News | Assessment

Ate Insurance Premiums In The Press Again!

01 December 2017

We reported recently on the case of BNM v MGN Limited & Michael Reynolds v Nottingham University Hospitals NHS Foundation Trust [2017] EWCA Civ 1767 and whether the old or new proportionality test applied to additional liabilities taken out prior to April 2013.

In Peterborough and Stamford Hospitals NHS Trust v Maria McMenemy [2017] EWCA Civ 1941 the court considered whether ATE premiums in clinical negligence cases could reasonably be taken out prior to evidence being obtained and whether Callery v Gray [2002] UKHL 28 remained good law.

When it is reasonable to take out an ATE premium?

The first question considered by the court was whether it was reasonable in post-Jackson clinical negligence cases to take out ATE insurance before evidence had been obtained.

The court considered Callery v Gray, in which the court had also considered with other issues, the reasonable time when a premium could be taken out. In Callery the court held that:

‘we have concluded that where, at the outset… ATE insurance at a reasonable premium is taken out, the costs of each are recoverable from the defendant in the event that the claim succeeds, or is settled on terms that the defendant pay the claimant's costs’

In considering whether this case still applied to post-Jackson cases, Lord Lewison when handing down a unanimous decision, considered the explanatory memorandum to The Recovery of Costs Insurance Premiums in Clinical Negligence Proceedings (No. 2) Regulations 2013 and concluded that:

‘there can be no doubt that the understanding was that ATE insurance was taken out "after an actionable event"; and that often it was taken out at the same time as the CFA: i.e. when solicitors were first consulted’.

This means that the principle laid down in Callery remains that ATE insurance can be taken out at the outset.  In simple claims where the matter is settled without the need for a medical report, or settled prior to the issue of proceedings, an ATE insurance premium will therefore still be payable in principle.

Can it still be argued it was unreasonable to take out ATE?

The court then considered whether the pre-Jackson case of Rogers v Merthyr Tydfil was also still good law and held that the principle that ‘costs judges do not have the expertise to second guess the insurance market’ remained good law in the post-Jackson world. The court did add that:

‘it may well be that it would be open to a defendant to argue that it was unreasonable or disproportionate to take out one kind of ATE insurance rather than another. The old practice direction directed consideration to the question whether any part of the premium would be rebated on early settlement, and it may be that it would be unreasonable in some cases to take out a single premium policy rather than one with stage payments; or one with the possibility of rebated premiums.’

This effectively brings us full circle back to where we were pre-Jackson and the same problems may still arise for paying parties when challenging the reasonableness of ATE insurance premiums (for example, whether sufficient contemporary evidence can be obtained). However, there is still a glimmer of hope for Defendants……

Challenges as to quantum

Counsel for Ms McMenemy and Mr Reynolds argued that once a claimant has a costs order, the premium is automatically recoverable without any further control by the court and that the market alone would ensure the reasonableness of the premium. This could mean that the claimant could enter an ATE policy for any amount at the outset and it would never be considered or scrutinised by the court. Thus, it would always be allowed as claimed, no matter how unreasonable the amount sought.

Fortunately, the court was ‘sceptical about the submission that ATE premiums can be controlled solely by market forces’ and further considered that it was ‘unlikely that Parliament chose to allow the level of recoverable ATE premiums to be determined solely by such an imperfect market’.

It was therefore determined that the court has a discretion to assess the reasonableness of the premium and ultimately what is allowed on assessment is ‘what the costs judge will allow’.

It was also observed that it was common ground in BNM that the new proportionality test would apply to ATE premiums in clinical negligence cases post April-2013 and this was not doubted by the court. Thus, Lord Lewison considered ‘once a costs order is made, its assessment must be governed by the CPR, as the court implicitly acknowledged in [BNM]’.

However, it was also noted that the quantum of such ATE Insurance premiums was not an issue the court was being asked to address and issues as to quantum are being considered in yet another test case, the outcome of which is still awaited.

Therefore, even if the Defendant cannot obtain the evidence to show that a policy should not have been taken out at all, it appears possible for reductions to the ATE insurance premium claimed to be achieved through the new proportionality test.

The Future

Lord Lewison made an obiter comment how it was unfortunate that the Rules Committee had not provided rules or practice directions to deal with the recoverability of ATE premiums in those cases where premiums are still recoverable and he invited them to reconsider that position, pointing out that ‘at the moment, however the pieces of the jigsaw puzzle are manoeuvred they do not all fit properly’.

Whether any new rules will flow from this is yet to be seen, but it would not be the first time that the Rules Committee saw fit to change the rules as a result of case law.

It will also remain to be seen how the court decides quantum of ATE premiums should be dealt with in the outstanding test cases, but it can only be hoped that the court ensures, unlike in the pre-Jackson world, that premiums are not allowed to get out of control.