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Have the courts decided to put ATE premiums under greater scrutiny?

View profile for Nicholas Lee
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In light of the new Mitchell era, we consider whether the courts will take a stricter line with parties filing replies outside of the 21 day period, which regularly occurs given their optional nature and seemingly lack of sanction for late service. 

Kelly & Ors v Black Horse Ltd [2013] EWHC B17 (Costs)

Reduction of ATE premium from £15,900.00 to £3,975.00

The main action related to a miss-sold PPI policy which was defended and went all the way to trial. The Defendant was ordered to pay the Claimant £6,000 and 70% of the Claimant’s costs to be subject to the detailed assessment if not agreed.

The main issue at the detailed assessment was the level of the ATE premium, which, including IPT of 6%, amounted to £15,900.  The ATE policy provided indemnity for the Defendant’s costs and the Claimant’s disbursements which totalled £7,243.30

The Defendant challenged the premium as unreasonable requested the Claimant provide the calculations for the premium; this was not provided.  The Defendant submitted that the premium should be calculated by reference to the “burn premium” that is the amount of the insurer’s exposure times the likelihood of having to meet such exposure.  As stated above the amount of exposure was in the region of £7,000.00 and on the Defendant's calculation the ATE insurer faced no more than a 15% risk that they would be required to pay out under the terms of the policy and therefore offered only £1,360.00 plus IPT.

The Claimant relied on the Rogers decision in support of its premium but was unable to provide any firm evidence in support of the calculation of the premium; the only evidence put forward was the Claimant's risk assessment, which Judge Hurst had already rendered "entirely meaningless" when considering the Claimant's success fee which was reduced from 100% to 53.85%.

The Judge accepted the Defendant’s submissions re the level of exposure but considered the risk of exposure was more likely to be 35% in accordance with the amount of success fee allowed and in accordance with the Defendant's "burn premium" calculation this would give a figure of £3,677.00.  In the circumstances the Judge held that the ATE premium sought was wholly disproportionate and that the information provided to the insurer in the risk assessment was meaningless and would not have assisted the insurer in correctly calculating the ATE premium.  The Judge ordered that the Defendant pay 25% of the premium plus IPT equating to £3,975.00.


In accordance with Callery v Gray and Rogers v Merthyr Tydfil the courts have been very reluctant to interfere with ATE premiums citing lack of expert underwriting knowledge to interfere with the premiums set; therefore this judgement in which Senior Cost Judge Hurst reduced an ATE premium of £15,900.00 to £3,975.00 makes for interesting reading; will this encourage the courts to make more frequent reductions?  Judge Hurst's comments at the beginning of his judgement do suggest this may be the case: "Given the great number of PPI mis-selling claims which are currently before the courts, and given also that I was told that the issue of ATE premiums recurs constantly, I decided to reserve judgment and hand down a written judgment in the hope that this may assist in resolving future disputes in this area."  It may well be that the courts will scrutinise the calculation of premiums more carefully to ensure they have been calculated on a reasonable basis and therefore it really is for the receiving party to provide this information.