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Re: Claims Direct Test Cases, Chief Master Hurst Senior Costs Judge

31 July 2002
The issues

Costs – premium – reasonableness.

The facts

A number of test cases were brought in relation to two issues, in particular:-

Whether monies paid to Claims Direct Plc by the Claimant in each case was a premium within the meaning of Section 29 of the Access to Justice Act 1999, and if so, whether it was reasonable in amount.

The premiums claimed in each case were £1,250.00 plus £62.50 IPT (and in one case £1,495.00 plus £74.74 IPT).

Claimants argued that the money paid was all premium and could not be broken down further. They further argued that the amounts payable were reasonable compared to other cases conducted under CFA arrangements with a success fee plus ATE insurance. (The Claims Direct Policy was a stand alone policy and did not involve the use of a CFA). The Defendants argued that the recoverable premium was only the risk bearing element, i.e. that part directly referrable to the amount paid to Underwriters and which was put variously between £140.00 and £200.00. The services supplied by the Claimants, the Defendants argued were twofold – insurance services proper (in respect of which the premium was recoverable) and claims handling services in respect of which nothing was recoverable.

The decision

(A) Whether the Claimants could recover any amount in respect of the Agreement with Claims Direct

1. The Claimant who entered into a contract with Claims Direct, was not exclusively “a party who has taken out an insurance policy”. There was an insurance element and in that regard he was entitled to recover the reasonable cost.

2. Claims Direct were not the Insurer nor even the Agent of the Insurer. They offered a package which included an insurance element. The true position was that insurance was provided by Underwriters through their Brokers to the Claimant via Claims Direct.

(B) What proportion of the sum claimed was recoverable?

3. The agreement between Claimant and Claims Direct was not an agreement with an Insurer. The money paid was not all premium. Although part of what was provided is an insurance policy and the premium for that was recoverable, the remainder was not. It was necessary therefore to identify the amount attributable to insurance.

4. Giving consideration to the amount paid to Underwriters, the Claims Direct commission, initial and continuing insurance services, the amount properly to be regarded as premium was £451.55 plus £110.00 (being Claims Direct’s commission which was recoverable) and £30.00 being an allowable sum in respect of insurance services.

(C) Whether it would be reasonable to take out an ATE Policy where liability had been admitted.

5. Claimant submitted that it was reasonable to take out insurance even where liability had been admitted, because this ensured that the many paid for the few. Lord Scott in Callery -v- Gray thought differently. Master Hurst would not set out a view with regard to the individual cases before him but did set out basic principles, namely that where an RTA occurred causing slight injury, and where the liability Insurer had from the outset accepted liability, it would generally be disproportionate and unreasonable to take out an ATE Policy. There might be different circumstances in which this general rule did not apply, particularly where there was a live issue as to causation.

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