Litigation insurers have routinely provided solutions to tackle clients’ legal fee exposure, both adverse and own side costs.  Where security for costs is an issue almost all insurers can now offer a deed of indemnity or a bond to run parallel with the insurance policy. Effectively, the insurer is providing, or enabling the provision of a guarantee in favour of a defendant in the event the court order costs in their favour.  Any sums paid under the guarantee are offset against the sum indemnified under the parallel insurance policy. The defendant and crucially, the court have the confidence that an order in favour of the defendant will be satisfied regardless of any breach of the insurance policy terms and conditions by the insured claimant.

The benefit of a deed of indemnity or bond is that it is typically far more cost-effective than utilising third party funding (albeit the costs of such guarantees can vary significantly between insurance providers).

Now, a growing group of insurers are expanding their offerings to include policies that can cover client risk when providing a cost undertaking in damages.  This can be particularly useful for clients who are largely illiquid or for liquidators with a limited fighting fund, who for good reason need to pursue a freezing injunction. Where the defendant is successful in obtaining an order for a cross-undertaking, the sums involved could be prohibitive for claimants.  By utilising insurer capital, claimants can potentially remove this obstacle in a relatively cost-effective manner.  Such policies are highly bespoke but it’s an encouraging development that the market is responding to what has previously been a gap in the litigation funding arena.

If you have a case potentially requiring insurance or funding to deal with a cross-undertaking in damages obligation please contact James Blick, Director. Email or call (0)845 257 6058


Waterfall of payments under priority agreements – moving claimants up the rankings

A deed of priority is an agreement that regulates the waterfall of payments in the event that the claim recovery proves insufficient to pay all interested stakeholders their expected returns.article.