Legal funding and insurance options

legal funding


Whether you are a dispute resolution solicitor running a legal case, or an Insolvency Practitioner or Liquidator dealing with litigation, it is important that you understand the various retainer options, legal expenses insurance, and litigation funding products available to help you run your cases with minimal risks. Using the right billing models and funding options can help you protect your clients for having to pay any adverse legal costs, as well as creating opportunities that might otherwise be blocked due to the potential costs and risks of litigating.

Solicitor billing models

Hourly rates billing

Using hourly rates billing, solicitors will charge clients for the time they spend working on a case. This is a very common model is used across many types of legal disputes. A benefit for clients using this billing model is that, if they win their case, they might keep 100% of the damages. If a case settles quickly legal fees for the client should be relatively low.

Something that may deter clients from using this billing model is the fact that the solicitor is paid for their work on the case, regardless of the outcome. This means that the solicitor is not taking any risk and has no financial incentive to find a quick resolution, which doesn’t appeal to all potential clients.

Fixed fee legal services

Fixed fees are pre-agreed for each element of the case, irrespective of the eventual actual cost. It may be possible to agree a fixed fee for an entire dispute, but this is extremely rare.

One of the main advantages for clients paying fixed fees is that fact that, no matter how long the case lasts, claimants only pay the agreed amount for their own legal services. If successful, claimants should retain all the damages, although if they are unsuccessful, they are still liable for their opponent’s costs.

A disadvantage for clients using fixed fee billing is the fact that, if the case is over quickly, the client still has to pay the agreed amount, which is one of the reasons that fixed fees for phases is more common than for a whole case.

A combination of hourly rates and fixed fees

Solicitors may charge a combination of hourly rates and fixed fees for a case. For example, a solicitor may charge a fixed fee for initial consultation and an hourly rate for any additional work.

No win, no fee agreements

No win, no fee is a type of billing model used by solicitors in the UK, where the client will not have to pay the costs of the solicitor for legal advice and representation if the case is lost. These types of agreements are common in personal injury claims, for example.

This type of billing model is also known as a “conditional fee agreement” or CFA. Under a CFA the solicitor will typically charge the client a success fee if the case is won. This success fee is calculated by reference to hours works, agreed upon in advance and is capped by the law.

Damages based agreements (DBA) are also a type of no win, no fee agreement. With a DBA the client pays a percentage share of the damages recovered to the legal team, so the fees are referenced to the amount recovered rather than the amount of time spent on the claim.

No win, no fee agreements will often require parties to take out an “after the event” (ATE) legal expenses insurance policy, which will cover the client against any costs incurred by the other side in case the claim is lost.

Insurance and Funding Options

After the Event Insurance (ATE Insurance)

After the Event (ATE) legal expenses insurance can be likened to a type of “swap” arrangement. The insurer assumes all the risk of potential adverse cost awards in exchange for either no upfront fee or a small upfront fee. In this way, the client transfers their responsibility to pay the defendants in the event of a loss to the obligation of paying the insurer in the event of a win.

This swap is appealing because following a win, the client is typically in a better financial position compared to a loss. Moreover, the payment to the insurer will only be a percentage of the adverse costs rather than the entire amount.

Third-Party Funding Agreements (TPF)

Third-party funding involves an arrangement where a litigation funder, unrelated to the dispute, agrees to finance some or all of the legal costs on a non-recourse basis, in exchange for a percentage of the damages if the case succeeds. TPF can be combined with various funding options, such as ATE insurance, conditional fee agreements, and damages-based agreements.

With the assistance of TPF, you can eliminate any financial risks entirely: the funder covers all expenses in exchange for a share of the awarded damages. If the case fails, the funder bears all the costs, and you are not required to pay anything.

Third-party litigation funding providers assume the risk of your litigation finance, which helps free up your cash flow and removes the risk from your balance sheet.

In return for taking on the risk, the funder typically seeks around one-fifth to one-third of any damages recovered. This means you can retain up to 80% of the reward while assuming none of the risk.

Benefits of alternative funding agreements for solicitors

No win, no fee agreements provide several benefits for solicitors. Listed below are some of the main advantages:

  • Increased client base: No win, no fee agreements allow solicitors to offer their services to a broader range of clients who may not have the financial means to pay legal fees upfront. This widens the potential client base and enables solicitors to assist individuals who might otherwise be unable to pursue legal action.
  • Financial risk sharing: Using a conditional fee agreement, solicitors assume a portion of the financial risk associated with the case. If the case is unsuccessful, the solicitor will not receive their fees, allowing clients to avoid paying for legal services in unsuccessful claims. This risk-sharing arrangement incentivises solicitors to carefully evaluate cases and increases client confidence in pursuing legal action.
  • Access to justice: No win, no fee agreements play a vital role in promoting access to justice. They enable individuals with limited financial resources to seek legal representation without the fear of high legal fees. This helps level the playing field, allowing even those who might not be able to afford legal services to pursue their rights through the legal system.
  • Motivated representation: Solicitors working on a no win, no fee basis are typically motivated to achieve a positive outcome for their clients. Since their fees are contingent upon winning the case, they have an added incentive to invest time and effort into building a strong case and obtaining a successful outcome. This might lead to increased client satisfaction and a potentially a stronger reputation for the law firm.


Recovery First have relationships with many businesses within the legal and insolvency sectors, including legal expenses insurance providers, such as Annecto Legal.

 Annecto Legal assists with commercial litigation funding and ATE insurance, with access to over 60 specialist providers. If you do not have a legal team on board, they can also help you get the right representation to give your case the strongest chance of success.

Clients can transfer the costs and risks of their case using commercial litigation funding and insurance and put themselves in a position of strength to negotiate the best settlement possible, or go to trial if necessary.

Annecto Legal deal with a variety of legal cases including assistance with breach of contract solicitorsprofessional negligence solicitorsfraudbanking litigation and can even help if you’re suing a solicitor or looking for commercial dispute resolution.

 If you would like to find out more, feel free to get in touch today.


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