Assessing the cost of ATE Premiums

If anyone needs a reminded why the costs landscape for personal injury litigators has changed so dramatically they may not need look much further than the judgment of the Designated Civil Judge of the County Court at London, HHJ Walden-Smith, sitting with DJ Letham as assessor in the costs case of Banks v London Borough of Hillingdon, which has been commented upon in the legal press.

The case concerned the correct assessment of an After-The-Event insurance policy, an issue which ranked high on the list of insurers’ (and it seems the Government’s) bugbears with the unreformed CFA system.

The underlying case was a straightforward, low-value, public liability tripper case. The successful claimant was awarded just under £7,000 in damages and costs were assessed/agreed save for a somewhat eye-watering £24,694 ATE premium.

Master Gordon-Saker the costs judge cut this down to £9,375 on the basis that it was patently unreasonable for a premium to so extensively exceed the likely assured sum. This latter figure the Master considered would have been a maximum of £15,000, that is, the maximum amount such an insurer would have to pay out in costs should the claimant lose the case. He awarded half this sum, plus another 25 percent.

Before the learned senior circuit judge it was argued that the costs master misdirected himself and should have considered the “basket of risk” for insurers, rather than applying some sort of common-sense approach on a case-by-case basis. The court overturned Master Gordon-Saker’s decision on the ground that he indeed erred and failed to consider the august guidance of the Court of Appeal in Rogers v Merthyr Tydfil CBC [2006] EWCA Civ 1134. The court held that it was for the paying party to adduce evidence that the premium was excessive and as this had not been available in the instant case, the costs master had no basis to conclude that the sum claimed was unreasonable (per, Kris Motor Spares Ltd v Fox Williams LLP [2010] EWHC 1008).

This decision must be seen as victory for claimant litigators, given that it should serve as a persuasive reminder to trial judges to follow Rogers in the ever-diminishing rump of cases where such high ATE premiums are seen. The lesson for defendants is obvious: in cases where they are put on notice that, if successful, a claimant party will seek payment of what appears to be a very high ATE premium, it would be prudent to obtain evidence that lower premiums were available to support the conclusion that what is allowed should be assessed down. In the event that such information is not available until at or after trial, such a defendant would have little option other than to request that the matter be subject to detailed assessment, potentially at the expense of the claimant party.