11 September 2015
Woodsford has struck a deal with two leading insurers to address issues on both sides of the funding table.
'It just takes too long'
Litigation funding can involve a great many moving parts, which can soak up time and make it a daunting task for claimants and their lawyers. Risk and reward can be spread across the claimant, its law firm, a third party funder and an ATE insurer. The documentation might include the lawyer’s engagement letter, a conditional fee agreement or damages based agreement, a litigation funding agreement, an insurance policy and a deed of priority, all of which should dovetail so that they work both commercially and legally. Unsurprisingly and notwithstanding the best efforts of some excellent brokers in the market, a recurrent complaint is that the process can take too long. This is wearing for those involved and often to the detriment of the claim itself.
ATE insurance - there when you need it?
Some funders claim they prefer arbitration over UK litigation. In fact, litigation has some advantages over arbitration, but in arbitration claim values tend to be higher and catch the eye (although can also shrink dramatically as the claim progresses) and the grounds of appeal are very limited. However, litigation’s real disadvantage is the threat of a third-party costs order and the open-ended nature of the potential liability. A funder may be perfectly happy to cover adverse costs as a matter of contract: the maximum cost exposure can be quantified and capped, and so has a given relationship to the funder’s prospective return. This is possible in the arbitration world but not in litigation. The English Court of Appeal decision in Arkin arguably limits the exposure to the funder’s commitment, but not many are keen to rely on that decision. The court’s discretion in this country remains largely unfettered.
It’s against this background that funders view ATE insurance for adverse costs. Get it right and the sting can be taken out of an adverse costs award – the defendant may have run up a bill that’s bigger than expected, but most of the liability should be met. Get it wrong and the funder is in a ‘fool’s paradise’ – the policy may fail to respond and the own costs number that’s already been lost is doubled, or worse.
The biggest worry for the funder is ‘material non-disclosure’. Typically, the claimant is the insured and must give the insurer the complete picture. Clearly, only the claimant has all the facts and only it will know if this fundamental obligation has been discharged. Its lawyer will be close to the claim and may also have a good sense of what the insurer should know. The funder is, however, a further step removed and is not well placed to judge whether the point could be taken by the insurer down the line.
Woodsford’s solution is an arrangement with two leading insurers that ensures Woodsford’s funding decision, and the insurers’ underwriting process, progress efficiently - in tandem and without duplication.
Woodsford also gives the claimant a contractual indemnity for adverse costs in the litigation funding agreement. Accordingly it, as opposed to the claimant, is the insured under policy and it’s Woodsford’s knowledge and obligation to disclose that’s relevant.
This is more straightforward for the claimant as it does not bring with it all the conditions attaching to an insurance policy. If the claim fails, the claimant can also rely on Woodsford’s balance sheet backed by recourse against the ATE insurer.
Woodsford has a policy with insurers with whom it has an ongoing relationship and whose balance sheet and claims payment record has stood up to due diligence.
Woodsford also has its own robust policy wording that doesn’t have to be considered and possibly negotiated on a claim by claim basis. Crucially, the obligation to disclose all material facts is Woodford’s and within its knowledge and control.
In short, it’s faster and it’s more robust for both claimant and funder.