Page 7 - PIC Magazine Autumn Issue 13
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   The effect of the Court’s judgment is to swing
the focus back (in respect of all premiums which are still recoverable) on reasonableness. This is because the “old” pre-1 April 2013 test of proportionality tended to have little, if any, appreciable effect on the recoverable level
of the premium from a paying party.
So far as reasonableness is concerned, prior to the decision in
West the case-law painted a confusing picture. That confusion arose from the decision in Surrey v Barnet and Chase Farm Hospitals
NHS Trust [2016] EWHC 1598 (QB), [2018] 1WLR 499 in which
Foskett J held that various costs judges were entitled to reduce
the recoverable level of block-rated premiums on the basis of their “experience”. He held as much because, in his view, the relevance
of the guidance in Rogers (see below) had to be seen through the lens of a decade’s worth of experience obtained by costs judges since the judgment in that case. The decision in Surrey undermined the status quo which had previously existed and caused considerable uncertainty. The apparent tension between Surrey and Rogers was addressed head on by Langstaff J in Pollard v University Hospitals
of North Midlands NHS Trust [2017] 1 Costs LR 45 who expressed reservations about the approach taken by Foskett J.
That set the scene so far as reasonableness is concerned before the Court in the Court of Appeal. The Court, after considering the case-law which pre-existed Surrey, held, in no uncertain terms, that the approach set out in Rogers as developed by Simon J (as he then was) in Kris Motor Spares Limited v Fox Williams LLP [2010] EWHC 1008 (QB), [2010] 4 Costs LR 620 and in McMenemy was
the proper approach to be adopted by judges. The principles to be derived from those authorities so far as block-rated policies are concerned are as follows:
A. Disputes about the reasonableness and recoverability of the ATE insurance premium are not to be decided on the usual case-by-case basis. Questions of reasonableness are settled
at a macro level by reference to the general run of cases and the macro-economics of the ATE insurance market, and not by reference to the facts in any specific case [McMenemy].
B. Issues of reasonableness go beyond the dictates of a particular case and include the unavoidable characteristics of the ATE insurance market [Rogers].
C. District judges and cost judges do not 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 [Rogers].
D. It is for the paying party to raise a substantive issue as to the reasonableness of the premium which will generally only be
Thus, for a paying party to challenge the reasonableness of a premium for an ATE policy they must do the following:
a. If the policy is an individually rated policy (i.e. bespoke) “then the grounds of challenge of
the amount of the premium are relatively wide. For example, it would be open to the respondent to challenge the bespoke policy premium on the basis that the
risk had been wrongly assessed.” This is important. It endorses the approach taken by the respective judges in Kelly v Black Horse Ltd, Senior Courts Costs Office, 27 September 2013 and Redwing Construction Ltd v Wishart [2011] EWHC 19 (TCC) in which premiums were reduced as a consequence
of the insurer underestimating the prospects of success on the claim.
b. “As regards a block-rated policy ... the ability of the paying party
to mount a sustainable challenge will be much more restricted.
The majority of challenges to block-rated premiums must relate back to the market in one way
or another and would therefore require expert evidence to resolve”.
                          capable of being resolved by way of expert evidence [Kri
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     www.pic.legal Autumn 2019
 Rupert Cohen is a Barrister at Landmark Chambers
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