Percy v Anderson-Young

On a standard-basis assessment, the reasonableness of taking out ATE insurance and the reasonableness of the premium are distinct questions. The court must assess the premium by reference to the circumstances as they reasonably appeared when the insurance was obtained or varied. A costs judge should not second-guess an underwriter’s assessment of litigation risk or reduce a premium on an arbitrary broad-brush basis without an adequate evidential foundation. Where ATE insurance was necessary to protect the claimant against a substantial adverse costs liability, the premium was proportionate if reasonable in amount. The ability to make a broad-brush assessment permits appropriate scrutiny of over-insurance, but does not confer underwriting expertise on the costs judge.

The claimant sustained severe brain injury in a road accident caused by the defendant. Liability was admitted. The claim was settled at mediation for £1.4 million, and the approved order provided for detailed assessment of the claimant’s costs.

The parties agreed all costs except the claimant’s ATE premium. The claimant had obtained additional cover of £450,000, making total cover of £500,000, shortly before the intended trial. The premium claimed was £533,017.13. District Judge Moss accepted that obtaining the additional cover and its level were reasonable, but reduced the recoverable premium to £82,513.07. The central issue on appeal was whether that reduction was legally and evidentially justified.

1. Appeal allowed. The claimant was entitled to recover the ATE premium of £533,017.13.

2. Under CPD 11.7, the reasonableness of the premium had to be assessed by putting the court in the position of the solicitor when the additional insurance was obtained. The District Judge had correctly found that obtaining additional cover, and obtaining cover of £500,000, were reasonable. He then erred by treating the late timing of the insurance and the supposed availability of a lower premium as reasons for reducing the premium. Those matters either contradicted his earlier finding or lacked an evidential foundation.

3. The distinction between the level of cover and the underwriting assessment was material. A costs judge may make a broad-brush assessment where the cover is excessive, as illustrated by Kai Surrey v Barnet and Chase Farm Hospitals NHS Trust [2016] EWHC 1589. That did not justify substituting the judge’s own assessment for the underwriter’s assessment of the risk in this case. The District Judge had fallen into the trap identified in Rogers v Merthyr Tydfil [2006] EWCA Civ 1134.

4. The premium was necessary because the claimant faced a potential adverse costs liability exceeding £500,000 if she failed to beat the defendant’s Part 36 offer. Applying Coventry v Lawrence [2015] UKSC 50 and Rogers v Merthyr Tydfil, a necessary premium was proportionate provided that it was reasonable in amount. The evidence showed a complex, high-value claim with disputed cognitive injury, capacity, care, employment and quantum issues. The underwriter was entitled to regard the trial risk as substantial.

5. The reduction to 25 per cent of the lower staged premium was unsupported by evidence and was effectively an arbitrary mathematical exercise. If the court intended to determine that the underwriting decision was flawed, expert or oral evidence should have been obtained. The full premium fell within the reasonable range of premiums available at the relevant stage.

High Court (Queen’s Bench Division): The appeal from District Judge Moss’s assessment order was allowed. The recoverable ATE premium was restored to £533,017.13.