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the Liverpool ATE Premium Test Cases, Liverpool County Court, 25 May 2012

7 June 2012
The issues

RTA portal – ATE insurance

The facts

The Regional Costs Judge considered eight test cases where ATE premiums had been taken out by claimants in cases proceeding within the RTA portal to cover the possibility of the claim exiting the portal and/or to protect the claimant against any potential cost liability to the defendant under stage three of the portal. The purpose was to consider:

  • whether it is reasonable for a receiving party to use block rated policies when cheaper individually rated policies are available
  • whether the use of staged premium policies is reasonable or necessary
  • whether in protocol cases there is a need for an ATE policy before stage three given the minimal risk of the claimant not recovering costs.

The defendant, in its skeleton argument sought to refine those issues further as:

  • whether it is reasonable to incur an ATE premium before stage three or exit from the process in a claim commencing in the RTA process
  • if it is reasonable, whether it is reasonable for the claimant not to choose a policy tailored for the RTA process
  • if the claimant had made an unreasonable choice, what is a reasonable amount to allow.

District Judge Smedley considered statements from costs draftsmen/lawyers and the costs solicitors and one statement from a claimant solicitor. Exhibited to the statements were examples of various policies on the market. The court noted reference to the MoJ consultation document ‘Case track limits and the claims process for personal injury claims’ which provided that:

“Under our proposals we do not consider it appropriate for the premium for any ATE taken out at the commencement of the claim to be recoverable. During the initial stage of the claim there will be no risk as to costs so there would be no risk to insure…”

The court further noted that the response to that consultation document was that:

“The Government has considered the various points made by respondents to the consultation and has concluded that it will not take forward these proposals. This will ensure that the introduction of the new claims process will not damage the ATE market, but will allow it to adapt to the new process.”

In August 2011 and February 2012 the ATE market contained 10 companies offering staged premium policies and 12 companies offering single premium cases.

The defendants submissions
The defendant argued that in cases started under the protocol it was unreasonable for a claimant to incur the liability for an ATE premium at all. In the alternative, each claimant had made an unreasonable choice of ATE policy by failing to purchase a policy specifically tailored to a low value RTA claim. Accordingly any premium found payable should be restricted to a reasonable sum payable under a specific RTA policy. The defendants did not rely on expert evidence but asserted that the claimant’s solicitors conduct in choosing the policy was wrong in that they were inappropriate policies for these low value cases. The defendant sought to distinguish Rogers v Merthyr Tydfill, asserting that the court could assess premiums in broad brush terms here because the defendants were not in fact challenging the actuarial basis of the premiums. The court could differentiate between different types of case and different risks they posed.

The defendant argues that the claimant should either a) not take out ATE insurance until it is clear the claim will be disputed or b) not enter into an ATE policy other than one specifically designed for use in protocol cases

On the question of risk the protocol divided the litigation into stages and as such dovetailed with staged success fees as considered in Callery v Gray and with stepped ATE policies; that at stages one and two there was no risk of adverse costs consequences and that at stage three only modest fixed costs may be payable by an unsuccessful claimant.

The defendant further argued that pursuant to CPR 44.4 disbursements were to be assessed on the standard basis and any doubt must be resolved in favour of the paying party. Whilst the court accepted that the burden of proof had not altered when the paying party had raised some material to show the premium was unreasonable, District Judge Smedley considered these test cases were more concerned with questions as to the reasonableness of timing and the amount of the premium rather than the reasonableness of entering into an ATE policy at all.

In this regard the defendant referred to paras 11.7 and 11.10 of the Costs Practice Direction which it argued supported a staged premium such that if a defendant chose to fight on he would face higher premiums.

Finally whilst the defendant conceded that claimant solicitors knew of the existence of policies with low cost initial premiums from at least April 2010, it was argued that claimants were aware that the purpose of the RTA protocol was to reduce costs. In all but one of the test cases the claimants solicitors had not provided a note as to their reasons for choosing the policy that they did as recommended in Rogers. The defendant contended that the policies were taken out by the claimant prematurely before the defendant had the chance to consider whether liability was in issue and therefore a policy taken out before liability was accepted would attract a higher premium, although no evidence was adduced to support that assertion.

The claimants’ submissions
The claimant’s argued the purpose of the protocol was to speed up resolution of low value RTA claims but had nothing to do with the alteration of risk. Fixed costs did not change anything, the risk of proving a claim was no different.

The protocol recognises that solicitors are entitled to be compensated for risk hence allowing for success fees at different stages. This is inconsistent with there being no risk. There are risks of not settling; failing to beat a Part 36 offer; or of the defendant through non-compliance taking the claim out of the protocol. The Court of Appeal and House of Lords have held it reasonable for additional liabilities to be taken out at the outset.

The protocol itself (Part 45.30 (2)(b) provides that the court may consider the amount of the insurance premium. It does not impose any restriction as to the timing of inception of the policy or whether single premium or staged (whereas such restrictions have been imposed in other areas e.g. in defamation claims).

The claimant accepted that, unlike the situation in Callery No 1, there is a short period of no risk of paying the defendant’s costs, but there is a risk if the claim drops out of the protocol or goes to stage three. There were no other grounds for arguing that these cases were distinguishable from any other road traffic cases.

The claimant maintained that Rogers remained good law and the court does not have the expertise to judge the reasonableness of a premium except in very broad brush terms.

The decision

The defendant’s case suggests that the introduction of the protocol brought into being an entirely new class of case in relation to road traffic claims, so differed from all other RTA claims that the decisions of the higher courts over the 12 years since the introduction of the CPR, CFA and ATE funding do not apply. The defendant argues that the claimant should either a) not take out ATE insurance until it is clear the claim will be disputed or b) not enter into an ATE policy other than one specifically designed for use in protocol cases.

Are the protocol cases an entirely different class of case?
There is no obligation on a claimant to use the protocol. The only sanction for failure to do so is costs but it is not mandatory.

Whilst the costs whilst a case remains within the protocol are minimal, is the risk equally minimal? There are no less than 30 triggers giving either party the option to leave the process. Once a case has exited the protocol it cannot re-enter it. Four of those triggers applies at stage one.

Judicial notice was taken of the fact that in Liverpool and Birkenhead there has been no obvious decrease in cases where liability is denied or contributory negligence. Although the court had no statistical evidence as to the number of cases leaving the protocol it was considered likely that less than 50% will settle in the protocol.

The protocol has therefore not led to a new class of case, merely a new procedure. Earlier authorities apply as much after the introduction of the protocol as before.

Is there a presumption in protocol cases that a) no ATE protection should be taken out until there is a failure to admit liability; or b) only policies specifically tailored to protocol cases should be taken out?
The protocol imposes no limit on either type of policy that may be taken out or a period during which single or staged premiums are not permissible or recoverable. The protocol provides that where there is a dispute about disbursements and success fee the Part 44.12A procedure (leading to detailed assessment) may be used. The ATE provisions set out in Part 45.30 (2)(b) are exactly the same as those at Part 45.10(2)(b). It is therefore inherent that the costs judge dealing with such an assessment does so on normal costs principles without any presumption imposed by the protocol.

In terms of the timing of the decision as to funding, in all the test cases ATE polices were taken out before sending the CNF. The defendants arguments that the claimant should wait until it is clear whether liability is admitted or use a tailored policy, reflect the arguments put to the Court of Appeal in Callery No 1. That approach was rejected by the court. Those principles apply as much to protocol cases as any other. It was reasonable to enter into the funding arrangements when the claimant did.

In respect of the choice of policy a decision has to be made on the basis of the information and likely risk when the decision is made. The claimant incurs a potential liability the moment he instructs his solicitor. There is the potential for an adverse costs order if the claim is unsuccessful. In most cases it will be reasonable to recommend an ATE policy to guard against those risks. The court did not go so far as to say the solicitor may be negligent not to do so.

At the present stage of the use of the protocol and with the uncertainty whether a case will remain in the protocol a claimant is entitled to choose either a single or staged premium policy. Neither can properly be said to be unreasonable if taken out at the outset. Accordingly the findings on the six points considered were:

  1. The issue stated is inappropriate because the evidence shows on the whole that even staged premium policies are now block-rated.
  2. The use of a staged premium policy is reasonable but not necessary.
  3. There is not a need but it is reasonable to take out an ATE policy before stage three of the protocol.
  4. It is reasonable to incur an ATE premium on the client first giving instructions, which necessarily is before stage three of, or exit from, the protocol.
  5. It is reasonable for the claimant to choose either a single premium or a staged premium policy.
  6. Not relevant as it was reasonable for the claimant to take out the policy.

It is clear from the judgment of District Judge Smedley that he only had evidence from costs draftsmen/lawyers who had no knowledge as to the circumstances and though processes when the policies were taken out. The evidence of the policies lacked depth and so to what extent these are truly ‘test’ cases is questionable.

Whilst the defendant referred to Lord Justice Jackson’s recent review of civil costs the court remained neutral on the point since implementation of the review is a matter for the future. Whilst the decision has been made on the basis of the law as it currently stands it is fairly false to consider these test cases in isolation from the wider environment.

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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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