Peterborough & Stamford Hospitals NHS Trust v McMenemy & Ors

A recoverable after-the-event insurance premium in a post-April 2013 clinical negligence claim remains subject to assessment under the Civil Procedure Rules 1998, including the new proportionality test. The clinical-negligence regulations permit, but do not require, its inclusion in a costs order.

A claimant may ordinarily obtain block-rated insurance covering liability and causation reports when entering into a conditional fee agreement. The introduction of qualified one-way costs shifting and the new proportionality test did not displace that policy-based approach. The absence of an expert report does not make early insurance unreasonable in principle. The costs judge may still examine whether the type and amount of cover were reasonable and proportionate, but should not deconstruct a packaged policy without evidence that narrower cover was available.

These conjoined appeals concerned premiums for after-the-event insurance obtained by two clinical-negligence claimants. Both claims settled before proceedings were issued and before an expert report was commissioned. The policies included cover for the cost of expert reports on liability and causation.

In McMenemy, a deputy district judge disallowed the premium in principle because the policy had been obtained before the medical records had been considered. HHJ Pearce allowed the claimant's appeal and remitted the amount of the premium for assessment. The NHS trust appealed.

In Reynolds, District Judge Rogers considered cover for causation reports reasonable but cover for liability reports unreasonable. He disallowed the whole premium because he declined to apportion it. The claimant appealed directly to the Court of Appeal.

The central questions were whether the premiums fell within the costs-assessment jurisdiction and the new proportionality test, and whether insurance could reasonably be obtained when the claimant first entered into a conditional fee agreement.

1. Disposition. The NHS trust's appeal in McMenemy was dismissed. Mr Reynolds's appeal was allowed. Beatson LJ and Hildyard J agreed with Lewison LJ.

2. The clinical-negligence regulations do not make a qualifying premium automatically recoverable. Regulation 3 states only that a costs order may include the premium. The power to make a costs order remains discretionary under section 51 of the Senior Courts Act 1981 and is exercised through the Civil Procedure Rules 1998. Where a claim settles through timely acceptance of a Part 36 offer, the resulting standard-basis assessment likewise takes place under those Rules.

3. The new reasonableness and proportionality regime in CPR 44.3 applies to recoverable premiums for post-April 2013 clinical-negligence claims. Such claims fall outside the transitional regime preserved by CPR Part 48. They also enjoy qualified one-way costs shifting. A premium may therefore be reduced or disallowed if it was unreasonably incurred, unreasonable in amount or disproportionate.

4. The court nevertheless declined to depart from the policy approach in Callery v Gray [2001] EWCA Civ 1117. Parliament retained a limited exception for insurance funding liability and causation reports because claimants might otherwise lack access to the reports needed to investigate clinical negligence. Parliament knew that block-rated insurance was commonly obtained when a claimant entered into a conditional fee agreement. The replacement regulations deliberately removed the proposed bar where no report was ultimately obtained. Qualified one-way costs shifting did not remove a claimant's exposure to their own disbursements.

5. It therefore remains permissible to obtain the insurance when the conditional fee agreement is made. The reasonableness of doing so is not reconsidered case by case according to the apparent strength or value of the individual claim. District Judge Rogers had no evidence that insurance limited to causation reports was available. He was therefore wrong to separate liability cover from causation cover within the packaged policy.

6. The amount and structure of the premium remain open to assessment. A defendant may contend, with suitable evidence, that another form of insurance was reasonable and proportionate, including staged or rebate-bearing cover. Those quantum questions were not before the court.

1. Court of Appeal (Civil Division): In [2017] EWCA Civ 1941, dismissed the NHS trust's appeal in McMenemy and allowed Mr Reynolds's appeal.
2. Liverpool County Court: HHJ Pearce allowed Ms McMenemy's appeal from DDJ Holligan, held the premium recoverable in principle and remitted its amount to a regional costs judge.
3. Norwich County Court: District Judge Rogers held that causation-report cover was reasonable but liability-report cover was not. He declined to apportion the premium and disallowed it entirely.