After‑the‑Event insurance plays a legitimate role in funding litigation, but it's also a product that's easy to mis-sell, because the true cost is often deferred until long after the client has agreed to it. In this guide, our ATE mis-selling specialist Mark Montaldo explains what ATE insurance is, what solicitors are required to do when arranging it, and how to recognise the signs that a policy may have been mis-sold.

What is ATE insurance, and how is it meant to work?

ATE insurance is an insurance policy that individuals take out when involved in a legal dispute – after the dispute has begun – to cover themselves in the event that they are ordered to pay the other side's costs (and sometimes their own costs) if the claim is unsuccessful. 

In most cases the premiums are deferred, and the policy is provided on a no-win, no-fee basis. You’re only liable for the premiums if you win, and the cost is deducted from any damages or compensation you are awarded at the end of the case.

ATE insurance is a valuable tool – allowing individuals to pursue legitimate claims without putting themselves at serious financial risk should the judgment go against them. However, misselling may occur when policies are not fit for purpose, are not explained properly to the claimant before they sign up, or involve an undisclosed financial benefit for the solicitor recommending the policy.

What obligations does a solicitor have when arranging ATE cover?

Informed consent

Before recommending ATE insurance, a solicitor must explain what the policy covers, what it costs, and how the premium will be paid, in terms the client can genuinely understand. Simply including the policy among a bundle of documents to sign isn't sufficient.

Suitability of cover

A solicitor should recommend a policy that's proportionate to the actual risk in the case, and should check whether the client already has legal expenses cover through another source, such as a household insurance policy or trade union membership, before recommending a new one.

Disclosure of financial interest

If a solicitor receives a commission, referral fee, or other financial benefit for placing business with a particular ATE provider, this must be disclosed to the client. A failure to disclose such an arrangement is a serious breach of professional conduct rules.

Transparency of costs

Clients should be given clear, written information about the premium amount (or how it will be calculated), when it becomes payable, and how it will be deducted from any damages recovered.

5 red flags that indicate a mis-sold ATE policy

Not every ATE policy is mis-sold, but there are some clear warning signs that should prompt you to investigate further if they apply to your situation. The most common scenarios we encounter which lead to claims include:

• You weren’t told the exact amount of the premium, or how it was calculated, before the dedication was made. 
• You were told, or led to believe, that the ATE cover was compulsory, with no mention of alternative options.
• The policy you were sold seems disproportionate to the risks or amounts involved in your case. For example, the amount of cover was too high.
• Your previous solicitor didn’t disclose whether they would receive a referral fee or commission if you signed for the policy.
• You never actually saw (or signed) a copy of the policy documents or funding agreement.

What steps should you take if you think you were mis-sold ATE insurance?

Gather your evidence

First, pull together all the documentation you have relating to the policy. That includes the engagement letter, any funding agreement, the ATE policy documents themselves, correspondence with your previous solicitor, and the final settlement statement showing the deduction. Don’t worry if you’re missing some of these documents: your former solicitors should have them on file.

Make a formal complaint

The next step is to make a formal complaint, in writing, to your former solicitors. Include your reason(s) for believing the policy was missold: for example, you weren’t told it was optional, you weren’t informed of the premium, or you believe the policy was disproportionate to your needs.

Don't be put off by a rejection 

It’s not uncommon for firms to reject your complaint initially; that doesn’t mean that it has no merit. There are various options available if the firm that sold you the policy is uncooperative or unresponsive.

Escalate further

If you’re unable to resolve the complaint by dealing directly with your original solicitors, you have the option to refer the matter to the Legal Ombudsman. If you’re unable to resolve the dispute here, or if the amounts involved are significant, you may also pursue a claim through the courts.

Common mistakes to avoid

Mistake: Assuming that signing a form means you have no claim

The fact that you signed a form doesn’t mean that you don’t have the right to make a claim if it turns out that a policy was mis-sold. If you were given inadequate, incomplete or misleading information, then your having signed doesn’t necessarily indicate informed consent.  

Instead: The key thing to focus on is what information you were given prior to signing, not just whether or not you actually signed. 

Mistake: Waiting too long to raise concerns

Whether you intend to make a formal complaint to your former solicitor, refer the case to the Legal Ombudsman or pursue the matter in court, there are time limits which apply. It’s important to act promptly once you realise there’s an issue, to avoid missing out on the right to make a claim. 

Instead: Raise concerns as soon as you suspect an issue, even if you're not yet certain you have a valid claim.

Mistake: Assuming the deduction is non-negotiable

Some clients assume that because the premium was already taken from their damages, they don’t have the option of making a complaint or a legal claim. That’s not the case.

Instead: A successful mis-selling claim can result in a full or partial refund of the premium, plus any associated charges and interest, regardless of the fact that the deduction has already happened.

Mistake: Going straight to court

Court proceedings can be both lengthy and costly, and in most cases involving ATE mis-selling, they’re not an appropriate first step. Even if you’re unable to resolve the matter directly with your previous solicitor, there are other options for dispute resolution you can explore before considering court action.

Instead: Start with a formal complaint to the firm that sold you the policy. If this is unsuccessful, you can refer the case to the Legal Ombudsman, which may avoid the need for litigation.

What does the law say about mis-sold ATE insurance?

Solicitors in England and Wales are regulated by the Solicitors Regulation Authority, a body which sets the rules of professional conduct and monitors solicitors and their firms to ensure compliance. 

These rules require solicitors to act in the best interests of their clients, inform them fully and transparently about costs and funding arrangements and disclose any financial interests which might affect their advice, including commissions or incentives earned for recommending insurance products.

Where a firm fails to meet these standards, clients may bring a claim for professional negligence, breach of contract, or misrepresentation, and may also be entitled to raise a complaint with the Legal Ombudsman, which has the power to order a refund of fees and compensation for loss.

If you’re in this situation and you need expert legal advice on how to proceed, speak to Complex Law.