In April 2000, the Government did away with legal aid for most purposes. Solicitors and insurance companies were asked to take the place of such a notorious burden on the taxpayer. There were high and excited hopes for the new regime. As it is, conditional fee agreements and after the event insurance (ATE) are yet to become seen as popular funding methods and their proper development is being frustrated.
Perhaps because the Government was in some kind of a hurry to discard public funding, the new legislation was a potential source of dispute. There were great expectations that Callery Gray would remove some of the uncertainty.
In Callery, the defendant's insurer, Norwich Union, claimed that Temple Legal Protection's £350 ATE premium was excessive in amount and could not be recovered because the insurance was taken before the issue of proceedings. Pre-issue premium was vindicated (as it had to be if the insurance was to give the same protection as that formerly enjoyed by publicly-funded litigants) and, having referred the matter to Master O'Hare for an extensive report, the amount of Temple's premium was upheld.
It is disappointing to hear that, notwithstanding the decision in Callery, the large liability insurers are proving obstinate in accepting their liability to pay ATE premiums. Apparently, even after the matter was so comprehensively debated, some costs negotiations acting for those large insurers have failed to appreciate that Temple's £350 premium related to a straightforward, fast-track, passenger road traffic accident claim and did not set a precedent for every case.
If that is to be the approach of liability insurers, it is unfortunate that the Court of Appeal chose to ignore Master O'Hare's recommendation that an ATE premium should be presumed reasonable until proven to the contrary.
It is also a little disconcerting to hear that liability insurers who gave evidence in Callery are now admitting that their own underwriting rates have been miscalculated by up to 100 per cent for more than five years. This is perhaps because they have failed to allow for the costs of ATE premiums in their underwriting models.
Capacity in the insurance world has reduced since 11 September and punters are being told to expect premiums to double. One wonders whether, in those circumstances, Norwich Union would be prepared to settle a claim to £700 in respect of Callery's ATE insurance without taking the matter to the Court of Appeal.
|“It is unfortunate the Court of Appeal chose to ignore recommendations that an ATE premium should be presumed reasonable until proven to the contrary”|
Unfortunately, the result of Callery may have been to inflate the cost of ATE insurance. For example, the Law Society-endorsed Accident Line Protect scheme has just increased its rates yet again. Its rate for a simple road traffic accident has risen from £155 to £300 in the past 18 months, and now to £375, only months after the Callery decision.
Of course, it is well known that so-called 'claims managers' have been inflating the cost of ATE insurance to their customers at the expense of the good name of ATE as a funding method. But they are not the only parties doing ATE an injustice.
The word 'provider' has become a prominent word in the ATE market, because its lack of meaning allows mere intermediaries – with little or no control over the business they write – to offer ATE insurance. The Law Society has a role to play in protecting the public and its members from some of the 60 so-called ATE providers. There must be a minimum standard to be maintained, even if it is to ensure that intermediaries carry some professional indemnity cover. The Law Society gives some credibility to the providers it lists in its own publications, and it should not do so without carrying out some basic checks.
Solicitors have a role to play in choosing a responsible provider. A check for professional indemnity cover, underwriting limits and authority and the identity of the underwriter are all prudent and may be expected by the lay client. If all that is too daunting, a good professional insurance broker will be able to advise. Alexander Forbes and Marsh are both experienced in this particular field.
There is no justification for any insurer or intermediary to charge an assessment fee – fees of more than £300 have been charged. But there are plenty of good insurers who do not charge and they are to be encouraged.
Greystoke, Litigation Protection and Saturn have all turned to legal expenses insurance company DAS for their underwriting capacity. Those seem like unlikely unions as Paul Asplin, managing director of DAS, has said that he sees before the event insurance as the way forward. Irony apart, one can only hope that the result is not a compromise in independence and a further shrinkage of capacity in a market which needs some encouragement.
Ian Lamacraft is a specialist insurance and insolvency barrister at Bracton Chambers