Toronto Injury Lawyer Blog
Insurance companies love to hear when clients have “After The Event” insurance or “ATE” as it is known in the industry.
What is ATE?
At trial, a Judge can order that the losing party pay for the winning party’s legal costs. ATE is a policy of insurance meant to cover a Plaintiff if they lose at trial and they are ordered to pay the insurance company’s legal costs. This means that the Plaintiff would be covered up to the limits of the ATE policy. The amount of coverage depends on the policy itself. The better the policy, the more the Plaintiff would be covered should things go wrong after a loss at trial.
How are ATE Policies Sold?
ATE is an insurance policy which is generally sold to personal injury law firms to insure ALL of their personal injury clients; or clients with similar contingency fee arrangements. You won’t see ATE insurance for clients in non-litigation sorts of cases. ATE can be sold on individual policies, but generally, these are either hard to come by, or very expensive. The companies which sell ATE typically sell them to personal injury law firms to cover all of their files, some of their files; or more than 1 file. The business model is set up for bulk files and not individual files.
Can I take out my own individual ATE policy?
I have never seen an individual Plaintiff take out and pay for their own individual ATE policy, although I suspect that it’s entirely possible. I suspect that the answer to this is “no“, but it really depends on the appetite for risk of the insurance company. They would want the peace of mind knowing that there is a competent lawyer advancing the case rather than a self represented Plaintiff. But, anything can be sold at the right price if the insurer is flexible. I would imagine that the premiums for an individual policy without a lawyer would be very high to the point of prohibitive. But, if you told an insurer that a Plaintiff was willing to pay $500,000 for an ATE policy worth up to $200,000; I don’t think the insurer would be opposed to selling the policy knowing that they would be guaranteed to make $300,000 on the sale of policy. Anything can be sold for the right price.
Is it a good idea to have ATE Insurance?
That depends. There is no straight forward answer.
If you own a house, and the house is in your name, and there is equity in the home (no mortgages or encumbrances), and you are named as a Plaintiff in the lawsuit, and you have a good paying job (not cash) where the income coming in can be tracked back to an employer, and that income arrives regularly and can be traced to a bank account; and you have no other significant debts in your life, then yes, ATE Insurance can be a good idea.
But, if you fall into one of these categories, primarily with real estate holdings, there is nothing preventing a Plaintiff to transfer the interest in the property from his/her personal name, to another entity so long as it’s an arm’s length transaction. Tax planning, and estate management counts as an arm’s length transaction (like transferring the property to your spouse). Most wealthy people do not hold assets in their own personal names. Those assets are held by different entities such as corporations or trusts. Those corporations and trusts are recognized as separate legal entities at law even if they are controlled by the same person. That means that a judgment against an individual Plaintiff who happens to be an owner of a corporation is not the same as a judgment against the corporation itself, unless there is a finding that the corporate veil needs to be pierced (which is rare and requires a finding of some sort of fraud or other bad behaviour).
If you are on ODSP, Ontario Works, CPP Disability, or you live in community housing, or live in a rental apartment, or a rooming house, you have no fixed address, you aren’t earning any income; you have no savings; you are in debt; you work for cash; you are a student with student debt; you are retired with no savings and no property; or you live off a retirement or a disability pension; or the property is in your spouse’s name and not your name; then ATE Insurance might not be such a good idea.
Everyone’s case is fact specific, and is based on their individual financial and life circumstances. If you have no real assets, then ATE insurance provides the insurer with a secured interest in your law suit against them. There is guaranteed money there from which they can collect should your matter go to trial, and should they succeed at trial. In other words, there is now incentive for them to run a trial against you because should they win, they will have a secured insurance policy from which to claim on to protect their legal fees.
ATE is strange when you think about it. If the Plaintiff’s own lawyer sends them a bill to cover the Plaintiff’s legal fees, and the Plaintiff cannot afford to pay for their own lawyer; it will not cover those costs; even though you are paying for the product.
But, if an adverse party sends the Plaintiff a legal bill to cover payment of their legal fees (which is essentially what a cost award is); then the ATE insurance will cover that. So, what ATE policies do is pay for the other side’s legal bill, and not your own legal bill. ATE essentially fills your opponents cup instead of filling your own when it comes to payment of legal fees.
Now wait a second: Won’t ATE cover the cost of my disbursements owing to my own lawyer should I lose at trial? Yes, it would. But, it will not cover your own lawyer’s legal fees, only their disbursements. Yet, it will cover your opponents legal fees and disbursements. Again, these products provide a greater benefit to your opponent than to your own professionals. In what world are you purchasing a product which will benefit your adversary, more than it stands to benefit yourself; particularly in cases where the Plaintiff does not have anything to lose to begin with (ie: they have no tangible assets which can be seized or encumbranced).
ATE insurance makes sense for wealthy people who have tangible assets, along with a regular income which continues to flow well after the subject accident. But, if the Plaintiff continues to earn a regular income well after the accident itself, then one has to think how significantly injured can they be and would their claim meet the statutory threshold if it’s a car accident case? Likely not.
