Rely on the most comprehensive, up-to-date legal content designed and curated by lawyers for lawyers
Work faster and smarter to improve your drafting productivity without increasing risk
Accelerate the creation and use of high quality and trusted legal documents and forms
Streamline how you manage your legal business with proven tools and processes
Manage risk and compliance in your organisation to reduce your risk profile
Stay up to date and informed with insights from our trusted experts, news and information sources
Access the best content in the industry, effortlessly — confident that your news is trustworthy and up to date.
With over 30 practice areas, we have all bases covered. Find out how we can help
Our trusted tax intelligence solutions, highly-regarded exam training and education materials help guide and tutor Tax professionals
Regulatory, business information and analytics solutions that help professionals make better decisions
A leading provider of software platforms for professional services firms
In-depth analysis, commentary and practical information to help you protect your business
LexisNexis Blogs shed light on topics affecting the legal profession and the issues you're facing
Legal professionals trust us to help navigate change. Find out how we help ensure they exceed expectations
Lex Chat is a LexisNexis current affairs podcast sharing insights on topics for the legal profession
Printer Friendly Version
Are claimants obligated to give defendants the chance to extend existing costs amnesty before taking out after the event (ATE) insurance? Roger Franklin, partner at Edwin Coe LLP, specialising in insurance litigation, considers the decision in Allan Coleman v Medtronic Ltd.
The case demonstrates that a claimant is under no obligation, before taking out after the event (ATE) insurance, to refer back to the defendant in order to give it the chance to extend an existing costs amnesty. In addition, a claimant will not be held
to be unreasonable even when taking out ATE insurance to protect against a comparatively small exposure. In the current case, the claimant, who had the benefit of a conditional fee agreement (CFA) and a costs amnesty from the defendant, took the view
that settlement was unlikely and did not justify further delays in its claim.
The case again reiterates the approach a judge will take when assessing the amount recoverable for ATE premiums incurred prior to 2013. Judges are not willing, in the absence of expert evidence, to substitute their own judgement for that of an insurer’s
assessment of the risk. Rather, a broad brush approach is taken when looking to reduce the recoverable amount of an ATE premium.
The defendant is a UK distributor of medical devices. It supplied cardiac leads to be used in cardiovascular defibrillators. The claimant was one of a number of claimants who instructed Leigh Day & Co after suffering personal injury when the leads
fractured causing electrical shocks. The issue in the case centred on the amount and recoverability of the ATE insurance premium which was taken out before 1 April 2013.
During early exchanges between the claimant and the defendant it was intimated by the claimant’s solicitors that claimants to the action would look to obtain ATE insurance to protect them from having to pay the defendant’s costs. This would
complement the CFA the claimant had with the claimant’s solicitors. In an attempt to reduce costs and the incurring of an ATE policy, a costs amnesty was agreed in which the defendant agreed to waive its right to recover individual costs and
disbursements. This was done, in part, to obviate the need for ATE insurance to be incurred by the claimant.
During this period a number of stays were agreed, which had the effect of extending the cost amnesty. A stay until 20 February 2012 was agreed to allow the parties to explore settlement options. On 31 January 2012, the defendant made an offer of settlement
to the claimant in the sum of £5,703. This amounted to less than 10% of the eventual settlement figure.
The claimant wrote to the defendant on 10 February 2012 stating that he had obtained a quotation for ATE insurance and that the defendant could avoid this cost by agreeing to one-way cost shifting. On 20 February the defendant wrote to the claimant stating
that it thought the incurring of ATE insurance unreasonable and disproportionate. On 2 March 2012, the claimant took issue with the agreement in place, in that it did not protect the client from the disbursements it incurred, and that it was not an
irrevocable one-way costs shift.
A further stay was agreed from 30 March 2012 to 25 April 2012. At the end of this stay, the claimant refused a further extension for the service of the defence. This was sought by the defendant so that it could obtain its own expert reports. On 27 April
2012 a defence was served denying liability. The effect of this was to bring an end to cost amnesty period. On 11 May 2012, the claimant took out the ATE policy and notice of funding was served. The claim settled on 27 March 2013 for £60,000.
As at 11 May 2012, the claimant had repeatedly warned the defendant that, in the face of any exposure to costs, he would take out ATE insurance. The claimant did not, as agreed, obtain the ATE policy while the amnesty was active, but only once the amnesty
came to an end the claimant was at risk. It should have been clear to the defendant that, in the absence of extending the amnesty, the claimant was going to obtain ATE insurance.
In Master Leonard‘s judgement there is no obligation that, before taking out ATE insurance, the claimant should have referred back to the defendant in order to give it the chance to extend the costs amnesty. The question then becomes: was it reasonable
for the claimant to reject the defendant’s suggestion of a further stay?
In the current case the Master found that no particular stay was mooted by the defendant to extend the amnesty, but rather that it sought an extension to obtain expert evidence (an exercise that would take many months). This would have the effect of extending
the costs amnesty. The Master noted that the proposed 25 April 2012 extension came six months after the service of the full particulars of claim.
In its letters of 11 May 2012, the defendant offered to settle the claim for a tiny fraction of its pleaded value. At this point it was clear the parties were still far from settling. As such, the claimant had no good reason to think that settlement,
without recourse to litigation, was so likely as to justify any more delay in pursuing his claim.
The Master also took the view that, while the amnesty offered by the defendant included individual costs, it did not extend to common costs. In addition, even though the defendant’s disbursements were covered by the amnesty, the claimant had been
incurring disbursements itself, which, while outside the scope of the amnesty, were covered by the ATE policy. As such the amnesty did not cover all of the exposure of the claimant and therefore it may be reasonable to incur the ATE premium.
The judgement details the overriding objective of the Civil Procedure Rules 1998, SI 1998/3132, but suggests that it was not incumbent upon the claimant to put its claim on hold for as long as the defendant was willing to extend a costs amnesty. Furthermore,
the Master found that by May 2012 the defendant was attempting to exert a degree of control of the terms and timings of the dispute resolution process, which it was not in the claimant’s best interests to accept. For the reasons given above,
Master Leonard took the view that, given the circumstances, it was reasonable for the claimant to take out the ATE insurance.
ATE premiums can be challenged on three grounds:
In respect of (2), in deciding when the premium was reasonable the court considers the following factors:
In Callery v Gray (No 2)  EWCA Civ 1246,  4 All ER 1, a costs judge was asked by the Court of Appeal to investigate the reasonableness of the ATE premium. The following points were made:
Interviewed by Diana Bentley. The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.
0330 161 1234