Plevin insurance

Okell

Jenni_D said:

🙋‍♀️ I'm probably stupid too  

Isn't ATE insurance only in the event of losing? If you win then your legal costs (including said insurance fee) are covered as part of the pay-out you get. If you lose then the insurance pays out any costs against you (including your own legal costs), and your legal rep pays (or should have) the insurance premium. I thought that was the point of No win, No fee arrangements?

Then we are both equally stupid - or equally ignorant!

Everything you've said above makes sense to me

What doesn't make sense to me is DullGreyGuy's comment that "ATE is normally self insured so  if you win you pay the fees out the winnings, if you lose the insurer covers their own fees."

I take that to mean that you fund the insurance fee if you win (which is fair enough) but if you lose and the insurance has to pay out, the insurance pay their own fees.

That makes no sense to me.

It sounds as if you have to pay the fees if you don't need to claim on the insurance, but if you do need to claim on the insurance you don't need to pay the fees.

Sounds back to front to me...

As I said previously, I'm sure I've seen this "you don't need to pay the premium if you make a claim, you only pay it if you don't make a claim" comment on the motoring board in respect of the VW dieselgate scandal or similar and I didn't understand it then

GDB2222

At a guess, the sequence of events might be:

Solicitor goes bust
Case is discontinued - perhaps without legal advice 
Premium becomes payable by the OP.

 The SRA has alleged that some inappropriate behaviour was involved by the law firm, and one possibility is that they did not wrap up some cases that were going nowhere and retained them as work in progress.  

  I'll add that this is pure speculation on my part, as an example of what could happen in some cases, and it is not a suggestion that this actually happened in the case of these particular lawyers. 

DullGreyGuy

Okell said:

DullGreyGuy said:

ATE is normally self insured so  if you win you pay the fees out the winnings, if you lose the insurer covers their own fees...

So if the claimant loses and the insurer has to pay out to cover expenses ordered against the claimant by the court, the insurer has to pay the insurance premium too?

I'm sure I must be missing something obvious somewhere, but it just seems counterintuitive to me... 

ATE is just a strange class of insurance, the insurer doesn't literally pay itself the premium but waives the premium. Its an option, most take the option but you can buy it without the waiver which arguably means your "no win, no fee" becomes "no win, only a small fee". Inevitably if the waiver is chosen then the premiums in the case of a win are slightly higher than if there had been no waiver. 

Jenni_D said:

🙋‍♀️ I'm probably stupid too  

Isn't ATE insurance only in the event of losing? If you win then your legal costs (including said insurance fee) are covered as part of the pay-out you get. If you lose then the insurance pays out any costs against you (including your own legal costs), and your legal rep pays (or should have) the insurance premium. I thought that was the point of No win, No fee arrangements?

The ATE isnt covered by the payout, it's deducted from the payout... ie you won't get a higher award from the defendant because you have ATE. Obviously in some circumstances the deductions from your damages can exceed the amount the court awards you meaning you win but end up owing your law firm money.

The ATE is a disbursement and so if your lawyer has to pay it you have to repay them for it, these are on top of fees (which is for their hourly rate). Most insurers offer a premium waiver in exchange for a higher premium and most people take the waiver such that if they lose the case the insurer waives the premium hence most will describe it as the premium being self insured. 

Okell

@DullGreyGuy

OK so have I got this right?

I go to a NWNF lawyer who agrees to take on a negligence claim for me.

The lawyer advises I take out ATE insurance and I agree.

I am given the options of either (1) paying a fee of £n up front, or (2) not paying a fee of £n up front, but having a higher fee deducted from any award I might subsequently win from the court.

OK - that seems to make sense so far.

But what happens if I've chosen option (2), I lose the case, and have costs awarded against me?  Presumably the ATE insurer pays out in those circumstances, but who pays the ATE insurance fee?

If I choose option (2), lose and have costs awarded against me, it sounds as if I've benefited from the ATE cover at no cost to me because I haven't paid for it.  That doesn't sound right.

Or are you saying that claimants who choose option (1) have a disproportionately higher fee deducted from their winnings in order to subsidise the ATE payouts of all those claimants who lose but have opted to pay no fee up front?

If that's the case then surely a claimant who is advised to take out ATE insurance should always choose to pay the fee themselves up front?  Unless they have a very doubtful claim in the first place...

Okell

@DullGreyGuy

So what might have happened in this case is that the initial ATE fee was waived and it was meant to come out of the OP's winnings.  

The OP won (at least some of his claims) but his lawyer never took the ATE fee out of his winnings to pass onto the ATE insurer.

The insurer is now pursuing the OP.

Presumably the OP remains liable to pay the ATE fee regardless of his understanding that his solicitor would pay it out of any award he won?

DullGreyGuy

Okell said:

DullGreyGuy

OK so have I got this right?

I go to a NWNF lawyer who agrees to take on a negligence claim for me.

The lawyer advises I take out ATE insurance and I agree.

I am given the options of either (1) paying a fee of £n up front, or (2) not paying a fee of £n up front, but having a higher fee deducted from any award I might subsequently win from the court.

OK - that seems to make sense so far.

But what happens if I've chosen option (2), I lose the case, and have costs awarded against me?  Presumably the ATE insurer pays out in those circumstances, but who pays the ATE insurance fee?

If I choose option (2), lose and have costs awarded against me, it sounds as if I've benefited from the ATE cover at no cost to me because I haven't paid for it.  That doesn't sound right.

Or are you saying that claimants who choose option (1) have a disproportionately higher fee deducted from their winnings in order to subsidise the ATE payouts of all those claimants who lose but have opted to pay no fee up front?

If that's the case then surely a claimant who is advised to take out ATE insurance should always choose to pay the fee themselves up front?  Unless they have a very doubtful claim in the first place...

It's not normally a discussion, a particular firm will typically be buying with or without the waiver but in principle it could be. 

In scenario 2 no one pays the insurance premium but the insurer still pays out on the defendant's costs. 

Insurers have relationships with the law firms, to be able to buy ATE the lawyer must estimate the probability of success and likely costs, insurance can only be purchased if the lawyer is saying its over a 51% chance of success. As the relationship develops the insurer gets a feel for how good the lawyers are at predicting costs and premiums for that firm are adjusted inline with the outcomes. Waivers potentially could not be offered if they are consistently getting it wrong before they decline to quote. 

Like all insurance those that have claims are funded by those that dont make claims, if you had an insurer that only offered ATE with a waiver then yes, the fees charged to those who win and those who withdraw must be sufficient to cover all those cases that lose, operational costs and profits. 

Okell said:

So what might have happened in this case is that the initial ATE fee was waived and it was meant to come out of the OP's winnings.  

The OP won (at least some of his claims) but his lawyer never took the ATE fee out of his winnings to pass onto the ATE insurer.

The insurer is now pursuing the OP.

Presumably the OP remains liable to pay the ATE fee regardless of his understanding that his solicitor would pay it out of any award he won?

It potentially is for both cases, those won where an error was made and the premiums not paid and those cases that were abandoned. 

Its been a long time since I read a ATE policy wording to recall exactly who is liable for the premiums in scenarios such as the law firm being insolvent 

Okell

@DullGreyGuy

Thanks for the explanation.

I suppose the key sentence is "Like all insurance those that have claims are funded by those that dont make claims"

DullGreyGuy

Okell said:
Thanks for the explanation.

I suppose the key sentence is "Like all insurance those that have claims are funded by those that dont make claims"

The "common pool" is the official term and its how premiums can be a tiny fraction of the sum insured; we pay £10/month for £300,000 of life cover, clearly my premiums alone are not going to cover a payout even with investment returns but the payout only happens if I die before 63. The majority of us will make it past 63 but the insurer cannot go have a party with the money either because its needed to payout on those that dont make it to the end of the policy. 

Things then get more complex when you consider many insurers sell more than one type of insurance and how the same event may impact different classes of insurance. Take annuities (aka pensions) and life insurance, they nicely offset each other, a spike in deaths (eg covid) means the annuity book does well but the life book does badly. A cure for cancer would do wonders for the profitability of your life policies but is a disaster scenario for your annuity results. 

If you can offset risks you can make your common pool a little smaller, if however you write Home and Motor both see a spike in bad winter weather so they compound your problems and your common pool needs to be deeper to deal with the spike or an insurer will buy insurance against it (aka reinsurance) to cover them for exceptionally bad weather