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Sharratt v London Central Bus Co, Senior Costs, 30 July 2003

5 August 2003
The issues

Costs – Premium – Proportionality.

The facts

Chief Master Hurst gave Judgment on the 15th May 2003 when he dealt with premium issues in these test cases. Premiums were allowed as follows:-

2000-£450.00 including IPT

2001-(Lloyds) £480.00 including IPT

2001-(NIG) – £425.00 including IPT

In that Judgment, he indicated that the figure for 2001 Lloyds might alter if an adjustment had to be made for swing premium. When TAG required further capacity they entered into a separate arrangement with NIG. The premium for both types of policy was £950.00 plus IPT. In the Lloyds cases, the premium paid to Underwriters and brokerage amounted to £328.50. £621.50 was paid to TAG as “Underwriter’s contribution to costs” and provision for “swing premium” which depended upon the level of losses incurred and which required TAG to pay additional premium by way of rebate of the Underwriter’s contribution to costs. The swing was between 80% and 125% of losses but with a cap of £550.00 per case. The remaining issues were – firstly what was the amount of the premium, which covered qualifying Section 29 Benefits, and secondly, what effect did the reasonableness and proportionality tests have on that figure?

The decision

1. Taking as a starting point the figure of £358.00 arrived at from the capped premium of £550.00 and adding to it figures for brokerage, cover holder’s commission and acquisition commission. The figure arrived at was £608.00.

2. It might be in the future that evidence would be presented showing that the premiums charged by NIG and others were insufficient to enable those companies viably to offer ATE insurance.

However, it was necessary for the matter to be approached on the basis of the Solicitors knowledge at the time the agreements were entered into.

3. The premiums so far approved by the Court of Appeal ranged from £357.50 (Callery -v- Gray) to £621.30 (Claims Direct). In the case of Claims Direct, the agreements provided for both sides costs and therefore provided wider benefits than those provided under the TAG scheme.

A reasonable figure therefore for 2001 Lloyds including Swing Premium and IPT was £525.00.

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