RECOVERABLE ATE PREMIUMS, IT’S TURNED FULL CIRCLE AND GOING ROUND AGAIN ….. Thursday 21st September, 2017
Post-LASPO 2012 ATE insurance premiums are recoverable on a between the parties’ basis in clinical negligence cases pursuant to Section 58C of the Courts & Legal Services Act 1990 and Regulation 3 of the Recovery of Costs Insurance Premiums in Clinical Negligence Proceedings (2) Regulations 2013 (the 2013 Regulations”).
Section 58C stipulates:
“Recovery of insurance premiums by way of costs.
(1) A costs order made in favour of a party to proceedings who has taken out a costs insurance policy may not include provision requiring the payment of an amount in respect of all or part of the premium of the policy, unless such provision is permitted by regulations under sub-section (2).
(2) The Lord Chancellor may by regulations provide that the costs order may include provision requiring the payment of such an amount where –
(a) the order is made in favour of a party to include clinical negligence proceedings of a prescribed description;
(b) the party has taken out a costs insurance policy insuring against the risk of incurring a liability to pay for one or more expert reports in respect of clinical negligence in connection with the proceedings (or against that risk and other risks);
(c) the policy is of a prescribed description;
(d) the policy states how much of the premium relates to the liability to pay for an expert report or reports in respect of clinical negligence (“the relevant part of the premium”); and
(e) the amount is to be paid in respect of the relevant part of the premium.”
Regulation 3 of the 2013 Regulations says:
“(1) A costs order made in favour of a party to clinical negligence proceedings who has taken out a costs insurance policy may include provision requiring payment of an amount in respect of all or part of the premium of that policy if –
(a) the financial value of the claim for damages in respect of clinical negligence is more than £1,000.00; and
(b) the costs insurance policy insures against the risk of incurring a liability to pay for an expert report or reports relating to liability or causation in respect of clinical negligence (or against that risk and other risks).
(2) The amount of the premium that may be required to be paid under the costs order shall not exceed that part of the premium which relates to the risk of incurring liability to pay for an expert report or reports relating to liability or causation in respect of clinical negligence in connection with the proceedings.”
Compliance and early determination
The first major decision in respect of post-LASPO ATE premiums was made by Master Leonard in Nokes v Heart of England Foundation Trust  EWHC B6 (Costs) in which the Defendant argued that Temple Legal Protection’s policy which referred to two premiums, one for the liability and causation experts’ fees and the other for the adverse costs risks in the case, was not compliant with Section 58C of the Courts & Legal Services Act 1990. However, the Cost Judge determined otherwise and decided against finding that the policy was non-compliant on the basis of some perceived ambiguity or imprecision in its wording (paragraph 12).
Nokes set an early marker with a premium allowed of £6,020.80 including IPT for an indemnity of £10,000.00 claimed under a delegated block rated scheme. The Defendant’s submissions attacking the level of premium to cover, an excessive limit of indemnity and on the grounds of proportionality all failed. There was no dispute that insurance had been taken out unreasonably in this case on around 8 November 2013 and the Court determined that the Defendant’s arguments seeking a reduction to the premium sum claimed based on pre and post LASPO alternative policies were rejected. Indeed, Master Leonard declined to compare evidence of less expensive individually assessed premiums which contrasted with the block rated premium sum claimed (paragraph 132) and it was found that no evidence had been adduced that there was a suitable policy available at the relevant time for less expense (paragraph 133).
The incurred test
The Callery v Gray  EWCA Civ 1917 Court of Appeal decision held that it was reasonable for a party to take out ATE insurance even before the end of the protocol period (paragraphs 96 to 100). This view was confirmed in the post-LAPSO 2012 decision of McMenemy v Peterborough & Stamford Hospitals NHS Foundation Trust (unreported HHJ Pearce, Liverpool County Court, 12 February 2016) (paragraphs 28 to 31), dealing with the reasonableness of incepting a policy of insurance at an early stage of a claim although this case was in the Court of Appeal on 5 June 2017 and judgment is currently awaited.
In Mewis v Burton Hospitals NHS Foundation Trust (unreported, Worthing County Court, June 2016) a Circuit Judge upheld a District Judge’s decision to disallow a block rated ATE premium in the sum of £1,802.00 on the basis that it had not been reasonably and proportionately incurred, noting that no medical evidence relating to breach of duty or causation had been produced and also that the Defendant had apologised in full at the earliest stage possible. Indeed, it was held that the letter of admission from the Trust was so evidently clear it was “virtually impossible to see how the Defendant could defend a case on the allegations which were later made”. The Judge also noted that this was not a claim in which the policy had been taken out very early on, where the Solicitor “would know very little” and there might be “some uncertainty even if liability seemed to be strong”.
Reasonableness and proportionality
The guidance in Rogers v Merthyr Tydfil County Borough Council  EWCA Civ 2234 has largely influenced the determination of quantum of recoverable ATE premiums in pre-LASPO as well as post-LASPO costs disputes. Claimants often place great reliance on the comments of Lord Justice Brooke to try and dissuade Courts from making reductions to premiums to avoid imperilling the ATE market without available expert evidence (paragraph 117). This is not to say that other evidence cannot be used and paying parties have frequently referred to redacted versions of ATE insurance certificates and policies to argue that a premium sum claimed is unreasonable or disproportionate with various degrees of success.
The question of proportionality and its relevance to assessment of the level of a premium to be chargeable to a paying party on the standard basis is the subject of different interpretations. Claimants rely upon King v Basildon & Thurrock University Hospitals NHS Trust  EWHC B32 (Costs), Savings Advice Ltd & Anor v EDF Energy Customers Plc  EWHC B1 (Costs) and Murrells v Cambridge University NHS Foundation Trust  EWHC B2 (Costs), in which each decision found that additional liabilities are not subject to the post-March 2013 proportionality test. However, this is contrary to the approach adopted by many paying parties which follows Master Gordon-Saker’s Judgment in BNM v NGN Ltd  EWHC B13 (Costs), that additional liabilities must be included when the new test of proportionality is applied and for determination of the ATE premium sum to be allowed as an individual item. BNM will be further addressed by the Court of Appeal later this year.
The most recent decision of Rebecca Mitchell v Dr Carole Gilling-Smith  EWHC B18 (Costs) covered numerous issues relating to the recovery of post-LASPO clinical negligence proceedings, however, for a dispute in which damages were agreed at £200,000.00 proportionality was not found to be a relevant factor when considering whether the £10,000.00 premium should be charged against the Defendant reflecting on the relevant provisions of CPR 44.3(5).
In Mitchell Master Leonard, some two years after the Nokes’ decision, criticised the Defendant’s attempt to rely on a test of hindsight when considering whether the premium sum sought was reasonably incurred (paragraph 59). The ATE policy was taken out under a delegated authority scheme with the Claimant’s Solicitors in around July 2014 for a total premium of £13,500.00 plus IPT, made up of £10,000.00 plus IPT in respect of cover for the breach of duty and causation expert evidence plus £3,500.00 and IPT for own expenses and adverse costs and disbursements. The Cost Judge found that the Defendant’s suggestion that ATE insurance should not have been taken out until some undefined point at which the level of risk to be insured becomes clear was not workable and essentially missed the point of taking out insurance at all (paragraph 67). Furthermore, reflecting on the comments of His Honour Judge Pearce in McMenemy, since the policy of insurance was incepted for the Claimant also to provide cover for own expenses and potential exposure to adverse costs and disbursements it was found therefore reasonable for the Claimant to take out the policy as soon as it was clear that the case was going to proceed (paragraphs 68 to 73).
The Defendant in Mitchell sought to rely on redacted policy schedules to display that cheaper alternative policies were available to the Claimant but Master Leonard found these to be of little evidential value when no evidence of the pertinent detail relating to the alternative products was provided, such as whether the claims covered were for fast track or multi track cases or even if the relevant policies were individually rated or block rated (paragraph 83). Therefore, in the absence of appropriate evidence or a good reason to disallow all or part of the premium the full sum sought was allowed.
It seems that post-LASPO premium case law has turned full circle, from Nokes to Mitchell, ironically with the same Costs Judge dealing with both of these cases, Master Leonard, with the onus firmly on parties to adduce appropriate evidence to deal with the issue of whether a policy was taken out reasonably or necessarily and/or whether the premium sum claimed is reasonable and proportionate in amount, although decisions awaited in the Court of Appeal in McMenemy and BNM could have further influence on the future determination of such additional liabilities going forward.
John Ivory, Director and Costs Lawyer