Failure by solicitors to advise upon and obtain ATE insurance

It is important that anyone who is taken on as a client by a solicitor is informed of their options to fund their litigation at the outset of the matter, as solicitors are under a duty to inform and advise their clients of the funding options available to them. A client may be able to make a claim against their solicitor for professional negligence if their solicitor does not inform their client that either: 

• a. If unsuccessful, they may become liable to pay an adverse costs order; and 
• b. That they can acquire protection against this by obtaining After the Event (“ATE”) Insurance. 

These adverse costs consequences can be disastrous if a claim is lost, meaning that the losing party will be required to pay their opponent’s costs if ATE insurance has not been obtained. Therefore, it is vital that solicitors take steps to protect their clients sufficiently against this risk. 

It is also possible that a potential claimant may be discouraged from pursuing a claim with reasonable prospects due to their solicitor’s failure to advise on ATE insurance and warning the client that they would personally be liable to pay substantial adverse costs. This lack of guidance can further impact the claimant’s claim if it affects the statutory time limit for bringing a claim. 

In most (but not all) cases, a limitation period of six years exists for a claimant to bring a claim against their solicitor before it becomes statute barred. Given the complexity of determining the limitation date, it is crucial to act quickly in consulting a solicitor who specialises in professional negligence in relation to these issues. 

Background 

ATE is a type of insurance obtained after a dispute or incident has arisen but before the matter reaches trial. In the context of a legal dispute, ATE is commonly utilised to provide protection against the risk of incurring financial costs if a claim is unsuccessful. 

Typically, ATE covers: 

• a. The claimant’s legal costs; 
• b. The defendant’s legal costs; and 
• c. Disbursements. 

The cost of ATE, paid by way of premium, is usually based upon an estimate of the overall cost of the litigation and is dependent on the outcome of the claim as follows: 

a. If the claimant wins, the premium payable will either be included as part of the legal costs or repayable as a lump sum; or 

b. If the defendant wins, the premium is generally waived. 

When solicitors refer to ‘no win, no fee’ arrangements, this generally involves the use of ATE as the fees payable to the solicitor are contingent upon winning or covered by ATE in the event that the case is lost. 

Regulation 

Most solicitors and law firms are regulated by the Solicitors Regulation Authority (“SRA”), to make sure these individuals meet the high standards set out in the SRA Standards and Regulations by taking action if they fall below this standard. 

Under paragraph 8.6 of the SRA Code of Conduct for Solicitors, RELs and RFLs, solicitors are under a duty to their clients to “ensure they are in a position to make informed decisions about the services they need, how their matter will be handled and the options available to them.” 

Furthermore, under paragraph 8.7 of this Code, solicitors are under a duty to “ensure that clients receive the best possible information about how their matter will be priced and, both at the time of engagement and when appropriate as their matter progresses, about the likely overall cost of the matter and any costs incurred.” 

Whilst keeping this duty in mind, there is an ongoing investigation by the SRA in relation to Cavity wall insulation claims handled by SSB Group (“SSB”) and Pure Legal Limited (“Pure Legal”). This is because at the end of 2023, the SRA received multiple reports that their clients were unexpectedly being held liable for adverse legal costs in relation to these claims. SSB had taken these clients’ instructions on a ‘no win no fee’ basis and had taken out ATE insurance for these claims. However, the insurers have refused to pay the costs as expected. The outcome of this investigation will shed light on the importance of these principles as the matter develops. 

Case Law 

A solicitor has an obligation to advise their clients on how a litigation matter should be funded, as outlined in Jackson & Powell on Professional Liability (9th ed: 2nd Supplement) Para 11-183. This has been reinforced in various cases that have been brought before a court. 

For instance, in the case of Andrews v Messer Beg Ltd [2019] EWHC 911 (Ch), Proceedings were brought against a solicitors’ firm and a barrister for allegations which included failing to consider and advise upon alternative funding, and failing to obtain ATE insurance in a litigation matter. The judge considered the duties owed by the defendants and ultimately outlined that ”A solicitor is generally obliged to discuss with his client how the litigation is to be funded”. He further outlined that “A barrister instructed to act for a client by a solicitor in relation to actual or contemplated litigation, however, owes no duty to the client to advise on the funding of the claim, unless specifically instructed to advise on that issue”. Furthermore, when making a claim it would need to be pleaded that had the claimant received the correct advice, they would have acted differently which would likely have placed them in a more favourable position. 

Furthermore, in the case of Adris and others v Royal Bank of Scotland plc (Cartel Client Review Ltd and others, additional parties) [2010] EWHC 941 (QB), it was held that “Where a solicitor in sole practice or a firm of solicitors had failed in its obligation to take out ATE insurance in respect of their clients and had failed to inform them of that fact, a non-party costs order could be imposed on the solicitor or firm where it had been shown that there was a sufficient causal link between the failure to obtain insurance and the costs generated by the case”. In this case, the clients were not informed that ATE had not been obtained and if they had been informed, it is unlikely that the cases would have progressed meaning the costs would not have been incurred. 

Conclusion 

In conclusion, solicitors must ensure that clients are fully informed about litigation funding options, including the potential risk of an adverse costs order and the availability of ATE insurance. A solicitor’s failure to provide such critical information not only undermines the client’s ability to make informed decisions but could also lead to a claim for professional negligence. If a client is not adequately advised, it can deter them from pursuing a good claim and create further issues in relation to the limitation period for bringing a claim. The ongoing investigation into SSB Group and Pure Legal Limited, alongside the growing case law on this topic, emphasises the importance of solicitors fulfilling their duty to advise clients on funding options and taking steps to protect them adequately. 

In addition to this, solicitors must ensure they are taking the necessary steps to obtain ATE should the client wish to do so. If a case is progressed without ATE unbeknown to the client, this could also place a risk upon the solicitor of becoming liable in professional negligence. 

Contact Us 

If you have found yourself in a similar situation and believe if you had been advised to obtain ATE insurance that you would have, you may have a professional negligence claim against your solicitor. We understand that your experience may have caused you substantial loss, which can be incredibly difficult to manage and is an overwhelming position to find yourself in. 

If you would like to discuss this with us further, please contact us on 020 7790 7311 to speak to Mr Avi Gordon, the head of our professional negligence department.