This issue of the reasonableness of insurance premiums was recently considered in the case of Mitchell v Gilling-Smith  EWHC B18 (Costs) where it was held that an insurance premium of £10,000.00 was both reasonable and proportionate.
The claim involved the negligent treatment of an ovarian endometrioma and damages were agreed at £200,000.00 for the Claimant. The case was funded by a CFA dated July 2014 and an ATE insurance policy was taken out at the same time with a recoverable premium of £10,000.00.
The Defendant argued in their Points of Dispute that the risks of being insured were controlled entirely by the Solicitor as they are the ones who decide if or when to instruct an expert to prepare a report. Further, the Claimant obtained only one report on liability and any further reports were at the least highly unlikely.
The Defendant also argued that there was very real doubt that the ATE premium was reasonably incurred and challenged the Claimant’s Solicitor to explain the advice given to the Claimant. In the absence of such evidence, the Defendant asked the Court to assume that the ATE insurance was purchased either as a matter of internal, routine procedure or because it was believed that most of the cost could be passed on to the Defendant. The Defendant relied upon the case of Sarwar v Alam  EWCA Civ 1401 and argued that the post-March 2013 statutory regime is intended to permit recovery for cases where expert reports relating to breach of causation are necessary to determine whether there was a case to bring and that this was not one of those cases.
Master Leonard rejected the Defendant’s arguments and concluded the following:
CPR 44.3(5) provides that costs are proportionate if they bear a reasonable relationship to the specified factors and the wording of the rule leaves no room for the Defendant’s attempt to measure the proportionality of the Claimant’s ATE premium by reference to the amount ultimately prepared for the expert evidence covered by it. That is not the test. There were other objections to the Defendant’s approach with the most obvious being the application of hindsight. However, applying the correct test, Master Leonard concluded that even assuming that it stands to be considered in isolation, an ATE premium of £10,000.00 could not be characterised as disproportionate in the context of a clinical negligence claim that settled for £200,000.00.
Whether the premium was reasonably incurred
Master Leonard did not accept that the risks were controlled entirely by the Solicitor as the requirement for independent medical evidence is dictated by the needs of the case, not by the whim of the conducting solicitor, the same could be said for the level of risk as at the time the ATE policy was taken out, the response of the Defendant was an unknown quantity.
As for the proposition that it was incumbent upon the Claimant’s solicitors to wait until a point at which they had a clear understanding of the level of recoverable ATE cover that was going to be required, Master Leonard considered the evidence before him as to the way in which the Claimant’s block-rated policy worked. Master Leonard noted that the Defendant neither objected to nor offered any evidence in response to the Claimant which confirmed that the block-rating arrangement entered into between the Solicitor and the Claimant required that the ATE insurance policy was taken out when a CFA is signed. Master Leonard noted that the Defendant did not identify any particular point at which the Claimant’s Solicitors might have been expected to have sufficient knowledge to know, with acceptable precision, what the prospective cost of expert evidence was likely to be, nor did they suggest that if the Claimant had waited before taking out the ATE policy, she could have reduced the premium payable. Rather, the Points of Dispute stated that the policy should not have been taken out at all, without conceding it would have been reasonable to do so. Master Leonard did not regard the Defendant’s suggested approach as workable given the proposition that it was incumbent upon a Claimant to refrain from taking out ATE insurance until some undefined point at which the level of risk to be insured has become entirely clear.
As regards the overall level of cover, Master Leonard heard nothing to substantiate the suggestion that the policy limit was excessive for the overall cover offered nor did he see evidence to justify the conclusion that there was any direct relationship between the level of over offered by the Claimant’s ATE policy and the level of premium payable.
Further, the Defendant failed to provide real evidence to support the proposition that suitable, less expensive alternative policies were available to the Claimant.
Master Leonard did not accept that the arguments advanced by the Defendant raised any real doubt about the reasonableness of the amount of premium paid.
Master Leonard summarised that the Defendant had failed to discharge the evidential burden or to give the sort of good reason for disallowing all or part of the ATE premium. He was invited on little or no relevant evidence, to conclude that some element of doubt had been established and to reduce or disallow the premium on the basis that it seemed to be too high. For those reasons, the challenge to the ATE premium failed and was allowed in full.
This case should serve as a warning to Defendants that if they are to dispute the proportionality and/or the reasonableness of an ATE premium, they should be able to provide evidence to support their arguments!