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Yvonne Booth

Yvonne Booth

Clinical Negligence Costs Lawyer

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Proportionality and ATE premiums – the final piece of the jigsaw puzzle?

Blogs29/07/2019

The assessment of After the Event (ATE) premiums has always been something of a conundrum given the divergence of approach in assessments at first instance. This is no less true than in relation to the consideration of the proportionality of ATE premiums post LASPO in clinical negligence claims.

This confusion was recognised by Lord Justice Lewison in the Court of Appeal case of Peterborough & Stamford NHS Trust v McMenemy when, likening the current regime to an ill-fitting jigsaw puzzle, he called for the Rules Committee to reconsider their view that there was no need for rules or practice directions dealing with the question of recovery of such premiums.

McMenemy confirmed that the ‘new’ proportionality test, as detailed by CPR Part 44.3, applies to such premiums.  It also determined that, for reasons of public policy i.e. preserving access to justice, the principles set out in Callery v Gray remain good law, meaning that it was reasonable to enter into a post-LASPO block-rated ATE policy at the outset of a case. 

Whilst the question of quantum of the premium was not before the court it did indicate that, when considering post LASPO ATE premiums, it was not persuaded that the new proportionality test called for an objective approach considered with reference to the facts and circumstances of the individual case before the court.

This was perhaps an indicator of what was to follow from a differently constituted Court of Appeal in West v Stockport NHS Foundation Trust & Demouilpied v Stockport NHS Foundation Trust [2019] EWCA Civ 1220. Allowing two appeals by claimants against the reduction of their block rated ATE premiums, the Court of Appeal determined that the question of reasonableness of such premiums should be settled at a macro level by reference to the general run of cases and the macro economics of the ATE insurance market, and not by reference to the facts of any specific case.  Further, the principles set out in Rogers v Merthyr Tydfil County Borough Council - that cost judges do not have the expertise to judge the reasonableness of a premium except in very broad-brush terms - were followed. 

This leaves the door open for challenges to be brought by paying parties who, it said, are not “automatically bound to accept the reasonableness of whatever premium has been paid”. However, it is clear that in reality, such challenges will succeed in only very restricted circumstances. Whilst bespoke premiums would be more open to challenge on the basis, for example, of an incorrect risk assessment, when it comes to block rated premiums, any challenge is to the wider insurance market which would require expert evidence to resolve.

The court went on to say that a simple comparison between the value of the claim and the amount of the premium paid was “not a reliable measure” of reasonableness. Neither was the use of comparable premiums of any assistance when assessing the level of a block rated premium.

On the question of proportionality of an ATE premium which has been assessed as reasonable there could be no further reduction for proportionality for two reasons:

  1. The amount of the premium for a block rated policy bears no relationship to the value of the claim
  2. ATE insurance plays a crucial role in providing access to justice

Are ATE premiums and proportionality now incompatible with each other?  It certainly seems so since the court has determined that an ATE premium constitutes an “irreducible minimum” of costs – a court fee being another example of such – which ought to be left out of account when the judge comes to consider proportionality at the end of the line by line assessment.

With this judgment, the Court of Appeal has delivered a diluted version of proportionality whilst leaving compensators very little scope for challenging ATE premiums in the future.