Date:   22 May 2007

Rogers – carte blanche to ATE providers and reckless abandonment of the logic that prevailed in Callery?

Regrettably, despite defendant insurers and their solicitors being up in arms about the often ostensibly high ATE premiums, the case of Rogers -v- Merthyr Tydfil County Borough Council [2006] EWCA Civ 1134 approved the use of such policies.

The Court of Appeal made it clear that the court should not simply use a costs to damages ratio when considering the suitability of a staged premium but rather should take a wider view taking into account the ATE insurance market itself, which was integral in allowing claimants access to justice.

The staged after the event (ATE) insurance policy is now commonplace. Increased premiums are triggered by certain events, for example the issue of proceedings, allocation to the multi-track and/or the matter proceeding to trial.

A Brief History

By way of background, ATE policies were designed to be, from their inception, frontloaded (i.e. the risk in insuring a case was insured at the outset, often when little evidence was available) hence the comparatively high single stage premiums. Therefore, it logically follows that a staged insurance policy should have an initially small premium due to the low risk to the ATE policy provider at the outset.  This is based on the fact that the risk to a Claimant solicitor, when taking on a case, of having to pay the Defendant’s costs is incredibly low, if not non existent.

Following a letter of claim the Defendant’s indemnity insurer will themselves proceed to investigate a claim and thereafter arrive at a decision on liability. At this stage there are no legal costs incurred by the Defendant and thus the Claimant (or in reality their ATE insurer) is at no, or very little, risk on costs, should the claim be discontinued.

The Theory & Reality

Often, it is only at the issue of proceedings that solicitors are instructed by the Defendant’s indemnity insurer. At this point the costs risk to the Claimant evidently increases. A staged premium will trigger a further premium at this point; this extra premium should logically reflect the case value and perceived risk of pursuing the claim. A further premium may well be triggered should the proceedings be allocated to the multi-track, fairly reflecting a claim which is more complex than the standard, run-of-the-mill affair.

How does this work in reality?  The first stage of any staged premium is often itself a lot higher than one would expect it to be. However, Rogers made it clear that staged policies cannot be compared to single stage policies. It is worthwhile remembering that staged policies often defer payment until the conclusion of the claim which they are funding and are frequently self-insuring. Therefore any argument against a high first stage is likely to be unsuccessful.

Is there any flexibility with Rogers?

It should not be forgotten that Rogers makes it clear that the reasonableness of a staged policy should still be considered. If, for example, a solicitor takes on a case one week before limitation is due to expire it is almost certain that proceedings will be issued. In those circumstances would it be reasonable for a staged policy where the second stage (triggered by the issue of proceedings) will become payable only a matter of days after the first? It is arguable but I am not aware of this argument being pursued yet..

What about a policy that is purportedly triggered on either the issue of Part 7 or Part 8 proceedings? Would that be suitable in an infant case where, save for a discontinuance, proceedings are inevitable in any event (Part 7 should the claim be contested and Part 8 where liability and quantum are agreed and the Court’s approval is required for any settlement)? In my view we should argue strenuously against such a policy on the grounds that it cannot be reasonable and proportionate

In a recent example, within 24 hours of detailed assessment, the Claimant’s ATE insurers were compelled to admit that Part 8 proceedings did not trigger the second stage within the terms of the policy and accepted that only the first stage was payable. This was despite assurances from the Claimant’s solicitors that they knew the ATE insurers well and were confident that insurer’s would have “dotted all the i’s and crossed all the t’s.”

The Moral of the Story

Do not simply acquiesce in the post-Rogers world! Premiums are still there to be shot at and scythed down to more digestible chunks.

The Compatibility with Callery and the need to insure early

It also raises the question as to whether Callery v Gray [2001] EWCA Civ 1117 needs to be revisited.

This states that it is reasonable to insure at the outset as “there is the overwhelming evidence from those engaged in the provision of ATE insurance that unless the policy is taken out before it is known whether a defendant is going to contest liability, the premium is going to rise substantially” (as per Lord Woolf at 99(ix))

However, present evidence suggests that ATE insurance now involves much higher staged premiums. Thus when the indemnity insurer settles a claim quickly, pre-issue, they are paying much higher ATE premiums to the Claimant.

We therefore return to the fundamental  question of whether it is necessary for  the Claimant to insure so early or whether they should they wait until the issue of proceedings.  This was one of the first challenges following the introduction of  ATE premiums and thus highlights the inconsistency of the Court of Appeal in these matters.

In conclusion, we can expect the appellate courts to revisit this question and at Buller Jeffries we continue to battle to reduce the premiums where possible.

Andrew Wallen