Though the claim appeared spurious, the defendant only had three options:
- Attempt to settle the claim incurring some legal costs and an element of the £10,000,000 claimed with no guarantee of success.
- Fight the claim and risk significant legal costs, including paying adverse costs to the claimant.
- Fight the claim but reduce the potential monetary loss by purchasing a comprehensive ATE insurance policy with a limit of indemnity in line with the total expected cost exposure.
The defendant decided to fight the claim and purchased a comprehensive ATE insurance policy from Harbour Underwriting (i.e. adverse cost cover, own side disbursement cover and own side solicitor’s fees) to mitigate as much as possible the financial risk.
The defendant lost at trial and because a comprehensive policy was purchased it paid out up to each individual limit of indemnity under each section of cover: 100% of the claimant’s cost award, 100% of the defendant’s own disbursements and, after a 25% risk-sharing deductible, 75% of the defendant’s own solicitor’s fees.
By purchasing the comprehensive ATE insurance policy, the defendant managed its risk and ultimately reduced the cost of losing the case.