Legal Cost Trends; Litigation and Insurance

Legal cost funding in the UK is becoming more advantageous to clients, driven by the increasing adoption of litigation finance and legal cost insurance. These mechanisms provide essential financial support for individuals and entities involved in litigation, allowing access to justice and ultimately, reducing financial risks. Exploring how litigation finance and legal cost insurance works enables clients to understand the benefits, potential risks, and impact on cost law. By understanding the current trends that affect cost law as an industry, clients can be more aware of the complexities of litigation with the support of expert cost law firms like County Cost Consultants.

Litigation Finance

Litigation finance, also known as third-party funding, involves a third-party investor providing the financial resources necessary to pursue legal action. In return, the funder receives a portion of the proceeds if the case is successful. This arrangement allows claimants to pursue meritorious claims without bearing the upfront costs of litigation.

Litigation funders assess the merits of the case, potential recovery, and the likelihood of success.If the case is deemed viable, a funding agreement is signed, detailing the financial terms, including the percentage of the recovery that will be allocated to the funder. The funder provides the necessary capital to cover legal fees, expert witness costs, and other litigation expenses. Upon a successful outcome, the funder recovers their investment and the prior agreed-upon share of the proceeds.

The Benefits of Litigation Finance

1. The access to justice enables claimants with limited financial resources to pursue legal action

2. Risk mitigation ensures claimants do not bear the financial risk of losing the case, as the funder covers the costs

3. With an enhanced litigation strategy, funders can provide strategic support, leveraging their experience and resources to strengthen the case.

The Potential Risks of Litigation Finance

1. Claimants might have to cede some control over strategic decisions to the funder resulting in a loss of control

2. The share of the recovery allocated to the funder can be substantial, potentially reducing the net recovery and resulting in a loss for the claimant

Legal Cost Insurance
Legal cost insurance provides coverage for the legal expenses associated with litigation. This can include "after the event" (ATE) insurance, purchased after a legal dispute has arisen, and "before the event" (BTE) insurance, purchased as a precautionary measure.

Claimants purchase a policy that covers the legal costs associated with pursuing or defending a claim. Policies can cover various expenses, including legal fees, court costs, and expert witness fees. If a claim arises, the policyholder submits a claim to the insurer, who then covers the legal costs as outlined in the policy.

The Benefits of Legal Cost Insurance

1. Shields claimants from the financial burden of legal expenses

2. Knowing that their legal costs are covered can strengthen a claimant’s negotiating position

3. Helps in budgeting for potential litigation expenses, making financial planning more predictable

The Potential Risks with Legal Cost Insurance

1. There are policy exclusions as not all legal costs may be covered, depending on the policy terms

2. The cost of premiums can be high, especially for ATE insurance in high-risk cases

Case Studies and Expert Opinions

Several high-profile cases in the UK illustrate the importance and impact of litigation finance and legal cost insurance:

Lloyds/HBOS Shareholder Litigation
This case demonstrated how litigation finance enabled shareholders to pursue claims against a major bank for financial losses. The funders provided crucial financial support and strategic guidance, leading to a significant settlement.

Volkswagen Emissions Scandal
Group litigation against Volkswagen for emissions cheating was supported by litigation finance, allowing thousands of claimants to seek redress without bearing the upfront legal costs.

Experts in the field, including those at County Cost Consultants, emphasize the strategic advantages of these funding mechanisms. 

How County Cost Consultants Can Help

County Cost Consultants is at the forefront of managing and recovering legal costs, offering unparalleled expertise in regard to the complexities of litigation finance and legal cost insurance. Our services include:

1. Expert guidance as we provide tailored advice on the best funding options for your case, guaranteeing informed decisions

2. Our team specialises in detailed cost assessments and budgeting, helping you manage litigation expenses effectively with cost management

3. We offer a high standard of strategic support, with extensive experience in cost law, we offer strategic insights to strengthen your case and maximise recovery

Litigation finance and legal cost insurance are transforming legal cost funding in the UK. By enabling access to justice and mitigating financial risks, these available strategies provide significant benefits to claimants. Expert cost law firms like County Cost Consultants play a pivotal role in guiding clients through these processes, ensuring optimal outcomes and effective cost management.