Both cases were heard by the Court of Appeal at the same time. Both were clinical negligence claims against the NHS Trust which had settled without the need for court proceedings. The dispute centred on the level of the recoverable ATE premium in each case.
The first case (West) settled for damages of £10,000 and the ATE premium claimed was £5,088 in a total bill of costs of £31,714.44. The second case (Demoulilpied) concluded with damages at £4,500 with a bill of costs served for the amount of £18,376 and the recoverable element of the premium also at £5,088. The ATE policies taken out were block-rated policies and set by reference to a wide "basket" of cases, rather than on their own merits.
It was initially held that the premiums claimed would each be reduced to £2,500 and £650. The basis of the decision in West was that the premium was unreasonable. The case was not complex and the recoverability of the ATE premium was initially limited to the cost of medical reports only. The basis of the decision in Demouilpied was that the ATE policy was reasonable but proportionality meant it had to be reduced.
Both first appeals were dismissed and it was held that the judges had taken the correct approach when assessing the ATE premiums when applying the principles of reasonableness and proportionality.
The Court of Appeal allowed the claimants' appeal and the ATE policy premiums were both awarded as claimed at £5,088. The Court of Appeal gave some guidance on how to deal with the assessment of the premiums.
With regards to block-rated policies such as those in the present cases, the ability of the paying party to challenge premiums will be much more restricted. The majority of challenges to block-rated premiums must relate back to the market in one way or another, and in particular, it will not usually be enough for the paying party simply to give evidence that another policy was cheaper. An expert's report would be required to the effect that the other policy was directly comparable to the policy under review.
Furthermore, contract terms commonly agreed between insurers and solicitors mean that an alternative block-rated policy may not have been available to the receiving party in any event.
A simple comparison between the value of the claim and the amount of the premium paid is not a reliable measure of the reasonableness of the ATE insurance premium. It would amount to a complete failure to consider the way in which the premium payable for a block-rated policy is calculated taking into account a wide range of cases.
It was recognised by the Court of Appeal that when considering proportionality, there were two reasons why an ATE premium discount was inappropriate. Firstly, being a block-rated policy, the amount of the reasonable premium bears no relationship to the value of the claim. Secondly, ATE insurance is critical to access to justice in clinical negligence claims and is an item of cost which are “…fixed and unavoidable, or which have an irreducible minimum, without which the litigation could not have been progressed”.
In West there was no evidence to suggest the ATE policy premium was unreasonable. The other LAMP policies that were referred to as evidence of cheaper alternatives could not be fully comparable as it was not clear if they were even block-rated premiums and in any event they were contractually unavailable due to the arrangement the claimant’s solicitor had with ARAG. The District Judge undertook his own calculation based on his own figures which was wrong in principle.
In Demouilpied it was held that there should have been no reduction on proportionality grounds as the premium was reasonable and was an unavoidable cost of the litigation.
The Court said:
District judges and cost judges do not have the expertise to judge the reasonableness of a premium except in very broad-brush terms, and the viability of the ATE market will be exposed if they regard themselves as better qualified than the underwriter to rate the financial risk the insurer faces.
“Subject to any points which do not arise from the Assessment, or are not addressed in this judgment, the position in respect of the recoverability of block-rated ATE insurance policy premiums is settled, at least until there are identifiable changes affecting the matters considered”.