After The Event Insurance blog

The Issues: Should the Claimants in this group action be required to disclose a copy of their After the Event Insurance policy to allow the Defendant to examine the extent of protection provided by the policy and to assess its potential financial exposure.

Held: Traditionally, insurance policies were considered a private matter between the insured and the insurer and were therefore not generally disclosable. However, ATE insurance policies are a relatively modern creation and there were far fewer decisions dealing with disclosure, or other issues.

It was held that there was a difference between liability or BTE insurance, which may have been in existence for years before and have nothing to do with the events which gave rise to an action, and ATE insurance, the inception of which might be the trigger for the proceedings. In this case, the group litigation depended on the After the Event insurance policy without which there would be no proceedings at all (para 43). The Claimants’ solicitors had sent a mail shot letter to potential claimants referring to a no win no fee agreement and to the existence of the ATE insurance policy “to cover any potential cost liability”.

For these reasons it was concluded that the ATE insurance policy was a relevant document to these proceedings and, in accordance with CPR31.14, it should be disclosed for inspection, but with the amounts of the premiums redacted (para 52).

Comment: Although the facts were rather unusual in this case the principle that an ATE insurance policy is disclosable does seem to have been set, and this is especially the case where the action is only being pursued because of the existence of the After the Event Insurance policy.

Box Legal Limited: After the Event Insurance Providers
www.boxlegal.co.uk  | daniel@boxlegal.co.uk | 0870 766 9997

The Issues: The Claimant claimed for injuries suffered through dust inhalation. Was it reasonable for the Claimant to purchase an ATE insurance policy with a premium of £2,730 (inc IPT) after the Defendants had admitted primary liability but had expressly reserved their position on causation?

Held: In Master Haworth’s judgment there were a number of risks which it was proper to insure at the time the policy was taken out, some 5 months after primary liability had been admitted. These were:

1. A real risk on causation, i.e. that the Court would find the dust exposure had not caused the injury;
2. The risk of the Defendant withdrawing its admission;
3. The risk of the Defendant making a Part 36 offer which the Claimant does not accept but fails to beat;
4. The risk of an adverse interim costs order; and
5. The risk of failing to recover a disbursement

It was therefore reasonable for the Claimant to purchase an ATE policy after an admission of liability, and Master Haworth concurred with the judgment of HHJ Inglis in the Avril v Boultby (2008).

Secondly, a premium of £2,730 (inc IPT) was reasonable in all the circumstances.

Comment: The High Court has approved the recovery of an ATE insurance premium taken out after an admission of liability, because of the continuing risks. It is fair to comment that in this case the Defendant had specifically reserved their position on causation, but nevertheless, the rationale of this decision was based on the 5 risks identified above, of which causation was only one. For a similar decision where the Defendant admitted liability without making any comment on causation, see Avril v Boultby (2008) which the Court specifically approved in this case (para. 27).

Box Legal Limited: After the Event Insurance Providers
www.boxlegal.co.uk  | daniel@boxlegal.co.uk | 0870 766 9997

The Issues: The successful Claimant sought to recover his fixed recoverable costs in respect of an RTA including a “ClaimSafe” After the Event Insurance premium of £367.50 (inc. IPT) arranged by Box Legal Limited. The Defendant believed that the Claimant’s solicitor might receive a commission in respect of the ATE Insurance policy, but had no evidence that any was paid. It therefore wanted the Claimant’s solicitors to disclose whether they would receive any commission, in order that the Court could then decide ‘whether the cost of insurance cover was reasonable, relevant factors to be taken into account’….being….’the amount of commission payable to the receiving party or his legal representatives or other agents’ (Part 44 Section 11.10 of the Practice Direction).

Held:

(a) £367.50 was a reasonable and proportionate premium and entirely unexceptional. There was no ‘basket of services’ being offered by a claims company (as in the Accident Group cases) to cause possible concern. Only in exceptional circumstances should the Court attempt to examine the various elements of an After the Event Insurance premium.

(b) Contrary to the Defendant’s submission, the Court could not simply order the commission element to be revealed and then decide if the commission was reasonable. It would instead need detailed evidence of how all other parts of the premium were made up, and expert evidence of commission and premium rates in the ATE Insurance market as a whole.

(c) Some commission was no doubt legitimate, so at best the Court might only disallow £50 or so. Even across a substantial number of policies, the cost of such an exercise would be disproportionate to the amount at stake.

(d) The Court of Appeal had repeatedly warned against unnecessary, complicated and expensive exercises to “deconstruct” ATE Insurance premiums.

(e) Such an exercise would remove much of the advantage of certainty bestowed by the fixed costs regime.

Conclusion: The Solicitors’ Code of Conduct of course requires clients to be advised of any commission received. That advice (being between the solicitor and his client) will inevitably be privileged and therefore need not be disclosed to the Defendant.Where the policy is unexceptional and the premium is modest (as with the ClaimSafe policy), there is no reason to advise the Defendant as to whether or not you receive a commission payment from your After the Event insurer, and it will certainly be unwise to reveal the level of any such payment. All requests for such information should be resisted.

Box Legal Limited: After the Event Insurance Providers
www.boxlegal.co.uk  | daniel@boxlegal.co.uk | 0870 766 9997

The Issues: The premium on the Claimant’s After the Event Insurance policy was only payable at the end of the case. The Defendant argued that it was not liable to pay the ATE Insurance premium because deferring payment of the premium was providing the Claimant with credit and the policy was therefore subject to the Consumer Credit Act 1974 (“the Act”). As the Act had not been complied with (no Consumer Credit Act agreement had been signed) the agreement was unenforceable and therefore the ATE Insurance premium was irrecoverable.

Held: ATE insurance was an entirely new product and there was no established normal business practice. Payment of the premium only fell due at the end of the case. The After the Event insurance policy was still in force (i.e. the case was still not at an end, because the proceedings were not concluded until costs were assessed). A premium is not deferred unless the payment is not required for a significant period beyond the end of the case. The ATE Insurance policy was not therefore caught by the provisions of the Act and no consumer credit agreement was required. The After the Event Insurance premium was accordingly recoverable. 

Box Legal Limited: After the Event Insurance Providers
www.boxlegal.co.uk  | daniel@boxlegal.co.uk | 0870 766 9997

The Issues: A number of test cases were selected to decide issues of principle. The main question was: Which of the elements which had been included in the premium of £1,312.50 (inc of IPT) could properly be categorised as a legitimate part of an After the Event insurance premium (within the meaning of s.29 of The Access to Justice Act 1999), and therefore which of those elements was recoverable?

Held: (1) Claimants could only recover the insurance element of any purported ATE Insurance premium, not the cost of other bundled services which were included in the Claims Direct “premium”. (2) The elements which were nevertheless part of the ATE premium and therefore recoverable, were naturally, payments to underwriters and IPT, but also Claims Direct commission, and a modest payment for insurance services, giving a total premium of £621.13. The £621.13 was made up as follows:

• £451.55 payment to underwriters (£311.55 risk bearing element and £140 brokerage and commission)
• £110 Claims Direct Commission
• £30 fee for MLSS for insurance services
• £29.58 IPT

The Court confirmed that commissions were part and parcel of any insurance policy.

Comment: Dicta of Master Hurst also suggested (para. 231) that it might be unreasonable to purchase an ATE insurance policy following an admission, except where causation was a live issue (although the issues do not appear to have been fully argued or considered). See however Avril v Boultby (2008), where it was decided that an ATE insurance premium taken out following an admission of liability is indeed recoverable, since in particular there remained a continuing risk of an adverse costs award e.g. a failure to beat a Part 36 offer.

Box Legal Limited: After the Event Insurance Providers
www.boxlegal.co.uk  | daniel@boxlegal.co.uk | 0870 766 9997

The Issue: Liability had been admitted from the outset in a road traffic accident. Could an After the Event Insurance premium taken out after that admission, be recovered?

Held: The Defendant in the case had attempted to rely on the often quoted dicta from Master Hurst in the Claims Direct Test Cases ( [2002] EWHC 9002 (Costs) – Para.223). The Senior Costs Judge however decided that, six years on, Master Hurst would most likely have come to a different conclusion when considering the risks in personal injury cases faced by today’s claimants.

There were several real risks which could result in the claimant having to pay adverse costs after an admission namely:

1. The admission being withdrawn
2. Adverse costs awarded on an interlocutory hearing
3. Disbursements being disallowed
4. The claimant failing to beat a Part 36 offer.

It was considered that these were real risks which clearly came within those identified by Section 29 of the Access to Justice Act 1999 and therefore they should be insured against, even after an admission of liability. In line with the reasoning in Callery v Gray, a solicitor should not ‘wait and see’ but should take out After the Event Insurance on all claims from the outset of a case or as soon as possible thereafter, notwithstanding an admission of liability.

Comment: This can be seen as a practical application of the reasoning laid out in Callery v Gray and should at last put to rest the challenges of ATE Insurance premiums made by defendant insurers where liability has been admitted.

Box Legal Limited: After the Event Insurance Providers
www.boxlegal.co.uk  | daniel@boxlegal.co.uk | 0870 766 9997