PROPORTIONALITY AND ATE INSURANCE: THREE WRONG DECISIONS
The level of, and principles relating to, After-the-Event insurance premiums has been considered in three recent cases.
In Mewis v Burton Hospitals NHS Foundation Trust, June 2016, Worthing County Court
a Circuit Judge upheld a District Judge’s decision to disallow a block-rated premium of £1,802.00 on the ground that it was not reasonably and proportionality incurred, noting that no medical evidence relating to breach of duty or causation had been produced and the Hospital Trust had apologised in full.
The early letter of admission from the trust was so clear that it was “virtually impossible to see how the defendant could defend a case on the allegations which were later made.”
The judge also noted that this was not a case where the policy had been taken out very early on in the matter where the solicitor “would know very little” and there might be “some uncertainty even if liability seemed to be strong.”
In fact the premium appears to have been disallowed on the old Lowndes test of whether the expenditure was reasonable and necessary, rather than on proportionality grounds.
The judge appears a little confused as he refers to the premium being not reasonably and proportionality incurred, which is conflating two entirely different concepts.
In Martin v Queen Victoria Hospital NHS Foundation Trust, June 2016, Leeds County Court,
a Circuit Judge upheld the District Judge’s decision to reduce an insurer’s block-rated premium from £3,843.00 to £2,500.00 on the ground of proportionality.
The claimant was awarded £7,000.00 after treatment was delayed due to a lost biopsy sample.
A medical report had been obtained at a cost of £3,591.00 but that was reduced on assessment to £2,400.00.
In relation to the ATE premium the judge accepted that proportionality applied to individual items as well as to the overall costs figure and that it had been open to the claimant to use cheaper insurance and thus the decision to cut the award in the context of proportionality, not reasonableness, was within the court’s discretion.
In these circumstances no evidence as to the general level of premiums and market rates was necessary.
“…it is open to a claimant to choose a block-rated policy, in the same way as it is open to a claimant to instruct Leading Counsel even if the case could perfectly well be done by a junior.”
“the claimant has thoses choices, but that does not mean the costs associated with them are necessarily proportionate.”
The judge is confusing the old Lowndes test of “reasonable and necessary” with the new proportionality test. It would not be reasonable and necessary to instruct Leading Counsel where the case could “perfectly well be done by a junior”, whereas a block-rated policy may well be both reasonable and necessary.
The judge appears a little confused.
In Banks v London Borough of Hillingdon, 2016,
a Master in a personal injury tripping claim concluded that it was unreasonable to incur an After-the-Event insurance premium of £24,685.00 in respect of a liability of around £17,000.00.
The judge, sitting with an assessor, allowed the claimant’s appeal, holding that she was bound by the Court of Appeal’s decision in
The court rejected the defendant’s contention that the Master had been entitled to reject the “basket” approach where, as here, the insurers were taking a hybrid approach, with Stages A and B of the premium being block-rated and Stage C calculated individually by taking into account the estimated maximum loss in the specific case.
Both this case and the Merthyr Tydfil case involved relatively modest personal injury claims:-
“… the fact that the ATE premium is large compared with the damages agreed does not necessarily mean that the ATE premium is disproportionate.”
Er – well it does actually. The premium may be reasonable and necessary but if it is “large compared with the damages agreed” then surely it is disproportionate.
The judge’s comment that it was not for the Master to recalculate the premium without access to the whole basket of risk and that the Master was wrong to think that the Merthyr Tydfil case allowed him to judge the reasonableness of the premium in very broad-brush terms, goes as to reasonableness not proportionality.
How can Rogers v Merthyr Tydfil, a pre-Jackson case, be relevant to the new, very different post-Jackson proportionality test?
Comment, Comment, Comment
Three cases, all wrongly decided, or at least three decisions arrived at by faulty reasoning.
Few judges understand proportionality, or even pretend to, possibly on the grounds that it is incapable of rational explanation in the absence of fixed fees or contingency fees.
However it would be helpful if they stopped conflating the old Lowndes “reasonable and necessary” test with out and out proportionality.
Please see my related blogs:-