Insurance solution
Adverse Costs Insurance
Protection against a costs order in favour of the opposing party.
- A judgment or award won
- A judgment against you
- Funder capital deployed
- Law firm fees and WIP
- Security for costs
- The opponent's costsThis cover
- Disbursements
- Own legal costs
Illustrative. The exposures a dispute can put on a balance sheet. What a policy responds to is set by its wording.
What is Adverse Costs Insurance?
Adverse Costs Insurance is a form of litigation risk transfer that may be arranged around liability for the opponent's costs. Protection against a costs order in favour of the opposing party. Terms, where available, are set case by case through underwriting.
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Schedule · specimen
Adverse Costs Insurance
Not a policy. A specimen to show how this cover is structured. Cover exists only when a policy is issued, on its own wording.
- Terms
- Terms, where available, are set case by case through underwriting.
- Protects
- Liability for the opponent's costs, depending on policy terms.
- Terms
- Limit, premium and conditions are set by underwriting on the specific risk.
Clause 1
The insured
Who it is for
Any party that could be ordered to pay the other side's legal costs — typically claimants in loser-pays forums, but also counterclaiming defendants and parties to appeals.
Clause 2
Insuring clause
What risks can be protected
The liability to pay an opponent's costs if the case is lost, discontinued or ends on terms that leave the insured paying costs, up to the policy limit.
Interim costs orders along the way may also be covered, depending on the wording.
Clause 3
Operation of cover
How it works
The limit is sized to a realistic estimate of the opponent's recoverable costs, not their full spend.
If an adverse costs order is made, the insurer pays up to the limit; anything above it remains with the insured. Budgets move, so limits are often reviewed at each stage.
Clause 4
Underwriting
Underwriting factors
The core assessment is the same as for After-the-Event Insurance: merits, quantum, a proportionate budget, recoverability and the legal team.
The points that weigh most for this cover are set out under "What risks can be protected" and "How it works" above.
Clause 5
Proposal documents
Information required
The standard presentation pack described on the After-the-Event Insurance page, plus the documents specific to this cover noted above.
Clause 6
Limit, premium and staging
Potential structure
A limit set against the opponent's budget, staged through the case, with a deferred and contingent premium.
Where security is sought, the policy may carry an anti-avoidance endorsement so the insurer cannot avoid the policy against the defendant for the insured's own breach.
Clause 7
Alternatives
Alternatives
- (a)Absorbing the risk;
- (b)A funder's adverse costs indemnity; and
- (c)A costs-sharing arrangement among co-claimants.
Clause 8
Territory
Jurisdiction notes
Forum rules apply as described on the After-the-Event Insurance page; the jurisdiction guides linked below set out the position forum by forum.
Specimen for explanation only. Terms, limits and exclusions are set by underwriting on each matter and by the wording issued.
Frequently asked
How much of the other side's costs would I have to pay if I lose?
In loser-pays forums the court usually orders the loser to pay a substantial share of the winner's reasonable costs, assessed by the court — often less than everything the winner actually spent. The policy limit is set against a realistic estimate of that recoverable amount.
What happens if the other side's costs exceed the policy limit?
The insurer pays up to the limit and the balance remains with you. That is why limits are reviewed as budgets change and can often be increased during the case.
Is Adverse Costs Insurance available for my dispute?
Availability depends on the merits, the quantum, the costs profile and the counterparty. Every risk is assessed individually and no cover exists until a policy is issued.
Does this quote a price?
No. Pricing is a function of the specific risk and is never quoted in the abstract. Nothing on this page indicates the cost or availability of cover.
Can it be combined with litigation funding?
Frequently, yes. Funding supplies capital; insurance defines the downside. The two are often structured together.
General information only. This page is not legal, financial, investment or insurance advice. Any insurance is subject to underwriting and to the terms of the policy wording issued.