Post LASPO recoverable clinical negligence after the event (ATE) premiums; what is the present position and what can be done to assist in recoverability?
Where are we up to so far?
A carved out exemption to the end of the recoverability of additional liabilities is the ability to recover an ATE premium in relation to insurance covering the costs of expert report(s) concerning breach and/or causation in clinical negligence proceedings where the damages are more than £1, 000.
Sir Rupert’s Jackson recommendation, within his Review of Civil Litigation Costs, that the recoverability of ATE premiums be abolished was not accepted, neither were his recommendations for what should happen in the event that there was to be any recoverability maintained. The Government acknowledged the specific concerns in relation to the funding of expert reports in clinical negligence cases, and the need to provide a means of funding these to ensure that meritorious claims could be brought by those who cannot afford to pay for these reports upfront.
Pursuant to s.46 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (“LASPO”) there was the introduction of s.58C of the Courts and Legal Services Act 1990, which allowed for the recovery of such premiums from 1 April 2013. There followed the Recovery of Costs Insurance Premiums in Clinical Negligence Proceedings (No.2) Regulations 2013 (2013 No.739). Other than these statues, if you look in the White Book there are not any provisions or guidance dealing with the assessment of these premiums. The reason for there being somewhat of a lacuna here is that the recoverability of these ATE premiums was not part of the package of the Jackson reforms. Lord Justice Lewison encouraged the Rules Committee to deal with this lacuna at paragraph 79 of Peterborough & Stamford Hospitals NHS Trust v McMenemy, and Reynolds v Nottingham University Hospitals NHS Foundation Trust  EWCA 1941 (Civ), stating:
- “I think that it is unfortunate that the Rules Committee took the view that there was no need for rules or practice directions dealing with the recovery of ATE insurance premiums in clinical negligence cases; and would invite them to reconsider the question. At the moment, however the pieces of the jigsaw puzzle are manoeuvred they do not all fit properly.”
We know that the ‘new’ proportionality test, as detailed by CPR Part 44.3, applies to such premiums – with reference to paragraph 62 of McMenemy. However, generally there is little guidance upon the application of the new proportionality test. We know that CPR 44.4(1) provides the court must take into all the circumstances when considering costs, which I would aver cannot exclude the financial risk to the insurer and concerns regarding ensuring continued access to justice. There are still the same policy considerations as noted by the Supreme Court in Coventry v. Lawrence (No.3)  UKSC 50:
“ATE insurance was integral to the fundamental objective of improving access to justice in civil litigation. A premium that was reasonable in amount (having regard to the litigation risk) was necessary and, therefore, proportionate”.
We know that insurance can be taken out at the outset of the case, per paragraphs 74 and 76 of McMenemy, with the policy considerations in Callery v Grey  EWCA Civ 1117 in this respect still being relevant.
If you are practising in clinical negligence costs then you will probably be aware of stay requests coming in from Defendant paying parties in detailed assessment proceedings seeking to await further proceedings in the Court of Appeal, and such matters were alluded to in the McMenemy at paragraph 78, when it referred to another test case to deal with quantum. The cases being referred to are West and Demouilpied v Stockport NHS Foundation Trust (Court of Appeal references A2/2017/0928 & A2/2017/0930).
What are the West and Demouilpied cases about?
West and Demouilpied had permission to appeal given in July 2017, for what is the second appeal. They concern block rated premiums provided by ARAG, with the recoverable element of the policy being £4, 800.00 of the total policy cost, and the cases settled for damages of £10, 000.00 and £4, 500.00 respectively. The appeals are listed for hearing before the Court of Appeal in October 2018.
In West the District Judge allowed £2, 500.00 for the premium, and on the first appeal HHJ Smith held that ‘insofar as the judgment was based on an “instinctive” view that the premium was unreasonable, the District Judge was not entitled to proceed in that manner’. However, it was noted that that was not the only basis for his decision, and it was held that ‘on the facts of this case and given the nature of the challenge to the premium, the material produced by the Defendant was sufficient to satisfy the evidential burden’ and expert evidence was not required, with the appeal being dismissed.
In Demouilpied a Deputy District Judge allowed £1, 982.20 for the premium on the papers, and a different Deputy District Judge allowed £650.00 at an oral review hearing. HHJ Smith considered that the DDJ was entitled to consider the proportionality of the ATE premium in isolation, that he took into account certain factors he was entitled to as part of “all the circumstances” of the case, and he was entitled to find the premium was disproportionate. However, the conclusion that the DDJ ‘sought in effect to calculate premium’ was held “both inappropriate… and potentially impermissible”. Despite the findings, the allowance for the premium was considered within the ambit of discretion and the appeal dismissed.
Crystal ball gazing
So, what can we expect from the Court of Appeal, following a reserved judgment? Well, I don’t imagine that we will be given any one size fits all guidance upon proportionality, there are simply too many variables to do so.
We have seen the Court of Appeal give guidance to deal with recoverable ATE premiums before, such as in the seminal case regarding pre LASPO ATE premiums; Rogers v Merthyr Tydfil County Borough Council  EWCA Civ 1134 which A&M Bacon Limited were involved in. Paragraph 117 of that judgment became what was paragraph 39.2 of the Costs Practice Direction. However, I doubt the Court of Appeal is going to want to stray too far into such matters, given the clear statement in McMenemy that such is a matter for the Rules Committee. That said, the grant of permission to appeal was with regard to there being at a divergence of approach at first instance and a measure of confusion that we can expect the Court of Appeal to look to put right.
I suspect that the ATE market is as competitive as ever as between the various insurers; and I cannot imagine that solicitors are going to want to recommend an ATE premium to a Claimant that they think will not be recoverable upon assessment, or where there would be a strenuous challenge to the premium. However, Lord Lewison commented, at paragraph 49 of McMenemy, that “I am sceptical about the submission that ATE premiums can be controlled solely by market forces.” So perhaps there will be a more detailed review of the ATE market in West and Demouilpied, like there was in Callery.
I do not consider that the statement at paragraph 117 of Rogers has been in any way diminished over the past decade in relation to the workings of the insurance industry and what evidence has to be given to the court upon assessment when challenging an ATE premium:
“District judges and costs judges do not, as Lord Hoffmann observed in Callery v Gray (Nos 1 and 2)  UKHL 28 at ;  1 WLR 2000, have the expertise to judge the reasonableness of a premium except in very broad brush terms, and the viability of the ATE market will be imperilled if they regard themselves (without the assistance of expert evidence) as better qualified than the underwriter to rate the financial risk the insurer faces.
There are still the same policy considerations in place as applied at the time of Rogers regarding there being the need for access to justice, hence the recoverability of such premiums being maintained. This is supported by the comment at paragraph 77 of McMenemy referencing paragraph 117 of Rogers. We have seen such policy considerations applied in cases such as Plevin v Paragon Personal Finance Limited  UKSC 23. However, how does such sit with the new proportionality test, which these premiums have been brought into, as block rated premiums have no such specific case consideration. Perhaps the Court of Appeal will have their shoe horn out – it is not an easy fit.
Is it unfair to Defendants? I would suggest not, the issue was considered and Jackson’s recommendations specifically rejected. In the majority of won cases the paying party is the NHS, as in the cases under appeal, and the Government’s (or tax payer’s) money – which does seem a little odd that they are seeking to argue against Parliamentary intentions. Yes, costs are rising for the NHS, but costs arguments will only be adding to this and will invariably lead to increased premiums. It needs to be appreciated that block rated premiums are not set with reference to the specific case, that ATE insurance by its nature only applies in limited cases and that the ‘winners’ have to pay for the ‘losers’ for the system to work, with bespoke policies always being more expensive.
What can be done now to assist in recovery?
My key recommendation to the fee earners conducting the case is to write a brief file note at the time that the ATE premium is taken out to say why, with reference to what is known when the premium is taken out, the ATE policy is considered appropriate based on the case facts. Say, with reference to the anticipated quantum of damages and the risks of the case, such as the Defendant being unlikely to admit liability or causation being perceived to be difficult. Yes, I appreciate that is on top of all the other obligations in relation to funding, however spending 6 minutes on this at the relevant time can save a lot of time and costs at the detailed assessment stage, and help ensure recoverability of the ATE premium.
Another thing that can be done is to have the senior fee earner that deals with the overall selection of the ATE provider prepare a generic statement detailing when the ATE review was undertaken, what was considered, and the reasons for the selection of the particular insurer. That can then be used across all cases insured; it’s likely a huge time saver in the long run. I would suggest that it is good practice to prepare such a statement to comply with what was paragraph 39.2 of the former Costs Practice Direction.
Caroline Cousins, Costs Lawyer of A & M Bacon Limited – July 2018.