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ATE Insurance

Q: What is After the Event (“ATE”) insurance?

A: ATE insurance is another option for transferring the financial risks of a legal dispute. In its simplest form, it is an insurance policy taken out after a dispute has arisen and provides cover against an opponent’s costs. ATE insurance can also be extended to cover own costs.

Q: What is the meaning of disbursement costs?

A: Disbursement costs are associated with a legal matter, usually organised by the legal practitioner, with the exception of fees for solicitors. Examples of disbursement costs may include: medical records, police reports, expert reports, counsel fees, court fees, witness expenses. A definition by the Federal Court of Australia can be found here.

Q: At what point in the legal process can I apply for insurance?

A: An application can be made at any point in the litigation. However, it is important to note that it is more difficult to obtain ATE insurance for in the latter stages of a claim. Where it can be obtained in the latter stages of the legal process, the terms given for such finance are unlikely to be as favourable.

Q: What information should I provide?

A: We would ask that you complete an application form. A copy of which is available to download in the application guidance section of this website. As well as the application form, you should also submit documents to support your application. We have set out a page on this website providing guidance for making an application. However, if you have any questions in relation to the completion of the application or in general then please do not hesitate to contact us.

Q: How much does ATE insurance cost? Do I need to make any payments upfront?

A: There are two types of premium; Contingent (sometimes referred to as deferred) and Paid (sometimes referred to upfront). A Contingent premium which is only payable if your legal action is successful. A paid premium which, as with most insurance policies, is payable on inception and is non refundable under any circumstances. The premium cost and type of premium will depend on several factors including but not limited to the type of legal action requiring ATE insurance, the level of cover, the stage at which the legal action has reached and the risk factors the insurer perceives in the specific legal action. We can discuss this in detail with you during the application process and once we have an understanding of the legal action you are pursuing.

Q: How long do applications take to assess?

A: The length of time it will take to assess an application depends on several factors including the complexities of the dispute, the volume of supporting documents to be reviewed, the number of parties involved, the review capacity of individual insurers.
In all cases, we as your broker, we would aim to respond to your application within 48 hours. Where there is a real need for an application to be expedited, we will do our utmost to fulfil such a request. Once you have instructed us to act for you, we will keep you up to date regularly.

Q: What happens if I lose my claim?

A: The exact terms of your insurance policy will be explained to you prior to you entering in to a policy in relation to the same. However, the standard position is that where you to lose your legal dispute you would have no liability for the amounts stated in the relevant funding documents.

Q: What happens if I am not happy with your service?

A: Clients who are not fully satisfied with our services should contact UIG’s Complaints Officer. UIG are also members of the Financial Ombudsman Service (FOS), a free consumer service. Further information is available from our office, or contact FOS directly on 1800 367 287 or visitwww.fos.org.au. We also follow the Insurance Brokers Code of Practice (insert link to Code on Website).

Funding (TPF)

Q: What is Third Party Funding (“TPF”)?

A: TPF in basic terms, is where an investor provides finance to an individual or business to fund a legal dispute in return for a share of the proceeds recovered. The arrangement is on a non-recourse basis. Where there is no recovery, the TPF loses the monies they have invested in the legal dispute and has no recourse against the relevant individual or business.

Q: What is the meaning of disbursement costs?

A: Disbursement costs are associated with a legal matter, usually organised by the legal practitioner, with the exception of fees for solicitors. Examples of disbursement costs may include: medical records, police reports, expert reports, counsel fees, court fees, witness expenses. A definition by the Federal Court of Australia can be found here

Q: At what point in the legal process can I apply for funding?

A: An application can be made at any point in the litigation. However, it is important to note that it is more difficult to obtain finance for litigation in the latter stages of a claim. Where finance can be obtained in the latter stages of the legal process, the terms given for such finance are unlikely to be as favourable.

Q: What information should I provide?

A: We would ask that you complete an application form. A copy of which is available to download in the application guidance section of this website. As well as the application form, you should also submit documents to support your application. We have set out a page on this website providing guidance for making an application. However, if you have any questions in relation to the completion of the application or in general then please do not hesitate to contact us.

Q: How much does third party funding cost? Do I need to make any payments upfront?

A: There are several factors which could impact the cost of funding but this will be explained to you once terms have been offered by a funder. It is very unlikely a funder will charge fees upfront.

Q: How long do applications take to assess?

A: The length of time it will take to assess an application depends on several factors including the complexities of the dispute, the volume of supporting documents to be reviewed, the number of parties involved, the review capacity of individual funders.
In all cases, we as your broker, we would aim to respond to your application within 48 hours. Where there is a real need for an application to be expedited, we will do our utmost to fulfil such a request. Once you have instructed us to act for you, we will keep you up to date regularly.

Q: What happens if I lose my claim?

A: The exact terms of your funding arrangement will be explained to you prior to you entering in to an agreement in relation to the same. However, the standard position is that where you to lose your legal dispute you would have no liability for the amounts stated in the relevant funding documents.

Q: What happens if I am not happy with your service?

A: Clients who are not fully satisfied with our services should contact UIG’s Complaints Officer. UIG are also members of the Financial Ombudsman Service (FOS), a free consumer service. Further information is available from our office, or contact FOS directly on 1800 367 287 or visitwww.fos.org.au. We also follow the Insurance Brokers Code of Practice (insert link to Code on Website).

M&A Insurance

Q: What are warranties and indemnities?

A: A warranty is a fact asserted by the seller to be true at the time of sale. A warranty usually covers assets, stocks and liabilities associated with the business being transferred. An indemnity is the clause that is triggered if the seller has made a false or inaccurate statement during the asset sale, known as a warranty breach, that causes the buyer a financial loss.

Q: What coverage will I receive from warranty and indemnity insurance?

A: Warranty and indemnity insurance protects buyers and sellers from loss and litigation brought on by warranty breaches. Under warranty and indemnity insurance, the buyer claims against their insurer, rather than pursuing the seller. A warranty and indemnity policy will cover either party for a fixed amount, typically 10% of the acquisition price.

Policies come into effect once the agreement has been settled and last three to six years. Statistically, most claims are made in the first two years following the sale.

There are some limitations worth noting. The Australian market caters for acquisitions valued between $5 million and $1 billion. However, it may not be financially viable if the sale is less than $10 million.

A typical policy covers a fixed dollar amount for losses, therefore the Seller, depending on the terms of the relevant Sale & Purchase Agreement, may be liable for additional losses not covered by the policy (extraordinary losses).

Coverage maybe limited by some standard exclusions and other specific exclusions, such as:

  • Breaches of which the buyer had prior knowledge
  • Some in-material risks, such as patent infringement
  • Some tax related issues
  • Liabilities related to asbestos or environmental issues
  • Revenue projections and other forward-looking speculations
  • Consequential losses or certain types of losses or multiple damages
  • Disputes related to wages and employee classifications

You may be able to negotiate an excess coverage rider on some specific warranties. You are likely, however, to be charged an additional premium for this service.

Q: What are the benefits of warranty and indemnity insurance?

A: Warranty and indemnity insurance offers numerous benefits, including:

  • Higher sales prices
  • Financial security for buyers and sellers
  • A cleaner exit for sellers
  • Complements private equity distribution terms
  • Protects the buyer and seller’s relationship
  • Better value for money than an escrow
  • Simplifies and speeds up negotiations

Q: How much will the premium cost? Do I need to make any payments upfront?

A: Warranty and indemnity insurance fees are typically calculated as a percentage of your sale price. Our team can discuss your individual needs and provide you with a estimated cost.

  • The premium is a one-time, upfront fee, generally calculated as a percentage of the coverage limit. Most policies have a minimum premium amount. This minimum fluctuates depending on the amount of policies on the market.
  • The insurer charges an upfront fee for completing a due diligence report as part of your application.
  • You may also be eligible for premium taxes, depending on your State or Territory.

Q: How much will I be covered for?

A: A typical policy covers a dollar amount equal to 10% of the acquisition price. A retention of 1% is excluded from coverage. Policies last from 3 to 7 years, depending on your negotiated terms. As most claims occur within the first two years after transition, this provides adequate coverage for most people.

Q: What help can I expect from Vie Legal Insurance during the application process?

A: Vie’s team will discuss your situation and develop your individual insurance profile. Your insurance profile includes the parties involved in the sale, the level of coverage required, the terms of your sale, your due diligence, and other relevant documents.

Once we have a comprehensive understanding of your needs, our team will match you to the best products on the market. Your broker will assist you with an application to your preferred insurer. The insurer will also conduct their own due diligence. Finally, the specific terms of your policy are negotiated between you and the insurer with Vie’s advice.

Q: What happens if I am not happy with your service?

A: Clients not satisfied with our insurance advice or placement services should contact UIG’s Complaints Officer. They are members of the Australian Financial Complaints Authority (AFCA), a free consumer service. Further information is available from our office, or contact AFCA directly on 1800 931 678 or visit www.afca.org.au.  UIG also adopt the Insurance Brokers Code of Practice. https://www.niba.com.au/wp-content/uploads/2021/03/NIBA_Code_2014.pdf.. For further information please refer to the UIG Complaints and Disputes information available at UIG.com.au.