ATE insurance
Recovery of the Premium
The following passages from the judgment of Lord Justice Brooke in Rogers v Merthyr Tydfil CBC [2006] EWCA Civ 1134 are key in justifying staged premiums:
In paragraph 107 of his judgement, Lord Justice Brooke stated that “there is in principle no difference between a two staged success fee (whose merits this court has consistently endorsed) and a staged ATE premium. The financial risk to which the ATE insurer is exposed inevitably rises as a case proceeds towards trial. While defendants may be liable to pay a higher premium if they take a case to trial and lose, the situation is no different from that facing then in relation to their liability to pay a higher success fee when claims are resolved against them 14 days or less before the date fixed for the commencement of a trial in the cases covered by the new arrangements for fixed recoverable success fees in CPR Part 45. Exposure to this greater liability requires a defendant to think very seriously about the merits of his position before a trial takes place. This obligation, too, runs with the grain of the philosophy of the CPR.”
In paragraph 117 of his judgment, Lord Justice Brooke stated that “If an issue arises about the size of a second or third stage premium, it will ordinarily be sufficient for a claimant’s solicitor to write a brief note for the purposes of the costs assessment explaining how he came to choose the particular ATE product for his client, and the basis on which the premium is rated – whether block rated or individually rated. District judges and costs judges do not, as Lord Hoffmann observed in Callery v Gray (No’s 1 and 2) [2002] UKHL 28 at [44]; [2002] 1 WLR 2000, have the expertise to judge the reasonableness of a premium except in very broad brush terms, and the viability of the ATE market will be imperilled if they regard themselves (without the assistance of expert evidence) as better qualified than the underwriter to rate the financial risk the insurer faces.”
In a case where the issue is raised as to the size of the premium there is an evidential burden on the paying party to advance at least some material in support of the contention that the premium is unreasonable – see Kris Motor Spares Limited v Fox Williams [2010] EWHC 1008.
The difficulties for parties attempting to challenge premiums were also illustrated in the Motto v Trafigura case which involved a premium where the method of calculating the risk multiplier was in line with the formula approved by the Court of Appeal in Rogers v Merthyr Tydfil CBC.
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Jim Knight, Partner and Costs Lawyer
