Recoverability: As relevant now as it’s always been


Pipkin: ATE is supporting access to justice

Posted by David Pipkin, director of the underwriting division at Litigation Futures Associate Temple Legal Protection

This is part of our response to the Ministry of Justice review of part 2 of LASPO. This extract focuses on the need to preserve the partial recovery of after-the-event (ATE) insurance premiums for clinical negligence claims.

It seeks to counter the view from certain quarters that perceives this insurance as somehow being less relevant now. As claimant lawyers and their clients well know, the reality is that it definitely is not the case.

One of the questions asked by the Ministry of Justice was this: “Section 46 abolished the recoverability of ATE insurance premiums (except in relation to clinical negligence expert reports). Qualified one-way costs shifting (QOCS) was introduced in its place in personal injury claims. In your experience, what have been the impacts of this reform?”

This was our reply:

The abolition of the recoverability of ATE insurance premiums has made little difference to the volume of insurance being purchased by claimants. The introduction of QOCS was, of course, significant and has reduced the adverse exposure a claimant faces, but nonetheless there is still risk – risks that claimant lawyers consider should be insured.

The volume of personal injury claims with ATE insurance has increased – despite the fact ATE premiums are no longer recoverable and are now paid from damages.

In clinical negligence claims, the volume of insured cases remains constant. Without ATE insurance, the majority of claimants would not be able to afford the cost of expert reports, the associated costs for medical records, the significant court fees and counsel fees (although in the majority of cases counsel are still prepared to act under a CFA).

There is still a requirement to insure for the failure to beat a part 36 offer. Our statistics show this is a real and ever-present danger, especially when a medical or other expert changes their mind and part 36 offers have to be accepted years after the time for acceptance has expired.

Adverse costs in such circumstances can wipe out the damages obtained; therefore ATE insurance cover is an absolute requirement for clinical negligence cases.

Access to justice is being maintained, but only because of the support of ATE insurance. In addition there has been a significant growth in disbursement funding providers, as a reduction in law firms’ profits has meant they are no longer able to assist clients in funding disbursements as much as they used to.

A funding industry has developed lending directly to the clients by way of consumer credit loan agreements or by funding to law practices, the cost of which is absorbed by the lawyers.

Invariably the disbursement funders require their outlays to be insured with ATE insurance in place. Many funders are regulated by the FCA, but many are not – something that we believe is unsatisfactory and could lead to wrongdoing by unregulated providers.

The legal industry has adapted fairly well to the reforms but I question whether it could survive further change at this time. The uncertainty over fixed costs for clinical negligence work coupled with the possible removal of the partial recoverability of ATE premiums is a big concern.

Access to justice will not be maintained if the reforms go too far. As NHS Resolution itself confirmed, the effect of the reforms is reducing legal costs. ATE premiums have also significantly reduced and have never been so competitive, with new providers entering the market.

Mediation initiatives appear to be working and, if this leads to earlier resolution, this will inevitably reduce legal costs further.

Temple has made the point before in many previous consultations that ATE insurers act as positive gatekeepers who vet insurance risks, and those claims without merit do not proceed.

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