Phillips v Whiddett

The Claimant and the Defendant were involved in a road traffic accident on 15 January 2011. The Claimant, who sustained injury, made a claim against the Defendant, who through his insurer agreed to pay the Claimant £2,310 plus costs in settlement of his claim.

The Claimant’s damages being less than £10,000, negotiations were conducted by reference to the provisions of the Pre-Action Protocol for Low Value Personal Injury Claims in Road Traffic Accidents (“the RTA Protocol”). The matter settled within stage 2 of the RTA Protocol. However the parties could not agree costs and the Claimant issued a Part 8 costs-only claim, pursuant to CPR 44.12A, on 21 July 2011.

The only matter in issue between the parties is the Claimant’s “After the Event” (ATE) legal expenses insurance premium of £418.70 (including, as with all premiums referred to in this judgment, insurance premium tax). He seeks reimbursement of that premium in accordance with CPR 45.30(2)(b). According to the Notice of Funding on the court file, cover was taken out on 26 January 2011.

It is not suggested that the premium was unreasonably incurred: the Defendant submits first that the premium is disproportionate to the amount of damages agreed, and second that it is unreasonably high in all the circumstances. The Defendant contends that a reasonable premium would be £200.00.

Alternatively, the Defendant argues that the insurance premium is “not recoverable under the RTA protocol”, as paragraph 7.40 of the RTA protocol does not require the Defendant to make any payment in accordance with CPR 45.30(2)(b).

As this last argument would dispose of any liability to pay the ATE premium, I should address it first. Prior to 1 October 2011 (when it was amended to refer to CPR 45.30 as a whole) paragraph 7.40 of the RTA Protocol, as the Defendant says, omitted any reference to CPR 45.30(2)(b). It does not however follow that the Claimant cannot recover an ATE premium. The RTA Protocol describes the behaviour the Court will normally expect of the parties prior to the start of proceedings. It does not override the Civil Procedure Rules, nor the jurisdiction of the Court to allow a successful Claimant to recover a reasonable, proportionate ATE premium as part of his costs.

It seem to me that the position in this case is governed by section II of CPR 45, which sets out the costs which are to be allowed in costs-only proceedings under CPR 44.12A for low value RTA cases. I say that because part VI, relied on by the Claimant, applies to claims that have been or should have been issued in accordance with Practice Direction 8B, under stage 3 of the Protocol. In any event both sections, under CPR 45.10(2)(b) and CPR 45.30(2)(b) respectively, provide for a claimant to recover an ATE premium.

My conclusion is that the Claimant is entitled to recover his ATE premium insofar as it is proportionate and reasonable in amount.

The Defendant argues that a premium of £418.70 is disproportionate to the amount of damages agreed in this case. I am unable to accept that submission.

First, even if I thought it correct to assess the proportionality of the premium simply by reference to the amount of damages claimed, it would not strike me as self-evident that an insurance premium of £418.70 is disproportionate to a claim settled at £2,310.

Second, as the Claimant points out, the correct approach to the proportionality of an ATE premium was identified by the Court of Appeal in Rogers v Merthyr Tydfil [2006] EWCA Civ 1134. In Rogers the premium in question was £5,103, representing the final stage of a staged premium. The Court did not find that premium to be disproportionate by reference to damages agreed in the sum of £3,105, plus interest.

In Rogers Brooke LJ (at paragraph 100) referred to Section 11 of Costs Practice Direction, which reminds parties that in applying the test of proportionality, the relationship between the total of the costs incurred and the financial value of the claim may not be a reliable guide.

At paragraph 105 of his judgment, Brooke LJ emphasised that if it is necessary to incur a given premium (in that case, a staged premium) then the premium should be adjudged a proportionate expense, and that necessity may be demonstrated by strategic considerations which travel beyond the dictates of the particular case, including the characteristics of the insurance market. The court considered evidence that demonstrated that the premium was reasonable by reference to the particular risk undertaken by the insurer. Further, the Defendants had been unable to identify any cheaper alternative provider for that particular claim. The cost of the premium had been reasonably and necessarily incurred.

Miss Bumpus for the Defendant submitted to me that the introduction, after Rogers, of the RTA protocol (with its emphasis on saving costs) justifies a departure from, or at least a variation of, the Rogers approach. She also suggested that this case can be distinguished from Rogers in that the Claimant’s solicitors in this case (unlike the Claimant’s solicitor in Rogers) would have some purchasing power in the insurance market. I do not regard the first argument as sustainable. The Court of Appeal’s judgment is, and remains, binding. Nor, for reasons I shall give, do I regard the matter of purchasing power to be material.

I am satisfied that the premium in this case is not disproportionate. Some of my reasons for that conclusion also have a bearing on my conclusions as to its reasonableness, and are set out below.

During the course of submissions, I referred the parties to the judgment of Mr Justice Simon in Kris Motor Spares Ltd v Fox Williams LLP [2010] EWHC 1008 (QB).

Simon J, at paragraph 44, summarised the position following Rogers in this way:-

The Defendant’s case to the effect that the amount of the ATE premium was unreasonably high is supported by the witness statement of Mr Thomas Ball dated 5 August 2011. Mr Ball exhibits to his statement a list of ATE premiums paid in cases settled by the Defendant’s insurer. The relevant policies date between 28 May 2010 and 24 December 2010. Mr Ball describes the list as a random cross-section demonstrating typical market rate premiums for cases that settle by stage 2 of the RTA Protocol process. He refers to premiums ranging between £78.75 and £99.75, and attaches to his statement copy policy schedules.

In my view Mr Ball’s evidence does not stand up well to analysis and is insufficient to raise a real challenge to the reasonableness of the premium paid by the Claimant. I say that for the following reasons.

Mr Ball cites 16 examples of ATE premiums settled by the Defendant’s insurers. None of them actually go to show (as Mr Finn points out) that a lower premium could have been purchased by the Claimant in this particular case.

This still leaves room for the conclusion that, by reference to premiums generally available for RTA claims of this kind, the premium paid by the Claimant appears unreasonably high. However the information before me as to the terms of the policies to which Mr Ball refers is very limited.

I cannot, on the information available, compare the products offered. It is, though, clear that the premiums relied on by Mr Ball are, except possibly in three cases, the lowest or rebated stage of staged premiums, payable if the claim in question settles within the RTA Protocol. The exact structure and amounts of the staged premiums shown is not clear in all the examples given, but the final stage premiums cost up to £2,835, or stand to be individually rated.

The three exceptions are all National Accident Helpline (NAH) cases. Mr Finn asserts that NAH policies may well be available to panel members only. It is unclear whether the premiums shown are first-stage premiums or not. Either the insurer, Allianz, has in at least three cases offered single premiums at a cost commensurate with the first-stage or rebated premiums offered by its rivals, or (which seems, on the very limited evidence available, more likely) the premiums shown are first-stage or rebated premiums. In the absence of further information they are of no assistance.

The premium paid by the Claimant in this case is a single premium. The Defendant, in relying upon the staged examples referred to above, does not compare like with like.

In Rogers, at paragraph 111, Brooke LJ observed that “It is not legitimate to compare the total premium payable at the third stage of a three-stage premium model with the single premium under a single premium model that is payable throughout the progress of a claim to trial”. Precisely the same applies to the comparisons offered in this case between a single premium and the first stage of staged premiums.

Miss Bumpus made several further submissions which (cogently argued though they were) seem to me to face insurmountable difficulties. I shall summarise them, and my conclusions.

First, Miss Bumpus argued that this case bore little or no risk of settling outside the RTA Protocol, so that it was unreasonable for the Claimant to incur a single premium rather than a staged one.

This assertion is unsupported by evidence of the position when the policy was taken out. In the absence of such evidence it is either a bare assertion or an invitation for me to employ hindsight, which would be wrong in principle. I have no reason to suppose that there was never any real risk that this claim would not settle within the RTA Protocol. Some such risk will at the outset be a feature of most, if not all, cases. Insurers are aware of that risk, as illustrated by the very existence of staged premiums and by the fact that the policies referred to by Mr Ball offer total cover of between £25,000 and £100,000.

I have seen nothing to support the proposition that it was unreasonable for the Claimant in this case to take out a policy with a single rather than a staged premium. By definition a single premium will cover all risks from the outset. For that reason it is likely (as some of the examples cited by Mr Ball illustrate) to be significantly more expensive than the first stage, and significantly less expensive than the final stage, of a staged premium.

Single and staged premiums, as Mr Finn points out, simply represent different ways of assessing risk. It is evident from Rogers that neither approach can be characterised as innately unreasonable.

Mr Finn supplies a list, derived from Litigation Funding’s August 2011 edition, of insurers offering single and staged premiums for RTA claims. The list is of very limited evidential value, but it does indicate that for claims of this kind, at least as many insurers offer single premiums as staged premiums. It also indicates that the single premiums on offer are comparable in cost to that paid by the Claimant in this case.

In effect the Defendant’s argument invites me to second-guess the judgment of ATE insurers in a market which offers both single and staged premiums for low-value RTA claims – the sort of judgment which, as the Court of Appeal concluded in Rogers, I am not equipped to assess without the assistance of expert evidence. I have no basis for reaching the conclusion that the Claimant’s choice was unreasonable.

Miss Bumpus submitted that, the premium being self-insured, the Claimant was never at risk as to costs. Accordingly the level of premium is unreasonable. This seems to me to fail to distinguish between the risk to the Claimant and to his insurer, and to overlook the fact that the reasonableness of the premium will (as Brooke LJ found in Rogers at paragraph 108) by measured by reference to, among other matters, the financial risk to the insurer.

As I have noted, it is not suggested that the Claimant should not have taken out insurance at all; doing so was a reasonable and (as in Rogers) necessary protective measure. As Brooke LJ stated at paragraph 118, referring to Callery v Gray (No 2) [2001] EWCA Civ 1246, it is permissible and reasonable for a premium to be insured by the policy. It follows that it was reasonable for the Claimant in this case to incur the cost of a self-insured premium.

A further submission made by Miss Bumpus was that the indemnity limit offered by the Claimant’s policy was excessive for a claim of this nature. The level of cover is one of the matters mentioned in part 11.10 of the Costs Practice Direction as pertinent on the assessment of the reasonableness of an ATE premium.

In submissions the level of cover was referred to as £100,000. According to the Notice of Funding, it is £50,000. Either way, one obvious difficulty with this argument is that most of the policies referred to by Mr Ball offer cover of £100,000, indicating that many insurers consider it appropriate to offer such a level of cover to meet all the risks of a low value RTA claim.

Another difficulty is that the argument assumes that the size of the premium is dictated directly by the maximum extent of cover, and I have no evidence to that effect. In Rogers, the limit of indemnity was £100,000. That was not taken as an indication that the premium was unreasonable, not least because it was in fact calculated by reference to more sophisticated criteria, in particular the actual level of risk and potential exposure.

In summary, I am invited by the Defendant to depart from the Approach of the Court of Appeal in Rogers v Merthyr Tydfil in assessing the reasonableness and proportionality of an ATE premium for a claim falling within the Pre-Action Protocol for Low Value Personal Injury Claims in Road Traffic Accidents. It is not open to me to do so. In the light of Rogers andfor the reasons I have given, it is my conclusion that the evidence offered by the Defendant does not discharge the evidential burden identified by Simon J in Kris Motor Spares, to advance at least some material in support of the argument that the premium is unreasonable.I have no reliable, material evidence before me to indicate that the premium paid by the Claimant is unreasonably high. It is not disproportionate, and it is recoverable in full.