Judgment has now been handed down in the much anticipated case of Peterborough & Stamford Hospitals NHS Trust v McMenemy & Ors  EWCA Civ 1941, in which the Court of Appeal has considered it permissible for ATE insurance to be taken out as soon as a claimant enters into a Conditional Fee Agreement [CFA].
Mr Bacon QC [for the respondent and appellant in the joined appeals respectively] argued that the introduction of QOCS had not changed the position that an unsuccessful claimant would find themselves in with regard to own disbursements and thus there was an incentive to insure against possible adverse costs, or the risk that [in the event of a successful outcome] the part of damages designed for PSLA are diminished in paying legal costs. It was reasonable to take out ATE insurance at a time when solicitors were first instructed and it would be impractical for a claimant to take out two policies, one at the outset for general disbursements and then another at a later date to cover the cost of expert reports – therefore it must be reasonable to take out a policy that includes the cost of expert reports under a single policy.
Whilst acknowledging force in submissions to the contrary, Lewison LJ was not persuaded to depart from the policy decision in Callery v Gray [to examine the reasonableness of taking out ATE insurance on a case by case basis], nor that the new test of proportionality required a case by case approach. The view taken was that it was clear from the Government’s formal response to Sir Rupert Jackson’s recommendations that the Government had decided to exclude ATE insurance premiums relating to the cost of expert reports in clinical negligence cases from the general abolition of their recovery. The reason behind this being that access to justice may be affected by a claimant’s inability to afford the “upfront” costs of such reports.
At paragraphs 75 and 76 Lewison LJ commented:
“75. Section 58C (2) (d) expressly requires a qualifying policy to apportion the premium between the recoverable and the non-recoverable elements. Although the first set of regulations would have barred recovery where no report was in fact obtained, that obstacle was removed from the No 2 Regulations. Nor did the Government accept Sir Rupert’s recommendation that there should be a breathing space equivalent to the protocol period during which the taking out of ATE insurance would be premature. The Government knew, as Sir Rupert had reported and as the case law made clear, that ATE policies were taken out at the same time as a potential claimant entered into a CFA, and must have intended not to disturb that practice. That, as it seems to me, was also recognised by the Explanatory Memorandum accompanying the No 2 Regulations.
76. For these reasons, in addition to those advanced by Mr Bacon, I consider that it is still permissible for ATE insurance to be taken out as soon as a claimant enters into a CFA.”
Turning to the comments of the District Judge in Mr Reynolds’ case, Lewison LJ found [with reference back to Rogers v Merthyr Tydfil] that he was wrong to have found that, although it was reasonable to take out ATE insurance against the cost of reports on causation, that it was unreasonable to insure against the cost of reports on liability. There was simply no evidence on which he could have come to the conclusion that any such limited ATE insurance was available in the market.
Lewison LJ went on to comment that it may well be that it would be open to a defendant to argue that it was unreasonable or disproportionate to take out one kind of ATE insurance rather than another. The old practice direction made reference to this, and it may be that it would be unreasonable in some cases to take out a single premium policy rather than one with staged payments; or one with the possibility of rebated premiums:
“78. But those questions go more to whether the amount in question was reasonable or proportionate rather than to the question of principle whether ATE insurance may be taken out at all at the outset. Questions relating to quantum are not before us and are, we were told, due to be considered by this court in another test case.”
In concluding the judgment, dissatisfaction was expressed at the fact that neither the rules nor the practice directions dealt with the recovery of ATE premiums in clinical negligence cases and invited this to be reconsidered.