How does ATE insurance support Insolvency Practitioners?

Access to justice is a necessity for Insolvency Practitioners (IPs) managing litigation to maximise returns for creditors. After-the-event (ATE) insurance plays a key role in supporting IPs. By protecting IPs from the cost liabilities associated with bringing claims, it enables them to pursue recoveries while limiting personal exposure to potential costs associated with a case.

The most common litigation risks IPs face are liability for disbursements and the other side’s costs. These include court fees, forensic accountant reports, and other expenses that must be paid up front. There’s also the risk of having to pay the defendant's legal costs if the claim fails.

Because companies in liquidation lack legal status, IPs are personally exposed, adding to the financial risk of litigation.

Making viable claims easier to pursue

As ATE insurance covers the financial exposures brought on by a case, it protects IPs from the financial consequences of an unsuccessful claim. This reduces the risk of bringing litigation against directors or debtors and makes the pursuit of cases far more viable.

An IP can continue with the reassurance that they won’t be liable for losses if the court doesn't rule in their favour. This gives IPs the ability to act decisively for the benefit of creditors.

Cover can be taken out by the solicitor involved in the case.

Tailored underwriting and arms-length support

ATE insurers like Markel will assess cases individually.

Markel’s particular approach is to remain involved in the litigation, to the extent that it helps manage the risks covered. Progress updates will be requested but strategy will not be interfered with. Markel does not dictate which disbursements can be incurred, nor require IPs to use specific panel lawyers.

Taking out ATE cover early can be beneficial

ATE cover becomes relevant the moment an IP is exposed to adverse costs, which is typically when court proceedings are issued. However, there are concrete benefits to engaging with an insurer earlier. Securing insurance early in the process can result in lower premiums. It also removes uncertainty, enabling more confident planning and increasing confidence among creditors.

IPs might ask why they should insure a risk that hasn’t yet materialised. However, early engagement has the added advantage of securing protection before any unforeseen case complications emerge.

As evidence comes to light and the case evolves, potential insurers may become more cautious and offer less favourable terms. Early involvement can also help to create a strong working relationship between the IP, solicitor, and insurer right from the start.

An effective tool for successful recovery

ATE insurance enables IPs to act in a more assured manner. Doing so makes the recovery of assets more achievable and reduces the personal risk associated with pursuing litigation.

Whether the claim is a straightforward breach of director duties or a trading dispute, comprehensive and timely ATE cover can offer beneficial reassurances. ATE enables IPs to more easily protect the interests of creditors and recover what is owed by taking their own financial risk out of the equation.