Security for Costs
Can ATE Insurance Satisfy Security for Costs?
What courts have looked for, and why the deed matters as much as the policy.
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The short answer
Often, yes — if the policy gives the defendant real protection. Courts in England and Wales have accepted ATE as security in a number of cases, particularly where the policy carries an anti-avoidance endorsement or is supported by a deed of indemnity, and the insurer is of adequate standing. Each application turns on its facts.
In brief
- The court must be satisfied the policy will respond for the defendant's benefit.
- Anti-avoidance endorsements and deeds of indemnity address avoidance risk.
- The insurer's financial standing is examined.
- The same logic applies in some other forums, including Australia.
- A judgment or award won
- A judgment against you
- Funder capital deployed
- Law firm fees and WIP
- Security for costsThis cover
- 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.
Background
Security for costs protects a defendant against a claimant who may be unable to pay costs.
ATE can offer that protection without tying up cash.
How it works in practice
- 01
The claimant offers the policy as security
- 02
The defendant tests the wording, the insurer and the limit
- 03
The court decides whether it is adequate
Worked example
A court orders £800k of security. The claimant offers an ATE policy with an anti-avoidance endorsement and a £1m limit, which the court accepts.
Figures are invented to show the mechanics. They describe no real client, matter or outcome.
What underwriters look for
Merits and budget as for any ATE, plus a clear understanding of the wording the court will require.
Jurisdiction notes
Arbitral tribunals decide security under their own rules and may take a different approach.
Related questions
What is ATE?
How much does it cost? See the related guides below.
Frequently asked
What is security for costs?
An order requiring a claimant to provide security — cash, a guarantee or another acceptable form — so that the defendant can recover its costs if the claim fails.
What will the court look at before accepting ATE as security?
Whether the insurer can avoid the policy against the defendant, the insurer's standing, whether the limit is adequate and how the defendant can claim. Anti-avoidance endorsements and deeds of indemnity address the main concerns.
Is ATE cheaper than paying security into court?
It can be, because it avoids tying up cash for the life of the case. Whether it is cheaper overall depends on the premium and the cost of the cash or guarantee it replaces.
What is an anti-avoidance endorsement?
A term that stops the insurer avoiding the policy, as against the defendant, because of the insured's own breach or non-disclosure.
Can security for costs be ordered in arbitration too?
Yes. Most institutional rules let tribunals order security, and an ATE policy or insurer bond may be accepted as the form of security.
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.