Law firms that failed to advise on after-the-event (ATE) insurance in commercial litigation cases could be on the receiving end of negligence claims, Irwin Mitchell has warned.
Jonathan Sachs, a partner and professional negligence specialist, said that in the pre-Jackson period only 10% of commercial litigation cases had ATE insurance, although policies were available which were “in effect potentially free”.
Mr Sachs said many more cases could have been insured. “There must be a lot of solicitors out there who didn’t give advice on ATE insurance, or couldn’t be bothered to arrange it.”
Since the introduction of the Jackson reforms, and the end of recoverable insurance premiums, he said the percentage of commercial cases covered by ATE had fallen, despite the fact that there were “still a lot of good policies on the market”.
Under the Code of Conduct, Mr Sachs said solicitors were required to discuss all available insurance options with their litigation clients and advise on whether it should be obtained.
He said Irwin Mitchell was acting in a “small number” of professional negligence cases, based on the failure to advise commercial clients about ATE, but he expected that number to increase.
Mr Sachs said that although there were no decided cases on the issue, there was “a line of cases” which have settled in which solicitors have been found to be negligent for failure to advise on public funding. “Failure to advise on ATE is just the next step in the same line,” he argued.
“If you are a commercial claimant who lost their case, despite being told at the outset you had a good chance of winning, and have suffered multi-millions in cost liabilities, then you may well feel aggrieved that your former advisers failed to tell you that you could potentially have removed that cost exposure at no cost all.”
He said that other clients might have decided not to proceed with their cases at all, because of the “sheer scale of the costs involved”, particularly if their solicitor failed to advise not only about ATE, but also about conditional fees.
“In such circumstances, there may be a potential claim for the loss of a chance of prosecuting a claim against an intended defendant and that could mean a claim for the damages the client could otherwise have achieved had they successfully pursued their case.”