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Proportionality and ATE Insurance Premiums

The judgment of the Court of Appeal in the case of West & Demouilpied v Stockport NHS Foundation Trust [2019] EWCA Civ 1220 confirms that the proportionality test should not be applied in respect of post LASPO block rated ATE insurance policies. The Court of Appeal also provided some welcome guidance on how the proportionality test should be applied generally.

The appeals were issued after the Respondent was successful in challenging the ATE insurance premiums claimed by the Appellants in their bills of costs following clinical negligence claims against the NHS Trust. Both Appellants had taken out post LASPO ATE insurance policies with Respondent. The ATE insurance policies were block rated and the recoverable element of the premium was £5,088 in both cases.

In West the premium was initially disallowed on provisional assessment by DJ Iyer in its entirety in the absence of any evidence that the Appellant had made enquires as to the availability of alternative funding. The overall costs were reduced down to £10,000 on the grounds of proportionality. The Appellant sought a review of the provisional assessment in respect of the ATE premium only and on review the DJ assessed the recoverable element of the premium at £2,500 as he considered that to be a proportionate figure, and in light of the Respondent producing evidence of what they considered to be comparable policies provided by LAMP Services Limited ranging from £1,802 - £1,982.20. The Appellant appealed; however, the appeal was dismissed by HHJ Smith who considered that the DJ Iyer was entitled to exercise his discretion to allow what he considered to be a reasonable figure.

In Demouilpied the Respondent again provided evidence of what they considered to be comparable policies and offered £175 which they considered to be a reasonable and proportionate premium. As in West the costs were provisionally assessed, this time by DDJ Beard. Regarding the comparable policies referred to by the Respondent he assessed the premium in the sum of £1982.20. There was an application by the Appellant for an oral review and this was carried out by DDJ Buckley who reduced the premium further to what he considered to be a proportionate figure of £650. An appeal by the Appellant was dismissed by Judge Smith.

The Court of Appeal were asked to consider specific points about the assessment of the ATE premiums, and also wider concerns about the costs assessment process to include the risk that issues such as the recoverability of premiums could be decided on a case by case basis with little consistency, the fact that judges were undertaking assessments without objectively ascertained comparable policies, and the Respondent’s reliance on their belief that the burden of proof fell upon the individual Appellant without them putting forward any detailed evidence to support their assertion that the comparable policies would have been suitable and available to the Appellants.

The Court of Appeal gave directions and ordered there to be an assessor’s report to assist the determination of the appeals. Amongst the key findings of the report were that the comparable policies produced by the Respondent would not have been available to these 2 Appellants, and were produced by the Respondent “out of context and without reference to availability or scheme specifics” The report noted that “LAMP’s own premiums under other schemes” could in fact be “significantly higher”.

The Assessor’s Report compared various policy premiums and concluded that the Respondent premiums were at a similar level to those of their competitors. It was also reported that the limit of indemnity played “a marginal role” in the setting of such premiums and that the main factor was average costs risk.

The Court of Appeal considered the guidance in Rogers v Merthyr Tydfil County Borough Council [2006] EWCA Civ 1134, Callery v Gray (Nos 1 and 2) [2002] 1 WLR 2000, Kris Motor Spares Limited v Fox Williams LLP [2010] EWHC 1008 (QB) and McMenemy v Peterborough and Stamford Hospitals NHS Trust [2017] EWCA Civ 1941 and confirmed that the following principles as established in those cases should still apply:

• Disputes about reasonableness and recoverability of ATE insurance premiums should not be decided on a case-by-case business (McMenemy).
• Issues of reasonableness went beyond the dictates of a particular case and included the unavoidable characteristics of the ATE Insurance marker (Rogers).
• District judges and costs judges did not have the expertise to judge the reasonableness of a premium expect in very broad brush terms, and that the viability of the ATE market would be imperilled if they regarded themselves as better qualified than the underwriter to rate the financial risk faced by the insurer without the assistance of expert evidence (Rogers).
• That it was for the paying party to raise a substantive issue as to the reasonableness of the premium which would generally only be capable of being resolved by expert evidence (Kris).
• The COA confirmed those principles should apply in every case as the ATE insurance marker “is integral to the means of providing access to justice in civil disputes.” (Rogers).

The Court of Appeal confirmed that where an ATE policy was a bespoke policy, with the premium assessed with regard to the particular risks of that case, the grounds open to a paying party to challenge the reasonableness of the premium were relatively wide. However, in block-rated policies the Court found the ability of the paying party to mount a sustainable challenge was much more restricted and that it would not be sufficient for a paying party to give evidence that another policy was cheaper.

The final point made was that a simple comparison between the value of the claim and the amount of the premium was not a reliable measure of reasonableness. To do so would be to ignore cases where the premium would be much lower proportionally to the value of the claim. There was a “swings and roundabouts” situation similar to that in the fixed costs regime as noted by Briggs LJ in Sharp v Leeds City Council [2017] EWCA Civ 33.
The Appeals were therefore allowed, and the Court found that there should not have been any reductions to the ATE insurance premiums.

The Court of Appeal also provided some welcome guidance on how the proportionality test should be applied. The first stage should be that the judge undertaking the assessment should consider each item in the bill on an individual basis and allow what he or she considers to be a reasonable amount. In doing so they may also consider the proportionality of that item on the basis there could be an overlap between them when assessing costs on the standard basis in accordance with CPR 44.4(1)(a).

The second stage, once all items in the bill have been assessed individually, is that the judge should consider the total figure at which the bill amounts to following stage 1 and the total figure should be assessed by reference to both r44.3(5) and r44.4(1). If that total figure is found to be proportionate that brings the assessment to an end. If, however, the judge finds this total figure to be disproportionate they must assess the bill further in order to arrive at a proportionate figure. As a line by line assessment has already been carried out the Court advised that it will be necessary for the judge to consider various categories of costs, suggesting disclosure or experts reports as examples, and decide upon an appropriate level of costs to allow for each of those categories. The Court of Appeal also confirmed that elements of costs that were unavoidable such as court fees and the recoverable element of an ATE insurance premium should be excluded from this stage of the assessment process.

Once any further reductions had been applied to categories of costs on the grounds of proportionality there should not be any further consideration of the revised total as the Court of Appeal recognised that would “introduce the risk of double-counting.”

Hopefully this judgment will make NHS Resolution less likely to challenge block rated ATE premiums in clinical negligence claims and allow Claimants to settle claims for costs in the cases where premiums were challenged and have been at a standstill whilst this judgment was awaited. The guidance as to how judges should apply the proportionality test is also very welcome and hopefully will reduce the level of uncertainty as to what might be recovered on assessment.

 

 

About the author

Gavin Elliott

Gavin Elliott

Gavin is a specialist Costs Lawyer and member of the Association of Costs Lawyers.

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