15th Nov 2014
Do I need to take out After the Event Insurance?
In personal injury claims, you may want the safety net of After the Event insurance (ATE), but is it really necessary?
Before 1st April 2013, solicitors were entitled to recover both their success fees and any ATE premium from their opponent, assuming they won the case. If the case was lost, the ATE policy would pay the defendant’s costs. So why did Parliament interfere with a system that had worked relatively smoothly for many years? CFA’s or `no win no fee agreements’ have been used in civil litigation since the 1990’s. The main reason was cost. The winning party’s success fee and ATE premium added substantially to costs for defendants and their insurers.
Since 1st April 2013, the old rules have changed and now the claimant in an injury case is responsible for paying both the success fee and the ATE premium if they win their case. The success fee can be up to 100% of basic fees – this remains unchanged from when CFAs were first introduced. However, in personal injury cases, the success must not exceed 25% of the damages, excluding damages for future care and loss. This is designed to protect claimants' damages in injury cases, and will ensure that any damages for future care and loss are protected in their entirety. These additional liabilities have to be deducted from a claimant’s winnings at the conclusion of the case.
So in what circumstance does a claimant need an ATE premium for CFA’s entered into after 1st April 2013? One of the most important changes to the costs rules after this date is QOCS, or `qualified one way costs shifting’. This means that Claimants are no longer liable to pay the Defendant’s costs, even if they lose, so why is ATE needed at all? In fact when QOCS was introduced, it was intended to be an alternative to ATE insurance.
However, like all things in law, nothing is ever straightforward. There are some circumstances where a Claimant may have to pay the Defendants cost and this is why it may be sensible to purchase ATE insurance.
If a defendant makes a Part 36 offer during the case, the Claimant is back on risk of paying the Defendants costs. The Claimant is only likely to have his winnings to pay the Defendant’s costs. Therefore if the Claimant fails to beat a Part 36 offer, he could lose some or all of his damages. Furthermore, if the case is lost, some firms charge their clients for their disbursements, such as medical report fees. This is when an ATE policy is worthwhile. The ATE policy should pay both the defendants fees if the claimant fails to beat a Part 36 offer and his own disbursements. However, this risk has to be weighed against the cost of the policy which, in personal injury cases, has to be borne by the claimant.
Bearing in mind part of the new reforms were implemented to encourage early settlement and for parties to negotiate before legal costs escalated for both parties, one wonders why costs protection was not extended to cover the situation where a Claimant failed to beat a Part 36 at trial? After all, most experienced claimant practitioners think carefully when a Part 36 offer is received. Should we have the added incentive to accept an offer that is too low because we fear our client will have to pay the defendants costs if we fail to beat the offer at trial? It seems the Claimant is penalised either way. They may be encouraged to take out an ATE policy which they will have to fund if they win for the small risk of failing to beat a Part 36 offer.
Fortunately for clinical negligence practitioners the situation is different. Certain experts reports may be obtained through ATE insurance and these premiums are still payable by the defendant.
So what to do?
At least ATE insurance protects the Claimant to the extent that he becomes liable to a Defendant for their costs. Thus a Claimant with ATE may think he is in a stronger position if he rejects an offer, rather than meekly accepting the first offer that comes along. But is a claimant is still required to notify a defendant of an ATE policy following the April 2013 changes since a defendant no longer funds the premium? It seems to place a tactical advantage on a Claimant to notify the Defendant that insurance has been taken out.
It is still early days for post April 2013 cases to be reaching our courts. No doubt as cases progress, pitfalls in the new costs regime will come to light. One piece of good news for claimants who may have forgotten to notify a defendant about their additional liabilities (the success fee and ATE Premium) under the pre-April 2013 regime, is a recent case on this point. In Antonio Caliendo and Barnaby Holdings LLC v Mishcon de Reya (2014), the judge decided that even though the Claimants failed to inform the Defendant of the additional liabilities within 7 days of notifying them of the claim (as was then required by the rules), the Claimants were still entitled to recover them. The judge decided it would not be `fair, just or appropriate’ to deny the claimants relief since the Defendants had not been prejudiced by the breach.
Nationally respected solicitor Samantha Robson of Robsonshaw, operates a specialist firm of injury solicitors. She has been successfully claiming compensation for injury and abuse victims for many years. To call us anytime for specialist advice on a free, no obligation basis, please call 01392 345333, or email enquiries@robsonshaw.uk