After the event insurance: security for costs

Under CPR 25.13 the court may make an order for security for costs in favour of a defendant if: it is just to do so, and; where the claimant is a company, there is reason to believe that it will not be able to pay the defendant’s costs if ordered to do so. A question that has arisen on a number of occasions is whether an order for security for costs should be made if the claimant’s action is being funded by after the event (ATE) insurance.

As long as the policy responds, costs will be paid by the insurers and accordingly there cannot be any justification for an order for security for costs under CPR 25.13. The defendant’s standard response in such cases is to assert that there is no guarantee that the ATE insurance will cover the claim, and in particular the ATE insurers may have the right to avoid the policy if the assured had failed to make a fair presentation of material facts when the policy was taken out.