Canadian law firms face complex and costly risks when pursuing civil litigation. Even a well-prepared case can result in an unexpected loss, leaving the plaintiff – and sometimes the law firm – responsible for significant legal costs. This is where After the Event (ATE) insurance comes in. So, what is ATE insurance? It’s a specialized form of legal expense insurance purchased after a legal dispute has arisen, designed to protect plaintiffs and their lawyers from the financial consequences of an unsuccessful outcome. In simple terms, ATE insurance acts as a safety net, covering many of the expenses if a case is lost.
At ALIGNED Insurance, we understand the pressures litigation puts on both clients and law practices. We work with law firms of all sizes across Canada to secure tailored ATE insurance solutions that mitigate these financial risks. In this post, we’ll explain the key features of ATE insurance, why it’s a strategic risk management tool for law firms, what types of cases it covers (and doesn’t), how the application and premiums work, and how upcoming changes in Canada’s legal landscape make ATE insurance more important than ever. We’ll also address some frequently asked questions.
Understanding After the Event (ATE) Insurance
ATE insurance is a type of legal expense insurance obtained after a lawsuit or legal dispute has started. Unlike insurance bought before a dispute (such as a general liability policy), ATE coverage is specifically arranged when a case is underway and the outcome is uncertain. Its primary purpose is to protect the plaintiff (your client) – and by extension your law firm – from the financial risk of losing the case. Here’s how it works and what it typically covers:
- Adverse Costs (Opponent’s Legal Fees): In Canada, the losing party in litigation is often ordered to pay a portion of the winning side’s legal fees. ATE insurance covers these opponent’s legal costs so your client isn’t personally on the hook if their case doesn’t succeed.
- Disbursements: Litigation involves numerous expenses (court fees, expert reports, medical assessments, etc.). ATE insurance can cover the disbursements and out-of-pocket expenses incurred during the case, which can be substantial in lengthy trials.
- Your Own Legal Costs: If you have a contingency fee agreement (e.g. “no win, no fee”), your client typically wouldn’t pay your fees if the case is lost. However, if there are any payable legal costs on the client’s side (for instance, under certain arrangements or partial indemnity scenarios), some ATE policies can cover some of the client’s own legal fees as well.
In essence, ATE insurance shields the client from financial ruin if the case fails. It gives both the client and the law firm the confidence to pursue meritorious claims all the way through trial, knowing that if they lose, the major costs will be taken care of by the policy. This safety net promotes access to justice: clients who might otherwise fear the risk of an adverse costs award can proceed with valid claims. It also strengthens a firm’s position during settlement negotiations – when the defence knows the plaintiff has insurance backing them, there’s less pressure on the plaintiff to settle cheap out of fear of cost repercussions.
Why Law Firms Choose ATE Insurance
Many small and mid-sized law firms assume that litigation insurance is something only large firms or big-budget cases use. That’s a myth. In reality, ATE insurance is accessible to firms of all sizes and for a wide range of civil cases. Here are a few key reasons Canadian law firms are increasingly choosing ATE insurance as a strategic tool:
- Financial Protection for Clients: The obvious benefit is protecting your client from crippling debt if their case is unsuccessful. This improves client confidence and trust – you are offering a solution that provides peace of mind during the litigation journey. Clients appreciate knowing that winning isn’t the only way they’ll emerge without devastating costs.
- Protecting the Firm’s Interests: In contingency fee cases, your firm might advance thousands of dollars in disbursements, expecting to recover them upon success. If the case is lost, those expenditures are lost revenue. ATE insurance can reimburse those disbursements, protecting your firm’s balance sheet. It essentially secures the investment your firm makes in each case.
- Competitive Advantage in the Market: Offering ATE insurance options can differentiate your law firm. Firms that can say “yes, we can help you obtain insurance so you won’t pay costs if we lose” are far more attractive to risk-averse clients. It levels the playing field, allowing smaller firms to compete with larger ones by offering similar risk management for clients.
- Better Outcomes in Mediation/Settlement: Knowing that the plaintiff has ATE coverage can actually drive fairer settlements. The defence can’t rely on the threat of mounting costs to force an unfavorable settlement. Your side can negotiate from a position of strength, since the typical leverage (“if you lose, you pay our fees”) is off the table. In contrast, the absence of ATE insurance can negatively impact mediation outcomes because clients without it might feel pressure to settle for less due to fear of adverse costs.
- Portfolio Risk Management: If your firm handles multiple litigation files, even a few losses with big cost consequences can be detrimental. ATE policies can be secured on a case-by-case basis to spread and mitigate risk across your portfolio of litigation files. This helps smooth out the financial volatility that litigation firms face.
ALIGNED Insurance works closely with each law firm to find an ATE policy that fits the firm’s case portfolio and risk profile. Whether you’re a boutique personal injury practice or a larger firm handling various litigation, ATE insurance can be tailored to your needs. We also continuously monitor market trends and new offerings from insurers to ensure that we can provide the most comprehensive and up-to-date coverage options available. If there’s an opportunity to expand coverage to new areas or improve terms, we’ll make sure our law firm clients know about it.
Case Types ATE Insurance Can (and Cannot) Cover
ATE insurance is commonly used in a wide range of civil litigation, especially in personal injury and similar claims. However, like any insurance, there are limits to what it will cover. Below is a summary of the types of cases that are often covered versus those that are typically excluded from ATE coverage:
| Commonly Covered Case Types | Case Types Generally Excluded |
|---|---|
| Personal injury claims, including: – Motor Vehicle Accidents (MVAs) – Slip-and-fall injuries (Occupiers’ Liability) – Assault and battery cases (including sexual assault) – Product Liability claims – Municipal Liability (claims against cities/towns) – General negligence causing bodily injury – Disability insurance benefit disputes (short/long-term)* |
Typically not covered: – Estate or probate litigation – Medical malpractice lawsuits – Dental malpractice claims – Class action lawsuits – Claims seeking only punitive damages – Appeals or post-judgment matters (after a trial verdict)* |
Covered cases usually involve plaintiffs seeking compensation for injuries or losses caused by another party’s negligence or wrongdoing. These are the kinds of cases where adverse cost exposure is a significant concern, and ATE insurance steps in to cover that risk. For example, motor vehicle accident lawsuits or slip-and-fall injury claims are prime candidates – these clients often cannot afford to pay the defendant’s legal bill if the case fails. Product liability and municipal liability cases (e.g., suing a city for an injury on municipal property) are also commonly covered, given their complexity and high potential costs. Even sensitive cases like sexual assault claims (a form of intentional tort) can be covered by ATE policies, treating them similar to personal injury claims in terms of cost risk. Additionally, disability insurance disputes (where an individual sues an insurer for denied benefits) are often eligible for ATE coverage, since they are civil actions for financial compensation related to personal well-being.
On the other hand, excluded cases are those that ATE insurers generally will not insure due to higher risks, unquantifiable exposure, or limited underwriter appetite. For instance, estate litigation (disputes over wills or estates) is typically excluded – these cases often involve family disputes and unpredictable outcomes. Medical and dental malpractice cases are usually excluded as well; they tend to be long, expert-heavy, and expensive to insure (though there are separate insurance solutions for malpractice in some markets, ATE providers often avoid them). Class actions are not covered by standard ATE insurance because of the massive scale and potential costs involved. Similarly, claims seeking primarily punitive damages or wanting coverage for punitive damages are excluded, as insurance generally doesn’t cover punitive awards (for public policy reasons). Finally, appeals or post-judgment matters are not covered by ATE since the “event” (the trial) has already happened – if you didn’t have ATE insurance for the trial, you generally can’t get one to cover an appeal after the fact.
Note: The coverage landscape is always evolving. ALIGNED Insurance continuously works with leading insurers and monitors industry trends to identify opportunities for expanded coverage. If your firm handles a case type that is usually excluded, talk to us – as the market grows, insurers may develop ATE products for new areas. We strive to find solutions even for challenging cases whenever possible.
Applying for ATE Insurance: Process and Premiums
One great aspect of ATE insurance is how simple and client-friendly the application and payment process can be. ALIGNED Insurance makes the process straightforward for the law firms we work with. Here’s what you need to know:
- When to Apply: It’s best to apply for ATE coverage soon after signing the client’s retainer agreement, typically within the first few months of taking on the case. Most insurers require that an ATE policy be in place within 6 months of the case commencing (retainer sign-up). Early application ensures the case is still relatively “new” and uncertain, which is when insurers are willing to underwrite the risk. Don’t wait until trial is imminent – by then, insurers will likely decline coverage.
- Easy Application: Applying for ATE insurance is usually a straightforward process. We will help you complete a short application or questionnaire about the case merits, the defendant, the estimated claim value, and the expected litigation budget (costs). You typically won’t need to pay anything to apply – it’s just information gathering for an initial quote. ALIGNED will submit the application to the appropriate insurer on your behalf.
- Deferred Premiums: A hallmark of ATE policies is that premiums are deferred until the case is resolved. This means no upfront cost for your client or your firm to put the insurance in place. The policy is essentially on standby during the litigation. If you win the case or reach a favourable settlement, the premium is then paid out of the proceeds (or as arranged – often it can be covered from settlement amounts). If the case is lost or discontinued without a recovery, no premium is payable at all. In other words, if you don’t win, you don’t pay. This no-win-no-pay structure aligns perfectly with contingency fee arrangements and ensures that the client isn’t adding another expense unless their case is successful.
- Premium Cost and Success Fee: How much is the premium? It varies depending on the case type, estimated duration, and coverage limit. Typically, the premium might be a percentage of the coverage amount or a flat fee schedule. Importantly, because it’s only due upon success, it effectively works like a success fee. Many firms factor it into their settlement targets (e.g., aiming to recover enough to cover the premium and still net the client a good outcome). ALIGNED will negotiate competitive premium terms for your cases, so you get cost-effective protection.
- Policy Documentation: Once approved, the insurer issues a certificate of insurance confirming the coverage details (covered amount, covered costs, etc.). Coverage usually commences from the date of your contingency fee agreement or retainer (so it retroactively covers the case from the start) as long as the certificate is issued. We’ll help ensure you have all documentation on file.
Overall, the ATE insurance application process is designed to be easy on law firms and clients – minimal paperwork, no upfront fees, and seamless integration with how you’re already handling the file. ALIGNED Insurance will guide you through every step, from application to receiving the policy, so you can focus on litigating the case with one less worry.
Retroactive Coverage for Past Cases
What if you have ongoing litigation that started some time ago and you didn’t secure ATE insurance at the outset? The good news for Canadian law firms is that ATE insurance can often be applied retroactively to existing files, even if the case has been underway for a while (subject to certain time limits).
Retroactive ATE coverage means that an insurer is willing to insure a case that is already in progress, covering adverse costs moving forward, despite not being taken out right when the case began. At ALIGNED Insurance, we have the ability to help firms obtain retroactive ATE policies for files up to five years old. This flexibility is incredibly valuable – for example, if your firm took on a large claim three years ago and only now realizes the risk exposure, you might still secure protection for the remainder of the case.
Key points about retroactive coverage:
- Typically, the case should still be unresolved and ongoing (no judgment yet). You cannot insure a case that has already been lost.
- The insurer will likely request additional information about the progress of the case to date – for instance, results of any discoveries, any settlement offers made, and how trial-ready the matter is. They want to ensure the risk is still reasonable to insure.
- In some situations, the insurer might impose a different premium or terms for retroactive cases (for example, a slightly higher premium or a lower coverage limit) to account for the increased certainty of the case status compared to if it was new.
- Retroactive cover is a great way to bolster your firm’s overall risk management. You can review your current litigation portfolio and plug any gaps by adding ATE on cases that are eligible.
ALIGNED Insurance assists by gathering the necessary documentation from your files, preparing the underwriting submission, and obtaining quotes from the insurer for retroactive coverage. Our goal is to ensure no file is left unprotected, even those you started before you knew about or decided to get ATE insurance. If it’s possible to insure it, we will help make it happen so your firm has comprehensive protection across all your litigation files.
Adjusting ATE Policy Limits as Your Firm Grows
Over time, your law firm’s needs and case load may change. ATE insurance policies offer flexibility to adjust coverage in many cases. For example, you might start with a certain coverage limit on a case, but as it progresses, you realize the potential costs (and exposure) are higher than initially thought. Or your firm might expand into larger-value litigation where higher ATE limits are necessary.
Adjusting policy limits – increasing the amount of coverage – is often possible, though it may require additional underwriting. If mid-case you decide you need, say, an extra $50,000 in adverse cost coverage (perhaps because the trial got extended or new expert evidence was required), the insurer might reassess the case and offer an increase for an additional premium. Retroactively increasing coverage (after the policy is in place) means the insurer will carefully evaluate any new developments since the original policy was issued.
ALIGNED Insurance is here to guide you through these adjustments. We will:
- Review your coverage needs periodically or upon request. If your case budget grows, we’ll discuss whether your existing ATE limit is still sufficient.
- Coordinate with the insurer to increase limits or make changes. This could involve submitting updated case information or just requesting a specific increase.
- Explain any new terms or costs associated with adjusting the policy. We’ll ensure you and your client understand any additional premium (which, like the original, would also typically be deferred until a successful outcome).
Our aim is to make sure your ATE coverage stays aligned with your actual risk exposure. Your insurance safety net should scale with your practice. Whether you’re taking on bigger cases or pivoting into new areas of litigation, we’ll help adjust your ATE insurance program accordingly.
Keep in mind: significant changes to policy limits or scope mid-stream will be subject to insurer approval. It’s not guaranteed, but with a solid case and ALIGNED’s advocacy, you have a strong chance of securing what you need.
Evolving Legal Landscape in Ontario – Why ATE Insurance Is More Vital Than Ever
The civil litigation landscape is not static. Procedural rules and practices can change, which in turn influences how risky or costly it is to pursue justice. Ontario is currently considering major reforms to its Rules of Civil Procedure (with other provinces often watching closely). These changes are aimed at streamlining the legal process, but they could also have unintended consequences for plaintiffs and their counsel. Some proposed reforms in Ontario include:
- Eliminating oral examinations for discovery: Moving towards written discoveries or limited discovery can make it harder to uncover all facts, potentially increasing the uncertainty in litigation.
- Reliance-based evidence disclosure: Parties might only disclose the evidence they plan to use, rather than everything relevant. This could lead to surprises at trial and make outcomes less predictable.
- Fixed litigation timelines: Stricter deadlines for moving a case through the courts. While this can reduce delays, it also means plaintiffs have less flexibility to wait for favourable conditions or evidence – you must be ready to go, or risk your case being dismissed for delay.
- Limiting adjournments and procedural flexibility: Judges may have less leeway to grant extensions or adjournments. If something goes awry (e.g., a key witness is unavailable), there’s increased risk of a negative result that isn’t through any fault of the case merits.
Collectively, these reforms aim to expedite cases and control costs, but they may tip the scales against plaintiffs who often need time and full discovery to build their case. From a risk perspective, these changes could make litigating certain cases riskier – if you have less time to gather evidence or if you face surprise information, the chance of losing might increase. Additionally, faster timelines mean legal costs accumulate quicker and there’s less time to strategize on settlement, etc.
ATE insurance becomes an essential safeguard in this evolving environment. If plaintiffs have fewer procedural tools to manage risk, having insurance protection against cost awards is even more critical. Law firms in Ontario (and everywhere in Canada) should see ATE insurance as part of their standard operating procedure, especially as the road to trial becomes more of a sprint than a marathon. By securing ATE coverage, you ensure that even if these new rules contribute to an unexpected loss, your client and firm are financially protected.
Staying ahead of changes is part of ALIGNED Insurance’s service. We keep abreast of legal developments that affect our clients. As courts and rules evolve, we can adjust our risk mitigation advice – including ATE insurance strategies – so that your firm is always prepared for what’s next.
Frequently Asked Questions (FAQs) about ATE Insurance
Q1: Is ATE insurance available for small law firms and their clients?
A: Yes, absolutely. ATE insurance is not just for big Bay Street firms or large class actions. Firms of all sizes, from solo practitioners to mid-size regional firms, utilize ATE coverage for their litigation files. Insurance providers do not require your firm to have a huge volume of cases; even a single qualifying case can be insured. ALIGNED Insurance has experience helping small and boutique law practices secure ATE policies that fit their limited case roster and budget. No firm is “too small” to protect their clients’ interests – in fact, for a smaller firm, one large cost award could be devastating, so ATE insurance is a wise precaution.
A: Yes, absolutely. ATE insurance is not just for big Bay Street firms or large class actions. Firms of all sizes, from solo practitioners to mid-size regional firms, utilize ATE coverage for their litigation files. Insurance providers do not require your firm to have a huge volume of cases; even a single qualifying case can be insured. ALIGNED Insurance has experience helping small and boutique law practices secure ATE policies that fit their limited case roster and budget. No firm is “too small” to protect their clients’ interests – in fact, for a smaller firm, one large cost award could be devastating, so ATE insurance is a wise precaution.
Q2: When should I apply for ATE insurance on a case?
A: The best time to apply is as early as possible – typically right after you’ve signed a retainer and decided to take the case, and certainly within the first six months of the case. Early application ensures you meet insurers’ criteria and that your client gets the protection in place before significant litigation steps occur. While some insurers (with ALIGNED’s help) can offer retroactive coverage on older files, it’s always safer and easier to secure ATE at the outset of a case. This way, from day one, you and your client know the safety net is there.
A: The best time to apply is as early as possible – typically right after you’ve signed a retainer and decided to take the case, and certainly within the first six months of the case. Early application ensures you meet insurers’ criteria and that your client gets the protection in place before significant litigation steps occur. While some insurers (with ALIGNED’s help) can offer retroactive coverage on older files, it’s always safer and easier to secure ATE at the outset of a case. This way, from day one, you and your client know the safety net is there.
Q3: Do we have to pay the ATE insurance premium upfront?
A: No – one of the biggest advantages of ATE insurance is that there are no upfront payments. The premium is completely deferred. Your client (or firm) will only pay the premium if and when the case is successful (usually at the time of settlement or when damages are paid after a win). If the case is lost or doesn’t result in any recovery, then the insurance premium is waived and nothing is paid. This deferred, success-based premium model ensures that the client isn’t burdened with extra costs during the litigation, which is already a financially stressful time. It aligns with “no win, no fee” practices, complementing the contingency fee system perfectly.
A: No – one of the biggest advantages of ATE insurance is that there are no upfront payments. The premium is completely deferred. Your client (or firm) will only pay the premium if and when the case is successful (usually at the time of settlement or when damages are paid after a win). If the case is lost or doesn’t result in any recovery, then the insurance premium is waived and nothing is paid. This deferred, success-based premium model ensures that the client isn’t burdened with extra costs during the litigation, which is already a financially stressful time. It aligns with “no win, no fee” practices, complementing the contingency fee system perfectly.
(Have more questions about ATE insurance? Feel free to reach out to ALIGNED Insurance – we’re happy to clarify how ATE coverage works for your specific situation.)
Partner with ALIGNED Insurance
Navigating litigation risks can be challenging, but you don’t have to do it alone. ALIGNED Insurance is your partner for ATE insurance solutions that support your firm’s success. We specialize in helping Canadian law firms manage and transfer litigation risk through tailored ATE insurance policies. Our team understands both the insurance market and the legal landscape – an essential combination for getting this coverage right.
By partnering with ALIGNED Insurance, you will:
- Get Expert Guidance: Our experienced brokers will assess your firm’s caseload and recommend ATE coverage options that make sense for the types of files you handle. We know the nuances of policies from different insurers and will find the best fit for your needs.
- Save Time and Effort: We handle the legwork – from completing applications to negotiating terms with insurers. You can stay focused on your cases while we secure your safety net.
- Receive Ongoing Support: Our relationship doesn’t end once the policy is issued. We assist with any claims on the policy (should your client’s case lose and a payout be needed) and with any adjustments or new coverage for future cases. We’ll keep you informed about new developments in ATE insurance that could benefit your practice.
- Provide Peace of Mind to Your Clients: By working with us, you can confidently tell your clients that their financial exposure is addressed. This added value strengthens your client relationships and reinforces your reputation as a firm that goes the extra mile to protect client interests.
Contact ALIGNED Insurance today to learn more about how ATE insurance can support your firm’s growth, resilience, and client outcomes. Our team is ready to answer your questions, provide a quote, or assist with applications. Don’t wait until an adverse costs order arrives – plan ahead and let us help you put the right protections in place. With ALIGNED Insurance by your side, you can pursue justice for your clients knowing that you have a powerful risk mitigation strategy in hand.