Pollard v University Hospitals of North Midlands NHS Trust  1 Costs L.R. 45
The claimant appealed against a decision to reduce her after-the-event (ATE) insurance premium from £100,000 to £18,000. The claimant had pursued a personal injury claim against the defendant, as a result of slipping in their car park. The claimant had entered into a three-stage block rated ATE insurance policy, which provided for indemnity cover up to £100,000. She was successful in her claim but the defendant argued that the ATE insurance premium was too high and the recorder agreed with this argument concluding that the premium was too high on the basis of the maximum costs liability which the claimant had been exposed to.
The claimant’s appeal was filed two weeks late, due to an administrative error by her solicitor and a failure to file the appeal in the correct court.
The court was required to determine whether an extension of time should be granted to allow the claimant’s appeal to be heard and if so, whether the recorder had erred in his approach when reducing the claimant’s ATE premium.
The court held that the three-stage approach as set out in Denton v TH White Ltd  EWCA Civ 906, was applicable to determining whether an extension of time should be granted in respect of the claimant’s late appeal.
Under this three-stage approach, the court held that the claimant’s delay in making the application was not a particularly substantial or serious default because it was a simple error which had been fairly quickly spotted. Secondly, there were no good reasons for the default, but the defendant had provided an explanation as to why it had occurred. Thirdly, having regard to the circumstances of the case and the way in which the matter had been dealt with by the recorder, it was held that it would be appropriate to permit the appeal to be heard. Specifically it was commented that the recorder had been criticising the product of an insurer when assessing whether the claimant had acted reasonably or unreasonably in respect of the ATE premium.
In respect of the ATE premium, the court concluded that the recorder had assumed that there was a straight-line relationship pro rata between the level of cover and the premium. As a result, there was a natural assumption that the higher the level of cover, the higher the level of premium would be. It was held that the recorder could not have legitimately done this due to the expert evidence that had been provided in respect of how the ATE premium had been calculated.
The court noted that the first two stages of the premium were set at block levels as to which the case of Rogers v Merthyr Tydfill CBC  EWCA Civ 1134, was to be followed. As a result, these two stages were recoverable. As to the third stage, the court held that the case was not exceptional; calculations had been clearly set out and the evidence showed that the level of the indemnity had not affected the premium charged.
It was held that the recorder’s approach of instinctively finding the premium to be too high and then taking a broad-brush approach in reducing it was wrong. Also, there has been no material put before the recorder as to the availability of any other policy which was suitable for the claimant to have chosen instead.
The court held that the appropriate course of action was to remit the matter to a regional costs judge to re-assess the premium. It was held that particular regard would need to be given to whether it had been reasonable for the claimant to have chosen the policy in question.
What this means for you
There have been many cases where ATE insurance premium costs have been challenged by defendants in respect of reasonableness and proportionality. This case reiterates the principles in Rogers v Merthyr Tydfill CBC  EWCA Civ 1134, and makes clear that when the courts make an assessment in respect of the ATE premium, there cannot be an assumption that the level of indemnity provided must directly correlate with the premium claimed. It will be interesting to see if the final judgment in respect of the appeal is published but we can presume that the claimant will recover considerably more than £18,000 in respect of the ATE premium.
This case also reiterates that the three stage test under Denton for relief from sanctions will apply to cases where a party has been late in filing for permission to appeal. In this case, it was noted that there had been administrative issues and the delay in bringing the appeal had been fairly quickly spotted and resolved. Also, it was concluded that there had been no real detriment caused to the defendant when considering the overall circumstances of the case and the reasons behind the claimant’s appeal.
In cases where a claimant’s ATE premium is being challenged, evidence should be obtained in respect of the availability of other comparable ATE cover at the time when the policy was taken. It should be considered whether it would have been reasonable for a claimant to have taken out this cover and whether it would have been at much lower cost. Also, the court will consider whether it had been reasonable for the claimant to have chosen the policy in question so it is necessary to consider whether there were any specific reasons why a particular policy was required to be taken out etc.