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After-The-Event Insurance - Part 2

August 2006

In July 2006 we produced an article concerning After-The-Event (ATE) insurance premiums.  In that article we referred to the awaited costs appeal in Rogers v Merthyr Tydfil County Borough Council from which it was hoped guidance would be provided as to the assessment of stepped ATE premiums.  The appeal has now been heard and a copy of the judgment can be found at www.bailii.org.  In summary the Court allowed a £5,103.00 ATE insurance premium in a tripping claim settled for £3,105.00 and where the damages could not have been more than £3,500.00.

Background

The action related to a claim for damages arising from an 11-year only child who had tripped over a peg in a designated playing area in Merthyr Tydfil.  The claim went to trial on liability and the damages were agreed at £3,105.00 plus interest.  The deputy district judge summarily assessed the Claimantís costs at £16,821.30, reduced from £18,632.73, and the ATE insurance premium of £4,860.00 plus £243.00 IPT was allowed.

The Defendants appealed the decision with the only additional evidence being an extract from the April 2002 edition of the Litigation Funding magazine.  The deputy circuit judge decided that there were other products available from a range of companies with cheaper premiums and he reduced the ATE insurance premium to £900.00, which was in the middle of the range of £450.00 to £1,350.00 quoted in Litigation Funding.

This decision was appealed by the Claimants (in reality DAS Insurance) on the grounds that the judge was wrong to reduce the premium, as the new rate did not take into account the risks of the case.  The judge should not have taken into account the material from Litigation Funding.

The ATE policy used in this case was the DAS 80e product.  This policy is available for all non-motor claims, subject to a number of exclusions.  The policy may be cancelled within 90 days with no charge.  The premium structure started at a low stage one premium of £450.00 plus IPT.  The larger stage two premium of £900.00 plus IPT became payable if proceedings were issued.  The stage three premium of an additional £3,510.00 was triggered 60 days before trial.  This part of the premium was assessed individually to take into account the risks of the case, the merits of the claim and the estimated maximum loss figure.

It was held on appeal that there was no difference between a two stage success fee as prescribed in CPR Part 45 and a staged ATE premium.  There is greater exposure to risk the nearer a case goes to trial and the Defendant should think very seriously about the merits of the defence before going to trial.  The staged premium was therefore considered a legitimate insurance product.

As stage premiums are allowable the court held that there was an obligation for the Claimant to inform an opponent of the existence of a staged premium and the trigger moments at which the next stage of the premium would be reached.  This information would be in addition to that provided in accordance with CPR 44.15(1) and in paragraphs 19.1(1) and 19.4 of the Costs Practice Directions.  If this information was provided it was felt that the opponent would be given sufficient notice of the staging.

It was also decided that it was permissible and reasonable for the premium itself to be insured by the policy.  This was in accordance with the judgment in Callery v Gray (No.2) [2001] EWCA.

As the court had decided that the DAS 80e policy was in principle recoverable, the issue to be decided was the level of premium.  Considerable evidence was submitted by all parties in respect of this issue and in particular DAS who provided details of how risk was assessed.  The estimated maximum losses of £6,500.00 was considered reasonable, as was the assessment of risk at no greater than 51% given DASís experience that more slipping and tripping cases taken to trial were lost rather than won. 

The issue of proportionality was also considered as the premium was far in excess of the damages recovered.  The court held that the issue of necessity was the deciding factor as prescribed by Lowndes v Home Office [2002] EWCA Civ 365.  As the Claimantís solicitor had legitimate reasons to use DAS as his ATE insurance provider, and as it was necessary to incur the premium in this case, it should follow that the premium was proportionate.  It was held that based on the figures before the court it was impossible to say that the total premium of £4,860.00 was unreasonable.

Based upon all the above the appeal was allowed and the decision of the deputy district judge was restored and the premium of £4,860.00 plus IPT was allowed.

Comment

This case has provided some much needed guidance.  For example staged premiums are a legitimate product, but if one is used the Claimant is obliged to inform the opponent of the existence of a staged policy and the trigger point of each stage.  The decision in Callery v Gray [2002] that self insured policies are recoverable has also been reaffirmed.  Assessing the amount of the premium is still going to be difficult and clearly the onus is on the Claimant to provide evidence to the court on how the premium was reached and how the risk was assessed.  In respect of proportionality, opponents will find such arguments more difficult as it appears that the Claimantís solicitor has only to show that he had to use a certain ATE insurance product as that was the appropriate policy from his insurance provider.  The issue now appears to be whether the reasons for choosing a specific ATE insurance provider were reasonable and proportionate.  In light of this judgment there can be little doubt that challenges to the level of ATE insurance stepped premiums will continue.



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Date:25 September 2017     Time:21:27:10