Yesterday’s Court of Appeal decision on proportionality and the recovery of after-the-event (ATE) insurance premiums was “a triumph for access to justice”, according to the insurer whose policy was under scrutiny.
However, a specialist costs barrister has described the guidance on how to approach the proportionality test as “astonishing”.
The court ruled that the lower courts were wrong to reduce the block-rated premium charged by ARAG, and sought to heavily curtail future challenges to such premiums.
David Haynes, underwriting and marketing director at ARAG, said: “The court has made it absolutely clear that ATE insurance, and recovery of the associated premium, is fundamental to the victims of clinical negligence being able to access justice, and that this must be the starting point for any debate about the recoverability of premiums.
“We are very pleased that a line has finally been drawn under the persistent and protracted challenges to the reasonableness and proportionality of block-rated ATE premiums for clinical negligence claims since LASPO.”
ARAG has also fought off challenges in earlier cases, such as McMenemy and Reynolds, but Mr Haynes said that during the time that these cases have taken to resolve, “millions of pounds in perfectly valid ATE premiums have remained unpaid”, forcing several ATE providers to leave the market, while one that was a party to this action “has been driven into insolvency”.
Chris Millward, head of claims at ARAG, added: “The court, in these cases and in McMenemy and Reynolds, has established absolute clarity around several key issues that have been used to challenge payment of ATE premiums in clinical negligence cases for several years.
“The guidance provided on reasonableness and proportionality means that the onus is now clearly on defendants to provide robust evidence that an ATE premium is unreasonable and, once the reasonableness of a block-rated ATE premium has been established, it cannot subsequently be reduced on the grounds of proportionality as it falls into the category of unavoidable costs, without which the litigation could not have progressed.
“Equally important is the recognition that challenges to block-rated premiums are likely to require an expert understanding of the ATE market and evidence from expert witnesses, so it is not the role of a district judge or costs judge to analyse the detail of policy wordings that are alleged to be comparable.
“The court has also made it clear that simply comparing a block-rated ATE premium with either the value of a claim or settlement sum in a specific case is not a reliable indicator of how reasonable the premium is, because it ignores underwriting principles and the wide range of cases with which it has been block-rated.”
Matthew Best, underwriting manager for Temple Legal Protection’s personal injury and clinical negligence team, said: “This decision allows us to continue with our current ATE insurance premium rating and reinforces the decision given by Master Leonard in Nokes [v Heart of England Foundation NHS Trust  EWHC B6 (Costs)].
“We anticipate paying parties in clinical negligence cases will be resolving ATE insurance premium disputes promptly in order to avoid further unnecessary legal costs.”
He added: “As a rule, the ATE insurance market operates responsibly in providing access to justice for clinical negligence claims and the threat of unworkable constraints is not helpful to anyone.
“Any further disputes should be avoidable, unless an ATE provider’s pricing is out of kilter, in which case a further test case may result. As it stands, this judgment should break the log-jam and I would hope that any further high-level decisions could be expected to be consistent with this one.”
Costs barrister Andrew Hogan, of Ropewalk Chambers in Nottingham, said the Court of Appeal “channeled the spirit of Rogers to reach a conclusion that can be simply described as being that block rated ATE premiums ‘cost what they cost’ and absent a determined challenge from a defendant backed with an expert underwriting report, will be allowed as claimed.
“As the number of underwriting experts who offer such reports can be enumerated on the fingers of one hand, that is probably the end of the road, for such challenges.”
Writing on his personal website, Mr Hogan said the approach to the proportionality test laid out by the court would have a two-fold impact: “The first is that the practice of looking at reasonableness and then the overall figure, absent such elements as court fees etc is now dead. Instead, proportionality can be applied at the line-by-line stage of the assessment.
“Secondly, proportionality is now to be applied not to the overall total of costs in aggregate, but by reference to categories of costs. Which is astonishing.
“Just think about it. The conceptual rasp you hear you hear in your mind, is the sound of a lit match struck, and about to fall into the waiting pool of litigious petrol.
“What categories of costs? How are these to be defined? How are these to relate to a phased bill with phases that have been set on the basis the phase totals are reasonable and proportionate?”
Mr Hogan questioned how the approach related to the court’s comments in Harrison, which said the costs judge on assessment would ordinarily still “ultimately have to look at matters in the round and consider whether the resulting aggregate figure is proportionate, having regard to CPR 44.3(2)(a) and (5): a further potential safeguard, therefore, for the paying party”.
The barrister said: “I predict two immediate consequences. First, the time spend adding up the bill after the assessment (assuming that it is not digital) and then as part of this process devising categories of costs for arguments sake, has now doubled.
“Secondly, the proportionality argument which… had reached the position of being the untidy spent fag end of many assessments across the country in the county court, is now potentially very much alight again.”
Claire Green, chair of the Association of Costs Lawyers, said: “We are pleased that the senior judiciary has finally responded to the concerns we and others have raised about the lack of consistency on costs assessments.
“Lord Justice Jackson always envisaged that case law would provide guidance on the new proportionality test, and though it has taken more than six years to get there, today’s ruling should curtail the arguments in court and varied approaches of judges at all levels.
“The court has also locked down disputes over the recoverability of block-rated ATE premiums in clinical negligence cases, which is good news – speculative arguments about costs do nobody any favours and hopefully this ruling will bring order back into the system.”
David Juckes, a barrister at Hailsham Chambers, said the court’s confirmation that proportionality included not only the case-specific factors listed in CPR 44.3(5) but also the wider factors in 44.4 “opens the possibility that a court could find the CPR 44.3(5) factors not met but still find costs proportionate”.
He continued: “Receiving parties facing an argument on proportionality will wish to address all the circumstances in their replies, including where relevant matters that reach beyond the case in question.”
Mr Juckes noted that, despite the paying party’s request, the court expressly did not deal with the self-insurance of ATE premiums, their failure rate, or commissions paid.
“These matters may be yet form contentious issues in future costs cases concerning ATE premiums.”