After-the-event (ATE) insurance premiums are recoverable in clinical negligence cases where the action is settled before proceedings are issued and experts commissioned, the Court of Appeal has clarified in an important decision.
Both claimant lawyers and insurers welcomed the ruling in the joined cases of Peterborough & Stamford Hospitals NHS Foundation Trust v McMenemy and Nottingham University Hospitals Foundation Trust v Reynolds [2017] EWCA Civ 1941.
Lord Justice Lewison rejected the NHS Trusts’ argument that the premiums, worth about £5,000 were not recoverable. He acknowledged the burden of costs on NHS funds, noting Department of Health figures showing the annual cost of claims in the NHS in England rose from £1.2bn in 2014/15 to £1.5bn the following year, with legal costs accounting for about one third of this. However, he held that it was reasonable to take out an insurance policy at the same time as entering into a conditional fee agreement.
He held that Callery v Gray and Rogers v Merthy Tydfil were still good law.
He also noted that it was ‘unfortunate’ the rules committee had not set out rules or practice directions concerning the recovery of ATE in clinical negligence cases. He said he ‘would invite them to reconsider the question. At the moment, however the pieces of the jigsaw puzzle are manoeuvred they do not all fit properly’.
Legal expenses insurer ARAG’s head of claims Chris Millward said the decision ‘brings a little further clarity to the continuing debate over how ordinary people can fund litigation, in the absence of legal aid.
‘Specifically, the use of block-rated ATE policies taken out at the time of entering into a CFA was disputed and ultimately accepted 15 years ago in Callery v Gray and has now been reaffirmed. Importantly, the court recognised that the introduction of QOCS [qualified costs shifting] has not changed the unsuccessful claimant’s position in respect of their own disbursements.’
