Provisions for ATE Insurance in Ireland Given by Court of Appeal

An opinion given by an appeal court judge is likely to increase the availability and use of After the Event (ATE) insurance in Ireland.

Due to the high costs of defending a court case, defendants who believe it is possible to successfully defend a claim made against them often apply to a judge to order a security of costs against the plaintiff. This is so that, if the plaintiff is unsuccessful in their court case, the defendants are assured of recovering their costs.

An application for a security of costs, if granted, can also be used as a strategy to force plaintiffs to abandon their court action due to not having sufficient assets to meet the demands for a security. Consequently many plaintiffs are being advised by their solicitors to consider ATE insurance in Ireland.

ATE insurance in Ireland is not, as yet, commonly used in litigation; but there are significant benefits to purchasing a policy when making a claim for compensation that is particularly complex or revolves around complicated legal arguments. Premiums are not charged for the policies until the outcome of the case is known and, if the plaintiff is successful, usually deducted from a settlement of compensation.

The use of ATE insurance in Ireland was challenged in a case heard at the High Court last year when a defendant claimed that a plaintiff should not be allowed to use after the event insurance as an alternative to security for costs, as ATE insurance in Ireland was contrary to the common law of champerty – a law that prohibits third parties (in this case an insurance company) from providing financial support in a court case when they have no direct interest in the outcome other than profit.

The judge hearing the court case conducted a review of how ATE insurance in Ireland operates, and ruled that the provision of insurance to plaintiffs by insurance companies did not constitute “trafficking in litigation” – the act of supporting a compensation claim in order to take a profit from the proceeds – because the insurance company´s role in the provision of insurance was not exclusively to derive a profit.

The ruling was appealed by the defendant, and arguments for and against ATE insurance in Ireland were heard last month by the Court of Appeal. In a recently-release written verdict from Judge Kelly, the Court of Appeal overturned the High Court judge´s ruling due to the insurance policy offered as security of costs being “highly conditional” and containing a significant number of exclusions that meant the insurance company could have avoided payment of costs to the defendant.

However, Judge Kelly wrote in his judgement that after the event insurance is a factor for a court to give consideration to in exercising its discretion whether to order security for costs. Judge Kelly wrote that ATE insurance in Ireland could be used as a full or partial alternative to security for costs provided that it did not contain exclusions that would allow the insurance company to avoid the payment of the defendant´s costs.