Novitas and the fight over ATE cover: what a five-year wind-down teaches about deeds of indemnity

Why a funder could sue an ATE insurer at all

That claim was only possible because of deeds of indemnity Novitas held with each insurer. Standard ATE cover doesn't work that way by default: it insures the individual claimant, or their loan, not the funder standing behind them. Without a separate deed of indemnity in place, Close Brothers would have had no direct standing to claim against either insurer when the underlying scheme went wrong - whatever the cover said on paper, the funder simply wasn't a party to it.

Where the claims came from

The underlying trigger was failure at panel-firm level. The wider scheme covered around 30,000 consumer claims - for negligently installed cavity wall insulation, mortgage mis-selling, mortgage miscalculation and undisclosed commissions - run by a panel of solicitors under conditional fee agreements, each paired with a Novitas loan and a corresponding ATE insurance policy. Two of those panel firms, Pure Legal and High Street Solicitors, both entered administration; an estimated 10,000 of the claims they ran turned out to be unsuccessful.

The dispute moves up another layer

AmTrust, while defending Novitas's claim, brought Part 20 proceedings against Endurance Worldwide Insurance Limited, trading as Sompo International, the professional indemnity insurer of Pure Legal and High Street Solicitors - seeking a contribution and recovery of sums already paid out in disbursements and adverse costs. Novitas and AmTrust settled the underlying claim in July 2025, with AmTrust paying £48.5m covering all the law firms in the scheme. AmTrust's own claim against Sompo has since grown: it was amended to around £44m in contribution, on top of the £15m AmTrust says it already paid out in disbursements and adverse costs.

The Commercial Court (Mr Justice Henshaw) handed down judgment on the preliminary issues in Novitas Loans Limited v AmTrust Specialty Limited [2026] EWHC 592 (Comm) on 16 March 2026, following a 12-day trial of 19 preliminary issues. Among his findings, the judge held that AmTrust was pursuing a single claim in respect of each law firm - not a separate claim for every one of the roughly 2,420 individual policyholders behind them - meaning each firm's exposure under its professional indemnity policy is capped at a single £3m limit of indemnity, rather than that limit being multiplied thousands of times over.

What this means for funders

Three layers of insurance sat behind a single funded scheme here - the funder's deeds of indemnity with two ATE insurers, and one insurer's own recourse to the solicitors' PI cover - and each layer behaved differently once claims failed at scale. The PI layer carried its own hidden ceiling: because the claim counted as one per firm rather than one per affected client, Sompo's exposure was fixed at a single indemnity limit per firm, however many thousands of individual cases sat behind it. Funders rarely have visibility of that structure until something has already gone wrong, and the single most important question - whether a deed of indemnity actually exists, and what the underlying PI cover is actually worth once its limits are properly understood - is rarely asked early enough.

An informed read of how ATE and PI cover actually interact, and whether the funder has enforceable standing at all, is exactly the gap this kind of dispute exposes.