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Caselaw Review: Sarwar v Alam - After the Event Insurance for passenger claims

The Issues: The Claimant was a passenger in a car and purchased an After the Event insurance policy in order to claim personal injury against the Defendant driver. At detailed assessment the Defendant’s insurers produced for the first time the Defendant’s Before The Event ("BTE”) insurance policy which would have covered the Claimant’s claim.

(1) When should an existing BTE policy generally be used in preference to an ATE Insurance policy?
(2) Should the Claimant passenger have used the Defendant driver’s BTE policy?
(3) What was the extent of the BTE enquiries a Claimant solicitor should normally make for any personal injury claimant?

(1) In the ordinary course of events a claimant making a straightforward modest RTA claim (i.e. less than £5,000) should use any pre-existing BTE policy they know of (para. 51), even though the claimant will probably have to use a BTE panel solicitor, and not the solicitor of their choice. This was not so for complex, specialist or more serious claims. It was therefore reasonable for take out an After the Event insurance policy.

(2) It was important that justice should not only be done but be seen to be done. The Claimant was not obliged to use the Defendant’s BTE insurance policy because (as with most such policies), it provided that the Defendant’s insurers would retain full conduct and control of the claim which was unreasonable since they were the same organisation against whom the claim was being made. (para. 54). NB. The position might be different if a defendant insurer were to finance a transparently independent BTE insurer to handle claims.

(3) The Court recommended that a solicitor should normally send a standard letter, asking his client to bring to an initial interview any motor or household insurance belonging to either themselves or their spouse/partner and any union membership or stand alone legal expenses insurance either of them might have. Searches should be proportionate to the amount at stake and the solicitor was not obliged to embark upon a "treasure hunt” nor check policies attached to credit cards. In addition, if the claimant was a passenger and there appeared to be no possibility of a claim against the driver, then the solicitor should ask the client to bring a copy of the driver’s motor insurance policy. (paras.45-50)

(1) This case relates to a claim where the CFA was entered into before the Conditional Fee and Collective Conditional Fee Regulations 2000 were enacted, but it certainly applied to the duty to make BTE enquiries once those regulations were enacted, and continues to apply. Prior to November 2005 (when those regulations were repealed), if a defendant could show that BTE enquiries had not been carried out in accordance with the regulations, then no valid CFA had been created and the claimant's costs would be entirely disallowed. After November 2005, many of the requirements which had been in the Regulations were instead included in the Solicitors Code of Conduct. A breach of the Code will not normally invalidate a CFA, Garbutt & Anor v Edwards & Anor (2000), and accordingly if a solicitor fails to carry out BTE enquiries then costs should now remain recoverable provided the CFA was signed on or after 1 November 2005.

(2) For CFAs signed after November 2005, the claimant's costs will not be disallowed, but a failure to follow the guidelines will still result in an inability to recover a success fee and an ATE Insurance premium, (unless the case is within the fixed costs regime and the 12.5% fixed success fee then remains recoverable – see Kilby v Gawith (2008).

(3) Where there is a suspicion that a CFA is unenforceable because of a failure to comply with the pre 1 November 2005 Regulations (eg. to properly investigate the possibility of BTE insurance), the recent case of Forde v Birmingham CC (2009) may be relevant. Here the High Court allowed recovery of costs under a second, retrospective, CFA, which was entered into because of doubts over the validity of the first CFA.

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