Rogers v Merthyr Tydfil County Borough Council

An after-the-event insurance premium is proportionate where it was necessarily and reasonably incurred, even if it is large compared with the damages recovered. Necessity is assessed in the context of the insurance market and its role in providing access to justice.

Staged premiums are legitimate. Their reasonableness depends on the insurer’s financial exposure, the insured risk and the overall premium model. A court should not compare a late-stage cumulative premium directly with a single premium covering the whole claim. The policyholder should notify the opponent of the stages and trigger points. Without expert evidence, costs judges should assess underwriting decisions only in broad terms.

The claimant recovered £3,105 plus interest for personal injury after a contested trial. The district judge awarded costs including an after-the-event insurance premium of £5,103 including insurance premium tax. On appeal, a deputy circuit judge reduced the recoverable premium to £900 after relying substantially on indicative market information published in Litigation Funding.

The Court of Appeal permitted a second appeal and reheard the premium issue as a test case with extensive evidence from insurers, the Law Society and other interested parties. The principal questions concerned proportionality, proof of the reasonableness of the premium, and the legitimacy of staged and block-rated premium models.

1. Appeal allowed. The deputy circuit judge’s decision was set aside and the district judge’s allowance of the after-the-event premium was restored.

2. Reasonableness and proportionality are conceptually distinct. Under the approach in Lownds v Home Office (Practice Note) [2002] EWCA Civ 365, an expense which was necessary for the proportionate conduct of litigation should be treated as proportionate. Necessity is not an absolute test confined to the individual claim. It may include strategic considerations and unavoidable characteristics of the insurance market, which forms part of the means of access to civil justice.

3. A staged premium model is legitimate. The insurer’s exposure increases as a case approaches trial. A higher late-stage premium also encourages a defendant to reconsider the merits before trial and accords with the philosophy of the Civil Procedure Rules.

4. The size of an insurance premium cannot be judged solely against the damages. The court must consider all the circumstances, including the insurer’s estimated maximum loss, the prospect of failure, overheads and a reasonable profit. On the evidence, the £4,860 premium was reasonable and was arguably too low fully to reflect those matters.

5. Indicative premium tables do not provide dependable comparative evidence without details of the available cover, conditions and premium structure. A cumulative staged premium cannot legitimately be compared directly with a single premium payable throughout a case. The evidence disclosed no cheaper suitable provider and showed that the insurer’s average premium compared favourably with competitors.

6. A party using a policy with staged premiums should tell the opponent that the policy is staged and accurately identify each later trigger point. Ordinarily, a brief note from the claimant’s solicitor explaining the choice of product and whether the premium was block or individually rated will suffice on assessment. Without expert evidence, costs judges should assess underwriting decisions only in broad terms.

7. It remains permissible and reasonable for the premium itself to be insured. The court did not decide whether the unsuccessful defendant should bear any identifiable part of a premium purchasing benefits unrelated to the insured financial risk.

1. Court of Appeal (Civil Division): Allowed the second appeal, set aside the deputy circuit judge’s decision and restored the district judge’s allowance of the after-the-event premium.

2. Cardiff County Court: His Honour Graham Jones, sitting as a deputy circuit judge, allowed the defendants’ appeal and reduced the recoverable premium to £900.

3. Pontypridd County Court: Deputy District Judge Sandercock found the defendants liable, awarded agreed damages and summarily assessed costs including the claimed premium.