A litigation funder which previously worked with claims firm SSB Law is suing after-the-event insurers for £19.5m, it has emerged.

Court papers obtained by the Gazette show that Katch Fund Solutions has issued proceedings against Stonefort Insurance S.A, formerly known as Builders Direct S.A. The papers show that Katch acquired SSB Law’s claim from its administrators.

Stonefort was paid a total of £19.5m from 2020 onwards in premiums for after-the-event policies for claims intended to be brought by SSB Law on behalf of its cavity wall insulation clients. But none of the claims succeeded or qualified as a win under the terms of the conditional fee agreement signed by clients.

SSB Law entered administration in January 2024. Since then clients have reportedly been hit with costs orders from defendant cavity wall installers.

Katch, which is represented by national firm Hugh James, alleges that one or more of the policy conditions were not satisfied in each of the cavity wall claims. This is because in some cases the prospects of success were not more than 70%, the expert surveyor’s report obtained was not in a court-approved format and there had been no viable solvent third party identified to pursue.

In its claim form, Katch outlines that the client care letter from SSB to each of the cavity wall clients informed them that the scheme set up to assist them pursue their claims involved a financial institution and an ATE legal expense insurer, and that the financial institution would lend funds to pay for the expenses involved. If their claims were not successful, the insurance policy would pay all the expenses and its own premium. Clients were informed that they would not be out of pocket personally.

It is alleged that in the circumstances, Luxembourg-based Stonefort was never at risk under the policies but nevertheless retained the premiums, and so was ‘unjustly enriched’ at SSB’s expense.

Katch seeks restitution of the benefit conferred by SSB on Stonefort, constituting the £19.5m plus interest.

Erich Kurtz, partner at Hugh James, said litigation funder recovery is now ‘centre stage’ in the SSB Law collapse. He added: ‘SSB Law is not alone. McDermott Smith Law, Quanta Law, and High Street Solicitors tell the same story: over-leveraged firms and litigation funders left exposed.’

Stonefort did not wish to comment on the legal proceedings but it is understood the company will defend its legal position in the proceedings.