Part 2 of the Legal Aid, Sentencing and Punishment of Offenders (LASPO) Act 2012 contains the key "Jackson proposals". This includes abolition of recoverability of conditional fee agreement (CFA) success fees and after the event (ATE) insurance premiums. However, an exception was made with regard to ATE insurance premiums to obtain expert evidence in clinical negligence cases.
The proposal is to allow recoverability of ATE premiums for up to two expert reports on liability and causation only and not quantum. In a letter sent to a select group of stakeholders, the Ministry of Justice (MoJ) sought views on the current thinking on how that exception should be implemented.
As a matter of principle, we have, in our response, confirmed that we do not agree with the proposal. The intention of Jackson is clear – to create better market forces in the long run and introduce greater fairness between parties, thereby controlling costs. Any exception risks a watering down of that aim and is, therefore, unfortunate.
However, accepting, as it appears we must, that the exception will be implemented, the importance of adopting it alongside the wider reforms must be realised. This applies most notably qualified one-way costs shifting (QOCS) - which is intended to provide greater costs protection to the claimant.
The MoJ should appreciate that in practice, normally only one report is needed to form a preliminary view on breach of duty for the purpose of the letter of claim (quantum reports not being required at this stage). Once reports have been obtained on liability and causation (and it has been established whether the claimant has a legal claim) both parties are then able to assess the risk of the claim.
Often at this stage liability will be admitted. Once liability is admitted there is no longer any risk to the claimant who should not, therefore, need to take out an expensive ATE premium in order to cover the risk of personally meeting the costs of further expert reports (including quantum reports). Whilst not ideal, restricting the recoverability of ATE insurance premiums to expert reports on liability and causation should at least ensure that the claimant takes some interest in the level of costs incurred in the instruction of experts.
Restricting the recoverability of ATE insurance premiums to two expert reports would not prevent the claimant from seeking additional reports. However, it would ensure the claimant gives proper consideration to whether they are needed in the first place. When coupled with QOCS, the recoverability of the ATE insurance premium for two expert reports would provide additional security for the claimant. The defendant would be required to bear its own costs (regardless of the outcome) as well as the ATE insurance premium for the cost of up to two expert reports. It would, therefore, be fair and proportionate for the claimant to bear the risk of ATE insurance premiums for any additional reports.
We have urged for tight regulation and compliance. Unless the insurance policy itself refers to the part of the premium relating to the expert reports for which recovery is sought, regulation would be impossible. In the absence of the policy being explicit, the defendant should not be required to meet the cost of the premium.
Further, transparency in relation to the calculation of the ATE premium is vital. Notice should be given to the defendant by the claimant that he intends to purchase ATE insurance to cover the cost of up to two expert reports. The claimant’s Form of Notice should include the level of ATE insurance cover, the ATE premium and a copy of the policy itself.
Whilst unfortunate in principle, the exception, if implemented with sufficient checks and balances, should hopefully not detract from the intention of achieving more responsible litigation.
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