth.
We believe that these changes can be used as a
springboard to a different and better market for legal
services, one that sees more people and small businesses
obtain access to the legal services they need. It is in this
broad context of rapid change and on-going concerns
about access to justice that we have developed our draft
strategic plan for the 2015-18 period.
We are proposing to structure our work into three distinct
but linked strands. Firstly, on breaking down regulatory
barriers to competition, growth and innovation. We
aim to ensure that unnecessary regulation which can
stifle positive changes is removed, thereby delivering
the benefits of competition, growth and innovation to
consumers and lawyers alike.
Secondly, we propose to look to enable need for legal
services to be met more effectively. Legal services must
be affordable and accessible, consumers must be able to
make informed choices to take advantage of the range
of services that a more dynamic market will offer, and
appropriate protections for consumers and the public
interest must be secured.
Thirdly and finally, we will pursue a core programme of
on-going activities, including statutory decision making,
maintaining regulatory standards and conducting essential
research. This work keeps us in touch with the real-world
challenges faced by the regulators, lawyers themselves,
and consumers.
In our work, we will take into account both regulated
and unregulated providers of legal services. We will do
this because this is the market in which consumers make
choices and because we, and you, need to understand
how regulated service providers can compete on a level
playing field with unregulated service providers.
We welcome any and all feedback on the plan, our
strategic priorities and the specific proposals in our
business plan for our work in 2015/16. Should you wish
to comment please visit the consultations section of our
website: http://www.legalservicesboard.org.uk/what_we_
do/consultations/open/index.htm.
Caroline Wallace, Strategy Director, Legal Services Board (LSB).
Q: ‘Can my client get a
‘top up’ to extend cover
under its commercial
ATE policy?’
A: ‘Potentially, but not necessarily…’
When applying for after the
event legal expenses insurance,
one of the most important aspects
to consider is the level of cover an
insured is going to need. Too much
and it could prove non-commercial.
Too little and there could be an
exposure to a liability which was
never in contemplation.
An insured usually wants to obtain full protection
against having to pay an opponent’s costs if the claim is
unsuccessful. On that basis, the start point should be to
seek cover at a level that represents the most realistic
estimate of what ‘adverse’ costs are likely to be to the end
of trial. Generally insurers ask for that information and
underwrite the risk on the understanding the figure given
will provide protection to that point. Premiums are usually
calculated on that basis. Despite this, underwriters are
frequently faced with late applications for significant top
ups, often just before a critical application or trial.
There may be a number of reasons why an insured ends
up with inadequate cover, including,
• simple under estimation of the extent of the adverse
• a view that, as most claims don’t get to trial, a lower
level of cover ‘should be sufficient’
• a notional deduction to take account of any reduction
by detailed assessment
• a belief that ‘top up’ will be available ‘on demand’
• an unforeseen turn of events in the action.
Whatever the reason, unless and until resolved, inadequate
cover could be the cause of headaches and stress.
On the positive side, where merits and commercials remain
strong, underwriters are unlikely to have an issue providing
a ‘top up’ necessitated by developments which could not
reasonably have been foreseen at the outset. The rationale
being if the case was ‘good’ for cover then, it remains ‘good’
for an increase. Conversely, the position will be significantly
more problematic where there is no apparent reason for the
increase (particularly if it is sizeable and the application late),
where circumstances and prospects have changed, and/
or where the costs escalation has created proportionality
issues. The consequences could be that increased cover is
not offered at all, or offered at an increased premium rate,
given the alteration in risk profile.
The moral of the story is that it must be preferable to
spend time on getting the requisite level of cover as accurate
as possible at the time of the application, to provide the
underwriter with a rationale for it, and to keep it under
regular review. On that basis, a top up request can be dealt
with sooner rather than later, and on an informed basis by an
underwriter already ‘on board’ with the reason for it.
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 2014
The Views22
