A Summary Of Recent Developments In Insurance, Reinsurance And Litigation Law - (02/12)

Natas Group v Styles & Wood

Effect of the terms in an ATE insurance policy on a security for costs application

http://www.bailii.org/ew/cases/EWHC/TCC/2011/3464. Html

The defendant applied for security for costs. Akenhead J agreed that the threshold test for the exercise of his discretion had been met, given the claimant's financial position. However, the claimant argued that the discretion should not be exercised, in part because it had taken out an ATE insurance policy.

Prior caselaw has established that an ATE insurance policy can, in principle, provide sufficient protection for a defendant, but it will be rare for the policy to be as good security as a payment into court or a bank bond or guarantee. In order for a claimant to be able to rely on an ATE insurance policy (and so resist a security for costs application), there must not be terms which allow the insurer to "readily but legitimately and contractually" avoid the policy (see Newman v