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Reasonable ATE premium can still be disproportionate – Martin v Queen Victoria Hospital NHS Foundati

Reasonable ATE premium can still be disproportionate

Whilst the question of recoverable ATE premiums has been the subject of numerous reported decisions, the abolition of recovery of premiums in most cases has changed the landscape. One area where an element of the premium is still recoverable is in clinical negligence matters. The Recovery of Costs Insurance Premiums in Clinical Negligence Proceedings (No 2) regulations 2013 provided for recovery of that part of the premium in relation to the risk of incurring liability for an expert report or reports on the question of liability and/or causation. With the rule changes only coming into effect in April 2013 and with there inevitably being a delay whilst new cases found their way to assessment, there is not so much guidance in this particular area. We have had cause to review a decision of Her Honour Judge Belcher in the matter of Martin v Queen Victoria Hospital NHS Foundation Trust, which proceeded in the County Court at Leeds in May this year.

This was an Appeal from an Oral Hearing which in turn followed a Provisional Assessment and is interesting because it reinforces the provisions of CPR 44.3 (2)(a) that costs may be found disproportionate even if they were reasonable in amount and reasonably incurred. It also found that it was appropriate to apply the proportionality test to a single item rather than necessarily the costs as a whole.

The case was a clinical negligence matter which settled for £7,000. An ATE premium was claimed in the sum of £3,843 and was reduced on assessment to £2,500. The policy was block rated and afforded £100,000 of indemnity. The premium was calculated by reference to the band within which the likely value of the claim fell. The only relevant expert’s report in the case had been claimed at £3591 inclusive of VAT and therefore the premium was greater than the sum at risk. This factor was perhaps compounded by the fact that on assessment the report fee had been reduced to £2400 inclusive of VAT. Arguments that hindsight should not be used were advanced.

In the assessment the Defendant had relied upon bespoke policies of insurance which were cheaper. The Claimant contended that the District Judge had been wrong to take such policies into account because this was a block rated policy and it was not in issue that it had been reasonable to take out a policy on a block rated basis. Reference was made to the case of Nokes v Heart of England Foundation NHS Trust, a matter dealt with by Master Leonard in the SCCO in which he found there had been insufficient evidence from the Defendant to undermine the reasonableness of the block rated premium. The reasoning followed the well trodden path established by cases such as Rogers v Merthyr Tydfil and Kris Motor Spares v Fox Williams LLPwhich made it clear that there was a burden on the paying party to produce some evidence to substantiate their argument. However, it was also clear that there is no presumption that the premium is reasonable and that the Court can reduce a premium even without expert evidence if, for example, arguments such as the prospects of success having been miscalculated or misrepresented could be established (for example in cases such as Kelly v Black Horse and Redwing v Wishart).

At the Appeal, the Judge held:

“Based on the authorities referred to above, I conclude that on the facts of this case, it is a case where something more is required from the Defendant, before the Claimant could be required to justify the premium as a reasonable, and before it could be properly concluded as a matter of law that the ATE premium for the block-rated policy in this case was unreasonable.”

However, from the transcript of the Oral Hearing, it appeared that the District Judge had justified his finding as to the recoverable premium on the basis of proportionality as well. It was argued, following Rogers, that once it had been concluded that the premium had been reasonably incurred it was not unreasonable to conclude that the premium was also proportionate. However, Rogers was a decision made before April 2013 and therefore the Judge found that in light of the rule changes, such an assertion could no longer be valid.

In Nokes there had been a suggestion by the Master that it was questionable whether proportionality should be applied to a single item rather than the costs as a whole, but here, the Judge found that there was nothing within the Rules to prevent such an approach and that if the case required it, then the proportionality test could be applied to a single item. She commented:

“I am conscious that the use of proportionality in this way could be said to undermine the principle that the use of block-rated policies cannot be said to be unreasonable. However, that is the result of the amended Rules and the express difference between the issue as to whether a cost is reasonably or necessarily incurred, and the issue as to whether costs are proportionate”

it is important to note that this was an Appeal and that whilst the Judge found that the District Judge’s approach on the question of reasonableness was flawed, the approach on proportionality was one of discretion and therefore, in accordance with usual principles of an appeal, unless the Judge took account of something irrelevant, or failed to take account of something relevant, then the Appeal Court would not intervene if the decision could be said to fall within the generous ambit of the Judge’s discretion of assessment.

So what is to be made of cases such as this? Clearly, when assessments fall to be determined at the mercy of discretion, then there is a need for caution. As is entirely clear from the Rules, costs may be disproportionate even if they are reasonable in amount and reasonably incurred. The recent decisions from the SCCO in BNM and May show that the outcome may well be radically different when comparing reasonableness and proportionality.

It is clearly no longer sufficient to rely upon the insurers’ underwriting expertise and documentation to secure the required recovery. The difficulties in challenging ATE premiums following Rogers may well now be overcome by an emphasis in the Defendant’s attack on the question of proportionality as opposed to reasonableness.

A particular difficulty may be that many of these cases will be subject to Provisional Assessment and the space available to advance argument is limited. There is obviously a costs risk in taking any challenge to an Oral Hearing. As this case demonstrates, taking a matter of discretion to Appeal is always going to be a very difficult challenge.

Practitioners should be wary; consider the position carefully; seek instructions from the insurers and advance their arguments with care.

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