Technicalities and realities – the battle over clin neg ATE premiums

Posted by David Stoker, senior underwriter at Litigation Futures Associate Temple Legal Protection

Stoker: Regime was not set up to create such pitfalls

We have received a recent premium challenge to a clinical negligence after-the-event (ATE) insurance from a well-known defendant law firm, in which the paying party is seeking to argue that a Tomlin order is not a relevant “order for costs” and therefore the premium is not payable.

We suggest that this is purely a technical point which should be given short shrift.

In this instance, proceedings were discontinued against the first defendant and then later settled against the second. The argument received was as follows.

In Cartwright v Venduct Engineering Limited [2018] EWCA Civ 1654, the court confirmed that a part 36 offer or a Tomlin order did not amount to an ‘order for costs’.

Section 46 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 says that a “costs order” can require the recovery of insurance premiums by way of costs, while the Recovery of Costs Insurance Premiums in Clinical Negligence Proceedings (No.2) Regulations 2013 also refer to a costs order.

Further and, in any event, the defendant noted that LASPO made clear that it permitted recovery of ATE premiums in clinical negligence claims by a discretionary inclusion in the costs order; in other words, the order must contain a specific provision for payment of the ATE premium. The regulations echoed that framework, it said.

The defendant also referred to the editorial note in the White Book (2019 edition), which at page 1595 says: “If no such provision is included in the order, the cost of the premium will not be recoverable.”

The defendant said the order here contained no such specific provision for payment of the ATE premium.

In our view, nothing in the 2013 regulations requires that an order directing the defendant to pay the claimant’s costs should specify the amount payable in respect of the premium.

The regulations simply enable the costs order made at the conclusion of the detailed assessment to make provision for the payment of the specified amount. The overall purpose of the regulations was to facilitate an exemption to the post-LASPO costs regime in clinical negligence cases that ended the recoverability of ATE premiums.

The decision in Cartwright is not relevant in the circumstances of this case. Paragraph 2 of the order in this case provides: “The second defendant shall pay the claimant’s reasonable costs of the action, on the standard basis, to be assessed if not agreed.”

If the parties cannot agree costs, the costs order that will be made following a detailed assessment can include provision requiring the payment of an amount in respect of all or part of the insurance premium provided the judge carrying out the assessment is satisfied that the conditions in the 2013 regulations are met.

The argument that a Tomlin order is not a relevant “order for costs” is purely a technical point. The Cartwright decision said a Tomlin order is not “an order for damages and interest made in favour of the claimant” but rather a schedule confirming the terms of an agreement reached between the parties.

In this matter the provision for costs recovery is included within the main body of the order, rather than in its attached schedule. The paying party’s stance is therefore misconceived.

The amount of the premium that can be ordered to be paid under the costs order is limited as per paragraph 2 of the regulations and will be determined in accordance with that paragraph in any detailed assessment.

CPR 48PD.4 states that the costs order “may include a provision requiring the payment of an amount” [my emphasis] and must override the commentary on the rules. The paying party was always aware of the existence of an ATE policy as required under the rules and by way of a notice of funding.

The post-LASPO regime and the advent of recoverable insurance premiums in clinical negligence cases was not set up to create such pitfalls when the defendant has always been aware of the potential liability for an additional liability for ATE cover.


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