Since the implementation of the Jackson Reforms in April 2013, the recovery of ATE premiums from an opposing party has been severely restricted. An area in which there remained limited scope for recoverability was in the medical/clinical negligence arena; the rationale being that, in such claims, expert reports are vital for establishing whether the claimant has a meritorious claim and such reports can be costly for the individual.
In one of the first judgments since the 1 April 2013 reforms, a claimant has successfully recovered a post-LASPO ATE premium in full.
The claimant, Emily Nokes, brought a clinical negligence claim against Heart of England Foundation NHS Trust. The claim was for the Trust’s failure to address results of blood tests which resulted in a traumatic birth, serious health risks to both mother and child and the claimant’s onset of OCD. Ms Nokes’ claim succeeded and an order for costs was made in her favour on 15 June 2014.
Within her costs claim, Ms Nokes sought recovery of a post-LASPO ATE policy premium of £5,680 plus IPT (taken out with Temple Legal Protection) under section 58C of the Courts and Legal Services Act 1990 and Regulation 3 of the Recovery of Costs Insurance Premiums in Clinical Negligence Proceedings (No 2) Regulations 2013.
Master Leonard, the costs judge presiding over the case, had to decide whether:-
The policy was compliant with section 58C and the Regulations, allowing the ATE premium to berecoverable from the Trust;
The amount of the ATE premium was reasonable and proportionate.
The Court dealt with the recoverability question swiftly, rejecting the Trust’s argument that the policy wording suggested there were two separate premiums payable under the policy, one of which was alleged to be self-insured, thereby falling foul of section 58C.
Master Leonard concluded that by reading the policy as a whole (which he identified as being the correct approach), the policy offered by Temple clearly complied with section 58C and the Regulations as it contained all the required information in those statutory provisions.
Accordingly, the Court concluded the premium was recoverable.
Reasonableness/Proportionality of Premium
The Court then had to consider whether the ATE premium was reasonable and proportionate in amount.
By way of reminder of the post 2013 regime, claimant costs, assessed on a standard basis, will be disallowed should they be unreasonably incurred or unreasonable in amount (CPR 44.3(1)). Under CPR 44.3(2), costs which are reasonably or necessarily incurred may be disallowed or reduced if found to be disproportionate in amount. The test for proportionality is set out in CPR 44.3(5).
The Trust raised the following arguments (among others) that:
- The cost of the premium was disproportionate and unreasonable by reference to the fact that the case was a “straightforward” clinical negligence claim, which settled swiftly, liability having been admitted promptly and no proceedings issued;
- The claimant had failed to conduct a market review to ascertain the best policy; and
- The level of cover (£10,000) was excessive taking account of the cost of the expert report: £2,530.80 inclusive of VAT.
The claimant countered these arguments as follows (applying the same numbering):
- The fact the Trust sought four expert opinions and required an extension of time to provide a reply to the Letter of Claim contradicted their argument that the claim was “straightforward” and “clear cut” in terms of liability;
- There was no obligation on the claimant to conduct a market review of ATE policies available but, in any event, the product compared favourably to others on the market;
- As it was a block-rated policy, a standard level of indemnity of £10,000 is applied. The claimant’s expert witness, an underwriter from Temple Legal Protection, explained that indemnity is set at uniform level as a “reasonable balance” of anticipated clinical negligence cases and avoids the need to assess bespoke limits of indemnity: thereby reducing administration cost and in turn reducing the cost of ATE premiums.
Court’s conclusions on reasonableness:
Master Leonard held that, for a Court to establish that an ATE premium is unreasonable/disproportionate, the Trust had to show a “sound basis for arguing that the ATE premium is unreasonable in amount.” The claimant would then be required to address any such points, with any doubt being resolved in favour of the Trust. Master Leonard’s view was that the Trust was unable to establish any such “sound basis”.
- The Trust had only advanced “general observations” (which were “unhelpful”) in support of their argument that the premium was wrong/unreasonable and Master Leonard noted that proving this would probably require expert evidence, yet none was offered by the Trust.
- Master Leonard, in applying the approach in Rogers v Merthyr Tydfil CBC  EWCA Civ 1134(that judges should not substitute their opinions for those of insurance underwriters) was unable to support the Trust’s proposed calculation of the premium of £347.99 plus IPT (based on a “burn” premium formula used within Kelly v Black Horse  EWHC B17). In any event Master Leonard noted that that proposed premium did not resemble what is available on the ATE market.
- The comparable evidence advanced by the Trust failed to establish that the premium wasunreasonable and, in fact, supported the claimant, that the cost of the premium was reasonable.
- There was no evidence that the claimant could have identified a suitable but cheaper policy on the market.
- Master Leonard was critical of the Trust’s expert’s comparison of the policy with pre-April 2013 policies.
Court’s conclusions on proportionality:
Master Leonard questioned whether it was appropriate to single out items of costs in applying the proportionality test post 2013, as the Trust proposed to do. He noted that the intention of LJ Jackson when introducing the test set out in CPR 44.3(5) was, rather, that costs be looked at as a whole, once assessed on the basis of their reasonableness. If, thereafter, the bill appeared to remain disproportionate to a costs judge, it could be reduced to a proportionate sum.
Master Leonard’s view was that it was incorrect to single out one item and assess its proportionality. However, even if that was the correct approach, by reference to the sums in issue and the complexity of the matter, the premium was not disproportionate. For the above reasons, Master Leonard found the cost of the claimant’s ATE premium to be neither unreasonable nor disproportionate in amount. Therefore the policy was held to be fully recoverable.
The judgment suggests that the ability of a defendant to attack the reasonableness and proportionality of a similar block-rated ATE premium will be a considerable challenge.
The Trust had tried to rely on the cases of Kelly v Black Horse and Redwing Construction v Wishart  EWHC 19 (TCC) but these were deemed by Master Leonard to be effectively irrelevant to the present case; those decisions had been concerned with individually assessed premiums, in respect of which it was found that at least one of the factors for calculating those premiums was evidently wrong. The same could not be established by Master Leonard in his consideration of the evidence available to him as regards the block-rated policy, the subject of the present case. This decision is a reminder of the lack of available authority in such cases and, accordingly, it seems that any challenge to the reasonableness/proportionality of such premiums would have to be bolstered by strong expert evidence. The cost of seeking such evidence is unlikely to be considered cost-effective in many similar cases.
Further, Master Leonard, in addressing the Trust’s argument that the policy was not subject to real market competition, sided with the claimant’s submissions that Temple offered a “compliant, competitive product.” The case illustrates a hesitation by the Courts to criticise the reasonableness and proportionality of such premiums; thereby strictly abiding by Rogers v Merthyr Tydfil CBC, that judges should not substitute their opinion for that of insurance underwriters.