AFTER-THE-EVENT INSURANCE: TWO NEW CASES
ATE and security for costs
the court ordered the claimants to give details of funders under the court’s inherent jurisdiction ancillary to CPR 25.14.
An application for security might face difficulty as the trial was imminent, but the court could not say it was so unrealistic or hopeless that the defendants should not have disclosure.
The court refused to order that details of ATE insurance be given.
This was sought under its case management powers and the judge concluded that the documents were not needed for case management purposes.
He was also concerned it could lead to further satellite litigation.
However, he expressed some reservations about whether there was sufficient funding and, in light of that, suggested there should be more transparency about the ATE insurance.
The decision provides detailed guidance regarding such applications, including that:
- It was not a condition of making an order for disclosure of funders ancillary to CPR 25.14, that the applicant had unequivocally determined to bring an application for security once details were revealed. However, the applicant must, at least, demonstrate that its putative application for security was a real possibility and had realistic grounds, and was not being suggested simply for some tactical purpose.
- In an appropriate case, the court’s case management powers under CPR 3.1 did extend to requiring disclosure of an ATE policy when this was necessary to enable the court to exercise its case management function. However, whether a party will be able to enforce damages and costs orders is not a matter which affects case management. Generally, an ATE policy, which does not impact on the issues in the case, will not be relevant. But there may be exceptions, for example, where the ATE policy has been deployed in the proceedings to influence or impact on a decision. That may be especially likely in group litigation.
- It was unlikely that privilege attached to an ATE policy.
ATE and Third Party Rights
the Commercial Court, part of the High Court but shortly to be the Business and Property Court, held that After-the-Event insurers were entitled to deny liability to a third party on the basis that their own insured had breached the policy.
Following litigation between the insured and the third party, the insured was ordered to pay some of the third party’s costs, but went into liquidation without making payment.
Relying on the statutory scheme in the Third Parties (Rights against Insurers) Act 1930, the third party commenced proceedings directly against the insurers, who denied liability, alleging that the insured had breached a number of policy conditions precedent to liability relating to, among other things, obligations to co-operate in any claim and provide information.
The decision is an interesting example of the court’s approach to the interpretation of conditions in an insurance contract. In particular, although the policy included a general “Due Observance” condition, which sought to create conditions precedent, the court examined each of the individual conditions in order to determine whether they could be construed as conditions precedent.
The decision is also a reminder that, for the purpose of the 1930 Act, the transfer of rights to a third party is subject to the defences available to insurers against the insured.
Although, under the Third Parties (Rights against Insurers) Act 2010, a third party is also in no better position under the insurance contract than the insured, and, generally, an insurer is able to raise any defence against the third party that would have been available to it against an insured, there are some exceptions.
For example, an insurer cannot allege non-performance by the insured where the third party has fulfilled the relevant policy conditions.
In the circumstances, had the 2010 Act applied, it might have been possible for the third party, upon the insured’s insolvency, to comply with the policy conditions by promptly sending, directly to insurers, all communications relating to settlement offers and the detailed assessment proceedings.
However, in practice, this will only be possible where the third party has succeeded in obtaining the relevant policy information from the insured or its agents in time to enable it to comply with any conditions.