After-the-event (ATE) insurer Elite has collaborated with broker TheJudge to offer a product aimed at helping insolvency practitioners (IP) when they do not recover what they expected from litigation.
In a joint statement, TheJudge said it had received lots of feedback from IPs and insolvency lawyers over the years about insurers’ reluctance to take a reduction on their premium even when all other stakeholders are accepting a reduction on the fees due to them.
“Elite used this feedback constructively and the result is a unique, innovative ATE facility for insolvency litigation,” it said.
The insurance policy contains a payment waterfall which ensures the IP and the law firm receive payment for their own fees – excluding success fees – before the premium is paid to the insurer.
Elite and the creditors then make up the second tier of the waterfall, with insurers receiving 80p in the £1 parri passu, with the creditors taking 20p in the £1, in the event that the ATE premium cannot be fully discharged.
The balance is then for the lawyer’s success fee and the creditors.
“This is the only policy TheJudge is aware of that states from the outset that the IP’s and lawyer’s base fees are paid first before the ATE premium and also provides the creditors with a guaranteed recovery in the event that the full ATE premium cannot be discharged. In these circumstances it has been very well received by IPs so far.”
The policy is only available in the run-up to 1 April 2015 – when the LASPO exemption from the end of recoverability for insolvency litigation ceases – and only law firms can apply.
The government is currently considering a last-ditch effort to make the exemption permanent after Conservative peer Lord Flight sought to introduce an amendment to this effect during the committee stage of the Small Business, Enterprise & Employment Bill last month. Business minister Baroness Neville-Rolfe said she would discuss it with the Ministry of Justice before announcing a final decision during the bill’s report stage in early March.
She said: “I note the concerns that litigation brought on behalf of insolvent estates has some differences in principle to other types of litigation. I also note the concerns about the potential impacts on litigation practice on behalf of insolvent estates.”