Nokes v NHS displays the current High Court views on post LASPO ATE premiums and the considerations in determining proportionality and reasonableness.
This case involved a claim for clinical negligence where the Claimant had obtained an After The Event insurance policy. The Claimant was successful and costs were provisionally assessed; £19,228.12 was awarded for the Claimant's costs and the ATE premium in the sum of £5680.00 + IPT was allowed in full. The premium contained two separate parts; part (a), relating to indemnity in respect of expert reports on liability and causation, and part (b), relating to indemnity for all other disbursements in addition to any adverse costs.
The Defendant sought to challenge whether the ATE policy could be recovered in line with s.58C of the Courts and Legal Services Act 1990 (as amended from 1 April 2013) and the Recovery of Costs Insurance Premiums in Clinical Negligence Proceedings (No 2) Regulations 2013. Section 58C(2)(d) and (e) of the Regulations state that an ATE premium taken out for clinical negligence proceedings must state how much of the premium relates to liability for expert reports. The Defendant argued that the policy in fact contained two separate premiums due to use of the word "premiums" within the policy wording definitions and consequently, the policy did not comply with the Regulations. The Claimant maintained that premium was split into two components as per the terms of the Regulations and the use of the word in the plural form was of no real significance.
Master Leonard referred to Investors Compensation Scheme Ltd v West Bromich  and considered that the policy was to be read as a whole; he concluded that it was expressly designed to comply with the s58C of the Regulations. He added that, whilst the term “Definition of Premiums” may be misleading, the policy wording clearly states that one premium is payable and that this is divided into two parts in accordance with statutory requirements. Master Leonard further added that he ultimately did not consider it to be particularly relevant whether one or two premiums were payable provided that the details required by Statue were included.
In addition to the validity of the premium, The Defendant sought to challenge the reasonableness and proportionality on several bases; the case was relatively straight forward, it lasted a total of 5 months and liability was admitted promptly. The Defendant additionally agued that, as a "root cause analysis" had been carried out identifying clear failings in care, liability and causation were "clear cut". The Points of Dispute relied upon Kelly v Blackhorse  requesting details of how the premium had been calculated and submitted that a premium of £6,020.80 for indemnity of £10,000 defied logic.
Master Leonard considered the test for proportionality as outlined in CPR 44.3(5) and noted that the history of the case would also be of significance.
Mater Leonard then moved on to consider the witness statement of Mr Pipkin, an underwriter at Temple Legal Protection who provided the ATE policy in question. Mr Pipkin explained that the policy was obtained under a delegated authority scheme which enabled policies to be issued without the need for a detailed risk assessment and on the basis of a block-rated limit of indemnity. This scheme was available to Claimants where there were at least 51% prospects of success, there had been no denial of liability and there had been no Part 36 offer made by the Defendant. Mr Pipkin further added that, whilst this was a fairly novel area, it is now possible to make comparisons against other providers and conclude that the premium was in fact pitched at a competitive rate.
The Defendant provided a witness statement from a Costs Lawyer and various allegations were put forward; he submitted that no data or calculations had been provided to explain the basis of the premium, there was no evidence of a market review in relation to other available policies and that the likelihood of liability being admitted was clearly very high based on the "root cause analysis". It was further argued that this policy did not comply with the ethos of the Jackson reforms given that this premium was in fact higher than comparable pre-Jackson policies. The Defendant concluded that the risk was negligible and that the premium was unreasonable.
After considering the further submissions put forward by both parties, Master Leonard considered the reasonableness of the premium and referred to Rogers v Merthyr Tydfil . He concluded that the Defendant’s proposed risk assessment was of no use in judging the reasonableness of a block-rated scheme and further that the Defendant had provided no evidence to suggest that the scheme utilised was inappropriate. He also noted that the Defendant's own suggested calculation for the premium was of no use due to the decision in Rogers and the elements on which the calculation was based; the "root cause analysis", whilst sufficient to establish breach of duty, would not prove causation and consequently, substantial risks remained.
Master Leonard turned to the evidence of comparable policies submitted by the Defendant and stated that it was not appropriate to make a comparison between policies that were offered pre and post 1 April 2013 due to substantial differences in the economics and dynamics of the market. He further concluded that other available policies did not make the policy look unreasonable and in fact noted to the contrary that other available policies attracted higher premiums. In relation to proportionality, he considered the Defendant’s submission regarding the “the sums in issue” under CPR 44.3 (5); it was submitted that the "sums in issue” referred to the ATE insurer's exposure rather than the amount of quantum in the main action. Master Leonard concluded that this was fundamentally wrong and consequently, the premium could not be said to be disproportionate.
Master Leonard concluded that, as Kelly v Blackhorse concerned individually assessed premiums, it did not apply to the Claimant’s case. He added that, given the absence of any evidence that the premium was unreasonable or disproportionate, the premium was to be recoverable in full.
Therefore, any Defendant who seeks to challenge the recoverability of an ATE premium should bear in mind Master Leonard's comments regarding the Regulations and additionally note that any arguments put forward to challenge the reasonableness or proportionality of the premium must directly relate to the specific type of policy in issue.