England and Wales High Court (Senior Courts Costs Office) Decisions

1. Is the contract of insurance void for uncertainty because at the time the contract is made the amount of the premium is insufficiently certain and is the said contract accordingly unenforceable by RSA against the claimant and if so what is the consequence?
   
   
2. Is the insurance arrangement between the client, the insurer and/or the solicitors unlawful on the grounds of champerty and if so what is the consequence?
   
   
3. Is the method of calculation of the premium inherently flawed and if so what is the consequence?
   
   
4. What commissions, if any, are payable to the claimants' legal representatives and/or any other agents of the insurers and if there are any, when and in what circumstances are they payable?
   
   
5. Should the amount of the recoverable premium be reduced on the grounds that an insurance policy ought reasonably to have been taken out at an earlier stage in the proceedings?
   
   
6. Has the claimant acted reasonably in taking out the RSA Pursuit policy, and if not what are the consequences?
   
   
7. What if anything is the recoverable amount of the premium against the defendant pursuant to Section 29 of the Access to Justice Act 1999?
   
   
8. Does the claimant's claim for the RSA Pursuit premium breach the indemnity principle because the claimant's purported liability to pay the premium is not a genuine liability but purely a device to enable recovery of the premium between the parties?
   
   
9. Assuming the method of calculation is not inherently flawed (issue iii) what is the relevance, if any, to the calculation of the RSA Pursuit premium of any pre-existing legal expenses insurance cover incepted and/or in existence prior to the claimant's agreement to enter into the Pursuit policy?
   

"Where in any proceedings a costs order is made in favour of any party who has taken out an insurance policy against the risk of incurring a liability in those proceedings, the costs payable to him may, subject in the case of court proceedings to rules of court, include costs in respect of the premium of the policy."

 

"17. (1) The general objective of this Part is the development of legal services in England and Wales (and in particular the development of advocacy, litigation, conveyancing and probate services) by making provision for new or better ways of providing such services and a wider choice of persons providing them, while maintaining the proper and efficient administration of justice.

(2) In this Act objective is referred to as "the statutory objective"."

 

"11.7 Subject to paragraph 17.8(2), when the court is considering the factors to be taken into account in assessing an additional liability, it will have regard to the facts and circumstances as they reasonably appeared to the solicitor or counsel when the funding arrangement was entered into and at the time of any variation of the arrangement.

...

11.10 In deciding whether the cost of insurance cover is reasonable, relevant factors to be taken into account include:

(1) [omitted]

(2) the level and extent of the cover provided;

(3) the availability of any pre-existing insurance cover;

(4) whether any part of the premium would be rebated in the event of early settlement;

(5) the amount of commission payable to the receiving party or his legal representatives or other agents."

"The premium is the consideration required of the insured in return for which the insurer undertakes his obligation under the contract of insurance (Lewis Ltd v Norwich Union Fire Insurance Co [1916] AC 509, 519)."

"46. ... The court specifically added "Satellite litigation involving such an exercise [i.e. examining evidence of insurance cover] is however unsatisfactory. The Judge can only be expected to give broad consideration to such evidence. It is not part of a function of a Judge assessing costs to carry out an audit of the insurance business" ... The court may wish to check the overall result which it reaches by reference to the alternative method of obtaining access to justice. This might involve looking at alternative rates of cover, or the costs which would be involved if litigation were to be funded in some other way. This has been called the "top down" approach. Nonetheless, in making that comparison it may be necessary to bear in mind that like may not be being compared with like ... Nevertheless in my judgment, the comparison between the cover provided by these appellants and other means of financing litigation, including other insurance cover, is a relevant consideration to which the appellants could properly bring ... the attention of the Senior Costs Judge. I say this, bearing in mind the general purposes of the new methods of funding litigation introduced by the 1999 Act and by the fact that it is obviously highly desirable in the interests of justice that these methods should be competitive. A premium may not be reasonable if there are alternative ways of providing the same funding at significantly less expense."

"The Insurer will provide the insurance described in this Policy in consideration of the Insured's promise to pay the Premium."

"INSURED

The term used to denote collectively both the Insured Litigant and Insured Solicitor in their capacity as beneficiaries under this Policy.

...

The Insurer's liability in respect of Normal Fees and Expenses shall not exceed in the aggregate 100% of the amount specified in the proposal for this insurance as the Insured Solicitor's reasonable estimate of the sum likely to be recovered from the Opponent, excluding costs, if the Legal Proceedings are resolved in the Insured Litigant's favour. This amount appears on the Schedule.

...

The net costs of the Opponent in the Legal Proceedings to the extent that the Insured Litigant is legally liable to discharge them, after taking account of any costs awarded against the Opponent or agreed to be paid by the Opponent. No cover is provided in respect of any success fee to which the Opponent or Opponent's solicitor or Opponent's barrister may be entitled.

The costs of the Insured's Solicitor acting for the Insured Litigant under the Conditional Fee Agreement and which form the basis of the calculation of the Success Fee.

Where the outcome of the Legal Proceedings is not a Success the Insurer shall have the right to have the Insured's Solicitor's bills taxed or assessed on the standard basis.

Expenses and other disbursements paid by the Insured's Solicitor to other parties which are reasonably and properly incurred by the Insured's Solicitor

a) in connection with the Legal Proceedings,

b) in appealing or resisting an appeal against the judgment of a court in connection with the Legal Proceedings provided Our prior written consent has been obtained to the appeal.

The Insurer shall not be liable for Counsel's fees where Counsel is retained to act in the Legal Proceedings under a conditional fee agreement.

...

Cover commences at the later of the inception date shown on the Schedule and the date of signing of the Conditional Fee Agreement.

Cover ceases when

a) the Legal Proceedings are concluded by a judgment of the Court of first instance or following an appeal to which We have given Our prior written consent, or

b) the Legal Proceeding are discontinued with Our prior written consent, or

c) the Conditional Fee Agreement is terminated whichever is the earliest.

The amount shown on the Schedule which becomes payable when the outcome of the Legal Proceedings is a Success.

Where the Insured Litigant receives an offer to settle or a payment into Court which equals or exceeds the definition of Success the Insured Litigant may at that time immediately pay the Premium based on the Normal Fees at that date. The Insured Litigant may elect by written notice to Us to continue with the action and defer payment of the Premium to the Conclusion of the Legal Proceedings. The Premium will then be based on the Normal Fees at the Conclusion of the Legal Proceedings. If, having made this election, the Insured Litigant ultimately fails to achieve a Successful outcome to the Legal Proceedings the Premium payable at the date when the Insured Litigant made the election shall remain payable.

The amount specified in the Conditional Fee Agreement as the percentage uplift to the Insured Solicitor's Normal Fees payable on the successful conclusion of the Legal Proceedings.

The Insured Litigant is offered or obtains at any time a net entitlement to money and/or damages and/or costs which, taking into account any counter-or cross-claim in the Legal Proceedings, equals or exceeds the sum shown in the Schedule as the definition of Success. If the Insured Litigant achieves such an outcome at trial and is required by Us to defend an appeal which results in a net entitlement to money, damages and costs which is lower than the definition of Success then the action will be deemed unsuccessful.

Where an offer to settle is received from the Opponent at any time which equals or exceeds the definition of Success then the outcome of the Legal Proceedings is Successful even if the Insured Litigant elects not to accept the offer.

...

Where the outcome of the Legal Proceedings is not a Success the Insurer will, subject to the Limit of Indemnity indemnify the Insured Litigant in respect of

a) Adverse Costs

provided that

1. the Court makes an award of Adverse Costs against the Insured Litigant or

2. the Legal Proceedings are settled or otherwise discontinued with the prior written agreement of the Insured Litigant, the Insured Solicitor and Us

3. the Insurer shall not be liable to pay any Adverse Costs until the Legal Proceedings are finally concluded.

(b) Expenses

provided that

1. the Insurer shall only be liable for any Expenses to the extent that the Insured Litigant is not entitled to recover them from the Opponent or any other party

2. the Insurer shall not be liable to pay any Expenses until the Legal Proceedings are finally concluded.

...

This insurance does not cover

1. The Insured Solicitor's Contribution

2. Any payment by the Insurer under this Policy which is due as a result of a discontinuance or settlement to which We have not given Our prior written consent.

3. Damages of any kind.

4. Enforcement proceedings.

5. Wasted costs or any increased legal or other costs arising from any unreasonable delay or negligence by the Insured Litigant or Insured Solicitor which in Our opinion is prejudicial to the conduct of the Legal Proceedings.

6. Under Section B only, any liability of the Insurer arising from the Insured Solicitor's failure to comply with procedural directions or pre-action protocols.

7. Legal Proceedings made, commenced, brought or transferred outside the Territorial Limits or which are not governed by English law.

8. Any payment by the Insurer arising from Legal Proceedings in respect of which the Insured is or but for the existence of this insurance would be entitled to indemnity under any other insurance policy.

9. Any amount which the Opponent is obliged to pay but fails to pay to the Insured Litigant or Insured Solicitor for any reason.

10. Normal Fees, Expenses and Adverse Costs incurred outside the Period of Insurance.

11. Any costs incurred by the Insured Litigant or Insured Solicitor in providing Us with any information or documentation under this insurance.

12. Any payment by the Insurer under the Policy where there has been misrepresentation or material non-disclosure by the Insured Litigant or Insured Solicitor.

13. Any payment by the Insurer under the Policy if the Legal Proceedings are stayed, discontinued, abandoned or withdrawn by virtue of the bankruptcy, insolvency or liquidation of the Opponent.

1. Premium

The Premium payable under this Policy and shown on the Schedule is established by reference to the Normal Fees of the Insured Solicitor.

The Premium is payable even if the Opponent delays or defaults in settling any judgment or agreed settlement.

The Premium will not be affected by taxation or assessment or any agreement which reduces the Insured Solicitor's Normal Fees or the level of the Success Fee.

...

3. Termination

The policy will terminate if the Insured Litigant or Insured Solicitor terminates the Conditional Fee Agreement.

We may cancel the Policy by giving fourteen days' notice in writing to the Insured Litigant and Insured Solicitor if

a) the Insured Litigant fails to comply with the terms of the Conditional Fee Agreement

b) the Insured Litigant does not follow the Insured Solicitor's recommendations with regard to settlement of the Legal Proceedings

c) the Insured Litigant does not follow Our recommendations with regard to settlement of the Legal Proceedings

d) the Insured Litigant rejects the Insured Solicitor's advice to discontinue the Legal Proceedings.

In the event that the Policy is cancelled, the Insurer shall be under no obligation to make any payment.

4. Minimising Claims or Legal Proceedings

The Insured must take all reasonable measures to minimise the cost of Legal Proceedings.

...

7. Due Observance

The due observance of and compliance with the terms provisions and conditions of the Policy insofar as they relate to anything to be done or complied with by the Insured Litigant or Insured Solicitor shall be conditions precedent to any liability of the Insurer to make any payment hereunder. In the event that the Policy is terminated the parties to this Policy shall continue to observe the conditions to the extent that they remain relevant.

8. Provision of information

The Insured Solicitor must

a) provide to Us regular progress reports on the Legal Proceedings and associated costs and when specifically requested by Us.

b) advise Us in writing as soon as an offer to settle the Legal Proceedings or a payment into Court is made by the Opponent. The Insured Solicitor and the Insured Litigant must not enter into any agreement to settle without Our prior written consent.

c) advise Us in writing as soon as either the Insured Solicitor or Insured Litigant wishes to discontinue the Legal Proceedings.

d) provide Us with a copy of the judgment of the Court in the Legal Proceedings.

e) advise Us immediately in writing if the Conditional Fee Agreement for which the Policy has been issued has been terminated or varied.

f) provide Us promptly with any requested information.

g) provide Us immediately with a copy of any Counsel's Opinion.

h) allow Us to inspect the files of the Insured Solicitor at any time, including after the conclusion of the Legal Proceedings.

The Insured Litigant or Insured Solicitor must advise Us of any material changes to the prospects of success in the Legal Proceedings.

..."

• The conduct of the hospital was reviewed by an independent physician from another hospital unfavourably to the Claimant.
  
  
  
• The claim was assessed for CFA purposes at 33% prospect of success, though that prospect had increased by the time of the proposal for insurance. In view of some favourable medical evidence the prospects were put at 70% for the proposal.
  
  
  
• The Claimant and her husband had spent two years trying to resolve the claim without litigation.
  
  
  
• The Claimant was unable to afford a premium payable at the outset. The Claimant made a Part 36 offer of ?75,000 before insurance was taken out. The Defendants refused that offer.
  

"Definition of success

The case is finally decided in favour of the insured litigant whether by a court decision or an agreement to pay the insured litigant damages."

• Rejection of the case by the Claimant's union solicitors Thompsons.
  
  
  
• Rejection of the claim to the CICA on the basis of criminal assault.
  
  
  
• Adverse evidence of an independent witness.
  
  
  
• Causation problems because of previous medical history.
  
  
  
• Various ATE proposals were rejected.
  
  

"Definition of success:

The claim for damages is finally decided in favour of the Insured Litigant whether by a court order or an agreement to pay the Insured Litigant damages or acceptance of any offer as advised."

• Causation, the Defendants argued that the Claimant's injuries were caused by the Claimant's karate activities.
  
  
  
• The Claimant was unsure of the date of the onset of the symptoms, limitation was thought to expire in Summer 2002.
  
  
  
• The policy was eventually taken up just before the expiry of four months for service, the insurers required further medical evidence.
  

"Definition of success:

The claim for damages is decided in favour of the Insured Litigant whether by a court decision or where an offer is received which the Insured Litigant's Solicitor advises should be accepted or acceptance of any offer."

"Definition of success:

The case is finally decided in favour of the Insured Litigant whether by a court decision or an agreement or acceptance of any offer as advised by the Insured Litigant's Solicitor."

• The Claimant had amnesia as to the circumstances of the accident.
  
  
  
• The Claimant had been drinking (which was the purpose of the outing) at the time of the accident.
  
  
  
• The Defendant bus driver, who was sober, was firm that the Claimant was wholly at fault.
  
  
  
• There was no independent direct witness evidence.
  
  
  
• The Claimant had before the event insurance up to ?25,000 which was used up and ultimately applied to disbursements.
  
  
  
• The defence raised a positive case not indicated in the reply to the pre-action protocol letter.
  

"Definition of success:

The claim for damages is finally settled in favour of the Insured Litigant whether by a court decision or where an offer is received which the Insured Litigants Solicitor advises should be accepted or any other offer accepted."

"Without ATE the use of CFAs would be impossible (since a litigant who could not afford to meet his own solicitor's costs could also clearly not afford to meet his opponent's costs if unsuccessful in the action)."

"Firstly it was obvious that the premium for such cases would have to be much larger than in run of the mill personal injury cases … Secondly it was obvious that a losing litigant would not have the means to pay the premium."

"That the premium needed to be deferred and conditional upon success. Those who won their cases would have the means to pay the premium. Those who lost would not need to do so."

"A ground breaking "after the event" conditional fee agreement protection plan."

• "No premium is payable at the outset.
  
  
  
• No premium is payable if your client's case is unsuccessful.
  
  
  
• Unlimited cover is provided for adverse costs.
  
  
  
• The majority of your costs and disbursements are paid if your client's case is unsuccessful."
  

"One further feature of the product's development was that we were aware that some solicitors were reluctant to use CFAs for fear of the effect of losing cases on the firm's financial position. We therefore incorporated a section of cover … under which we would cover a proportion of the solicitors own costs. This facility was not used in any of the Test Cases but does have relevance to the rating mechanism explained below."

"We therefore determined to make the premium deferred and we did this prior to any legislation as to recoverability of the premium from the opponent."

"will always be in a position at any stage in the case to know what their costs are and these will be quantifiable at whatever stage the case is concluded."

"We felt that it was a reasonable assumption … to make in broad terms, for the purpose of establishing and maintaining a consistent underwriting procedure that the level of the insured's costs and the opponent's cost would escalate for the duration of the case on a roughly equal basis … We thus arrived at the basic fundamentals of a sliding scale premium calculated by reference to own solicitor's fees. It is important to appreciate that each case is rated on the estimated costs of that case. There is no standard assumption, for example, that the insured liability will always be a fixed proportion of own costs. The only workable assumption is that, as costs for both sides start at zero and proceed to the estimated levels at trial, the relationship between own costs and the insured's liability will remain constant throughout the action."

"In order to do this it was necessary to form a view as to:

(i) the likelihood of the insured's case succeeding in percentage terms; and

(ii) if the policy was called upon, how much would have to be paid out in order to work out the break even position, or "burning cost" for the scheme, where the cost of the claims paid exactly matches the value of risk premium income (excluding expenses and commission) received. Given the product was an entirely new concept, the absence of previous underwriting data, and the considerable volatility in rates in the ATE market, we resolved to apply basic principles to arrive at an appropriate rating model."

"In order to form a view as to the burning cost it was necessary for rating purposes to predict what the policy liability, ie own disbursements and adverse costs and disbursements, might come to in each case. This was done by asking the prospective insured's solicitors in the proposal form to provide us with the best estimate of these costs and disbursements to trial … The insured's solicitors would also be in the best position to know the likely rate of the other side in coming to their estimate which we could then use to calculate the premium."

(a) adding together the opponent's solicitor's estimated fees and disbursements and the claimant's solicitor's own disbursements;

(b) dividing the total by the anticipated basic fees of the claimant's solicitors (producing an exposure multiplier);

(c) arriving at a multiple, which is inversely proportionate to the percentage prospects of success of the case at the time the cover is taken out (producing a risk multiplier);

(d) applying the risk multiplier to the exposure multiplier to reach the relevant burning cost premium rate;

(e) adding an allowance for profit and administration and an allowance for broker's commission (if a broker is appointed). IPT is then due on the resultant premium (paragraph 41).

"It can also be seen that our exposure is on average approximately ?60,000 compared with the solicitors' exposure of ?38,000. If it is reasonable for a solicitor to recover a success fee in a range of 60% - 100% to reflect the risk, it follows that the required premium rate for our exposure is in the range of 100% - 150% to reflect the risk we take."

"The intention was to introduce a policy that was cost effective and also was aimed at solicitors who did bulk PI work and had the demonstrable track record of using CFAs effectively. Such solicitors needed to have high quality systems in place for handling such large scale work, and expertise in it. Watermark was designed as a delegated authority scheme for such solicitors as opposed to one off cases only - they were therefore expected to place all eligible risks with us.

...

14. The cover is similar to Pursuit to the extent that premium is conditional and deferred. However there is a limit of indemnity of ?125,000, and in common with other delegated authority schemes in the market there is a stringent set of acceptance criteria for cases to be eligible to be put on cover by the solicitor."

"It [obviously] depends on the state of proceedings. It depends on whether information has been shared under protocols between the solicitors, and often in our cases, because they are taken on late, there may be reliance on an estimate provided by the other side, but that still suffers from the same propensity for variance as the solicitor's own costs. By the nature of the fact that they are estimates, they are not likely to be absolutely accurate. On the other hand, they may be much more accurate than saying that you want, let us say, ?100,000 cover in every case. I would say there is some difficulty. In the majority of cases those estimates are unlikely to be seriously adrift in terms of their relationship one to the other, which is fundamental to Pursuit rating. In some cases -- in the Gouldens case I mentioned previously, which is such an example -- where because the case had an unexpected turn, all the estimates were similarly affected and were wrong. From my experience there is a tendency for estimates to be inaccurate in individual cases. In most cases, the inaccuracy is not material. In some cases both sides costs will be materially underestimated because the case goes all the way to trial and the trial is more complex than is anticipated, but I have some difficulty with the assertion that there is systematic under - or over - estimating ..."

"… the reason for that is if we charge an up front premium there would be no reduction if solicitor's costs were taxed or assessed down, so why should there be with the benefit of hindsight? We set the premium rate up-front. If we charge an up-front premium amount there would be no adjustment and we think it is inequitable that there should be a retrospective adjustment."

"I set up The Judge in April 2000 as an advisory source and started broking in 2001. The Judge is deliberately not a tied agent. Its business purely comes in from solicitors. The Judge has broked about 2,500 cases since November 2001 on behalf of about 700 firms of solicitors. There has been a 50% increase in cases submitted on an annual basis. We reject about 40% of cases on sight of the proposal forms and these do not go to the insurers at all."

"We would usually send a proposal to the most suitable three or so of them [ATE insurers] on any occasion. I would regard it as a tight market so far as the availability of ATE insurance underwriting capacity is concerned. There are only a limited number of insurers active in the market. In most cases it would be rare to get as many as three quotations back accepted … Outside the mainstream personal injury field the market is a declining one and is far from vibrant. This is particularly the case with clinical negligence where there are only a handful of providers remaining in the market."

"Pursuit is a somewhat different product than some of the alternatives in the market in that it operates on a sliding scale and does not have a specified premium figure at the outset. At the time we supply the quotation to solicitors we take pains to make it clear how Pursuit operates, particularly to any solicitors who may be unfamiliar with the product. When in discussion with solicitors, I seek to tell them that there is a parallel between the premium and their success fee, with the risk for solicitors bearing their own fees being comparable to the risk being borne by the insurers. I also explain that the risk for insurers can in fact be substantially greater than theirs, because the policy covers adverse costs, adverse disbursements and own disbursements. I also tell them that the nature of the policy can also be an incentive for the other side to settle, because the cost of the premium rises the longer the case proceeds."

"We receive a deferred commission of a general rate of 10% from First Assist conditional upon the successful outcome of the case."

"Where insurance cover is provided under a delegated authority scheme, it is a condition of the scheme that the solicitors must insure all their CFA cases using that particular policy and for the policy to be incepted at the same time that the CFA is entered into, usually before any letter of claim is dispatched. Solicitors who are not part of the insurer's panel authorised to work on a delegated basis could not access that type of policy. … The usual period of time for acceptance is 14, 21 or 28 days. Once a claimant has been declined cover by one insurer, that has to be disclosed in any future insurance applications and in my experience if a proposal has been turned down by two insurers it is almost "certain death" to the prospects of sourcing insurance from any other provider."

"Premiums shown here are indicative only and may vary depending on a number of factors which might include the stage the case has reached, whether liability is in dispute, the prospects of success, etc."

There are also other more specific warnings relating to particular policies.

"insurance policies are not that black and white. It's a mechanism to try and spread the risk because you could have had a premium which is charged on the full amount which is payable from day one and then it settles the day after, and that in certain circumstances can end up being more expensive than a policy like this … If you draw a comparison with a case which is insured early on, say for ?100,000 cover, and you might pay a premium of between 20 and ?30,000 for that typically for a non- personal injury case. Pre- proceedings the only liability for the insurer is always going to be disbursements but the premium is still ?20,000 to ?30,000. So the thing you are describing is not unique to First Assist. "

"We can advise that for a limit of indemnity of ?100,000 the premium payable, for our Clinical Justice Plan will be ?13,230 being ?12,600 together with insurance premium tax at the current rate of 5% of ?630.

We can advise that for a limit of indemnity of ?75,000 the premium payable for our Clinical Justice Plan will be ?9,922.50 being ?9,450 together with insurance premium tax at the current rate of 5% of ?472.50."

"If cover is not taken out in this period it may or may not be available at a later stage depending on the circumstances although the premium required will certainly be higher. If you are unable to accept this quotation within 21 days please advise before the expiration of this period.

You should ensure that the level of indemnity you have sought will provide full cover for the entirety of the proceedings. Because of relevant actuarial evidence most underwriters are reluctant to consider later increases to the indemnity particularly after the issue of proceedings."

"I trust the premium is acceptable to your client and look forward to receiving your cheque in order that we may issue the policy documentation. If your client is obtaining funding for the premium we need confirmation of their application, in writing, within 21 days."

"I therefore approached a lender with a request for a loan by way of a credit agreement under the Consumer Credit Act 1974. The loan was to be used to pay the premium. Mrs Baker signed such an agreement with the proposed lender First National Bank Plc (FNB)."

"I requested he investigate possible funding terms on behalf of Mrs Baker, I also pointed out that I had to issue proceedings by the end of July 2002, so time was short.

...

18. Mr Gilbert returned to me with the possibility of a policy with First Assist. There were discussions about the nature and terms of the policy but it was also clear to me that First National were no longer effective or interested, and in fact never replied to the application for a loan by Mrs Baker to pay the premium to LPL. This left the Bakers with an LPL policy which they would have to pay the premium up-front which, financially, they were not in a position to do and which left Mrs Baker in a thoroughly unsatisfactory position with limitation a few months away."

"This letter is written to provide an opportunity for settlement of our client's claim without the additional cost of proceeding to trial including the cost of insurance cover which is available to our client."

"If this offer is not accepted (within 21 days) then our client will exercise the insurance cover available to her … such a settlement would save additional cost particularly for the Trust and we would draw your attention to the savings made in avoiding the insurance premium cover if such a cover is reached."

"You will therefore appreciate that we do not have the luxury of delaying the cost of insurance cover beyond the limit of the Part 36 offer."

"Yes there are different functions. The claimant has to build a case and that takes a lot more time and effort, whereas the defendants try and destroy it and that takes a lot less time."

"My client and I were both astonished about the level of premium but you have to take the product as you find it and it is insurers who run the market not the lawyers. These were observations that I made as a clinical negligence lawyer but of course bear no relation to the rating set by the insurance industry. I might also say that the limit of ?75,000 - ?100,000 I would not be comfortable with these days."

"In the event of the costs and the premium being reduced upon assessment we would be agreeable to taking a commercial view in such a situation and that we would consider either accepting a reduced premium based on the actual assessment of the costs or limiting any sum in respect of the shortfall that we would seek from the claimant from damages depending upon the reason for the reduction in the costs claimed."

"I am aware of a range of different ATE products available in the market as a significant proportion of my caseload is conducted pursuant to CFAs backed by ATE products. I use a number of different ATE providers and I am not tied to recommending any particular product. I advise my clients on a case by case basis depending on the circumstances. It is not possible to give standardised advice in this regard. I must consider whether the proposed ATE product is suitable for my clients in accordance with my professional responsibility."

"Our client has received an offer of after the event insurance from Royal and Sun Alliance pursuant to their "Pursuit Protection Plan" this offer of insurance remains open until 11 September 2002. The premium for this policy cannot be identified at the outset, as it is based on a percentage of our normal fees (i.e. basic costs under the conditional fee agreement) calculated upon conclusion of the case. It is therefore in the party's interest to conclude a settlement of this case sooner rather than later.

To this end we enclose a claimant's Part 36 offer to settle the issue of liability."

"We see no reason to alter or previous stance in this matter. Both liability and causation are denied and we leave it to your client to take whatever steps he considers appropriate."

"Quantum was considerably lower than had been anticipated at the outset because of difficulties in establishing medical causation. This was one of the risk factors identified in the CFA with my client."

"I generally find costs estimates to be difficult whether it is own or other parties costs. But I arrived at that figure on the basis that at the time I was making the application, the defendants had not instructed solicitors at that point, it was still being dealt with by insurers. So I felt that the defendants solicitors would be involved over a shorter time span so that their costs were likely to be less."

"It no longer seems likely that we will be able to attribute a loss of earnings claim to the accident at work and, in the circumstances, our expectation of a successful outcome would be ?5,000."

"I advised Mr Clarke to use the legal expenses insurance brokerage service provided by The Judge.Co.UK.Ltd (The Judge) whereby he would complete one proposal form which would be sent to a panel of five or six after the event legal expenses insurance providers. I considered this to be a cheaper and more effective way of obtaining several quotes simultaneously than approaching insurers direct. I also advised Mr Clarke that by requesting five quotes he would be well prepared to counter any subsequent arguments by the Defendants that the premium was unreasonable.

...

5. An insurance proposal form was forwarded to The Judge on 27 March 2002 and on 2 April I received a letter from The Judge advising that the application had been submitted to Amicus, Mike Young Legal Associates (MYLA), Litco and First Assist being the only insurance providers on their panel that The Judge considered might offer insurance for this particular case.

...

Emmanuel Gilbert managing director of The Judge advised me on 11 April that two of the insurance providers had responded to date and that they had explained no insurance quotation would be forthcoming until medical evidence had been obtained."

"Mr Clarke also asked me to enquire about the option of a deferred premium as he was already paying out money for disbursements and had concerns about the other expenses he would have to pay in pursuing the litigation. I spoke again with Emmanuel Gilbert on 1 August 2002 and he advised that MYLA were not able to quote on this case for their disbursement funding policy. He mentioned one other disbursement funding policy, which might be available with First National Bank, but explained that Charles Russell would have to register with the bank and show the last two years accounts before being accepted, so it was not going to be easy to get cover up and running in time for this claim. This avenue was therefore not pursued."

"It is not necessary to protect a client from adverse costs before proceedings are served, as there can be no liability for such costs at that time. In this case it took five months for a quotation to be obtained as the insurers were unwilling to provide one without medical evidence. I had applied on Mr Clarke's behalf for insurance as quickly as possible after receiving his instructions to pursue the claim."

"It is my belief that the ATE insurance market for RSI cases was virtually non existent. I have formed this view from discussions with colleagues in the personal injury world outside my own firm whom I meet regularly at training and social events and where we naturally discuss our cases on an anonymous basis."

"The comments I have made in respect of RSI and stress claims would apply equally to not only our own DAS ATE product, called Conditional Fee Insurance Services and subsequently renamed 80E, but also to other products underwritten by DAS namely Litigation Protection, Greystoke Legal Services, QLP and Saturn Professional Risks."

"The nature of my practice has not really come out through the witness statement but I only handle about 10 cases at any one time. That was true in 2002 and it is true now. They are all very different cases and when I have gone to various providers to ask about being accepted onto their schemes, they have said that they do not find me an attractive proposition for insurance purposes.

...

I seem to have the very difficult cases. I get referrals from other solicitors perhaps when they turn down the case on merits but the client wants to go on and they will ask us to have a look at it. I have catastrophic injury cases, a number of very difficult brain injury cases, RSI cases. The sort of things that you cannot handle too many at one time and do them properly."

"I like the idea of having one form, one small fee and somebody else who is more knowledgeable about the market than I was who could get simultaneous quotations."

"The fact that we have not seen your employer's file, which may include documents prejudicial to your claim.

The claim could fail on the issue of medical causation and we do not yet have a medical report.

The employer may produce witnesses who deny your method of handling work trolleys was the appropriate and approved method.

We could fail to beat a Part 36 offer."

"I always find when you're handling claims from employees, you never quite know what is going to happen. You receive the client in the office and they tell you their account, but it's the strange situation where the defendant actually knows them and their working practices much better than you do.

...

You never quite know what is going to come out of the woodwork in terms of other employees coming forward with evidence. That's one big risk factor. On the liability side there was also a risk factor on medical causation."

"Our estimate of costs of ?35,000 to ?40,000 is our estimate of the total costs (including disbursements of ?6,500), that we expect to incur in taking this case to trial. When assessing the adverse costs risk, we have assumed that the defendant's hourly charge out rate will be no higher than our own (frequently insurance companies require their panel solicitors to work at a lower hourly rate than the court norm). We cannot see that they are unlikely to incur any less costs than we will and they will no doubt have to interview witnesses as well and are likely to get their own expect evidence in a case of this type. I am not sure whether this will affect your calculations, but I feel it would be acceptable for the adverse risk to be ?35,000 with ?6,500 cover in respect of own disbursements so potential risk to insurers of ?41,500."

"What I actually meant was that I didn't think that they would need any less hours on the job than we would … and that they will no doubt have to interview witnesses as well and are likely to get their own expert evidence in a case of this type …"

"This is high but we have been out to the market place and that is what it is really."

"Well I had no intention for this claim to run a day longer than it had to. But, I had a client who had had two surgical operations on his arm for this injury caused at work. I thought he was entitled to make a claim. He wanted to make a claim. We had no other alternative in the marketplace, and I could never advise the client to go into litigation facing a potential adverse costs order without insurance so I thought I was stuck really. The client was given the information and with informed consent he wished to proceed."

"In the event of the costs and the premium being reduced upon assessment at our discretion we would be agreeable to taking a commercial view of such a situation and that we would consider either accepting a reduced premium based on the actual assessment of the costs or limiting any sum in respect of the shortfall that we would seek from the Claimant to the amount of her damages depending upon the reason for the reduction in the costs claimed."

"I was aware that this would be a difficult and risky claim to pursue on behalf of the Claimant and that therefore it might be difficult to obtain after the event insurance. I was satisfied that the client that she had no alternative method of funding and even applied for public funding from the Legal Service Commission despite the provisions of the Access to Justice Act 1999. However this proved to be unsuccessful …

...

7. A proposal was submitted to Litigation Protection Ltd on 2 May 2002 a company which had successfully provided after the event insurance in the past. Unfortunately the application was returned, it would appear unread, with the blanket reason that stress at work cases were not covered by them … Efforts were also made to contact other after the event insurance providers including Eastgate Assistance, ENA Underwriting Ltd, Temple Legal Protection, Watkins Davies Insurance Consultants Ltd … Eastgate Assistance and Temple Legal Protection simply could not be contacted. I cannot now recall why ENA Underwriting Ltd and Watkins Davies Insurance Consultants Ltd were not of assistance but I am certain that they were not. It was then decided to utilise the services of The Judge.Co.UK.Ltd and proposal forms were submitted to them on 30 May 2002. It was indicated by "The Judge" that a number of potential insurance providers would be nominated. However due to the difficulties of pursuing a case of this nature they were only able to provide a quotation from the First Assist Group Ltd.

8. Consideration had also been given in addition to the above insurance providers to the services of Accident Line of which my firm were a panel member. There was a delay in pursuing this option as at the time my firm were still putting in place a funding arrangement to compliment that scheme. In any event an application to Accident Line was also refused."

"Please contact the insurers on our behalf and thereafter inform us whether or not the premium calculation is correct. It would be helpful to establish, in view of the substantial amount of the premium, whether the insurers would accept a premium based on the costs which are ultimately agreed, not on the costs set out in the bill of costs."

"This was a sort of premium that I had not dealt with before and I wanted to ensure that I could get any assistance that was necessary."

"Please note that Royal Sun Alliance's premium for issuing this (ATE) policy of insurance has been calculated by reference to the risks inherent in the action and with specific reference to the defence put forward by your clients.

Further, this premium is also calculated by reference to our costs in conducting the action and the extent of any adverse costs as estimated by us by reference to the information on that issue that you have provided to the court and/or this firm …

Specifically, the amount of the premium is calculated as a multiple of our base costs, prior to the addition of our CFA success fee, plus insurance premium tax at the prevailing rate."

"By way of example the Defendant's legal costs up to and including the liability trial were predicted by their solicitors, to be in excess of ?92,000. There was a very real possibility of this case being fought equally hard on quantum, if Mr Farr had succeeded at the liability trial on 29, 30 September 2003 … Upon that basis, with adverse costs of liability only being in excess of ?92,000 it is, in my submission, easy to see how the funding issue could have resurrected itself, with a vengeance, following the liability trial and/or during the preparation of the Claimant's case on quantum. Particularly if adverse costs were "capped" at say ?100,000 which was a fairly common upper ceiling in my experience."

"Examples I have seen from The Judge website caused me a number of concerns … in the context of my position as a partner within Dolmans in Cardiff. The first issue is that we as a practice are a predominantly - vastly predominantly - a defendant practice. I would say about 90 per cent of our work is defendant insurer work. To that extent, because of the way the work comes to us, which is predominantly from local authorities, predominantly directly from local authorities as opposed to through insurers … On that basis, we have to be very very careful in terms of the relationships we develop or maintain … with ATE insurance providers. The reason being that local authorities particularly … are very sensitive about any of their advisors, whether they are legal advisors or otherwise having connections to the ATE market."

"I would have concerns about the extent of the cover at ?120,000. Because of the way that the costs developed in this case … or the way the case generally developed. I also have concerns in relation to the nature of the policy itself in the sense that Mr Wait appears to suggest that it is possible - even though it is a product offered by another insurer - to use the BTE cover in the manner that it was used in this case. I don't see how one insurers competitor with another insurer would be prepared to allow that second insurer access … to its BTE fund ..."

"What I said to Mr Farr at the time was that this was the best option, albeit in my view at that stage, he had very very few options."

"The services provided by Temple are carried out exclusively for the provision of a full range of legal expenses insurance both before the event legal expenses (BTE) and litigation insurance, ie after the event insurance (ATE). Temple provides ATE insurance to all categories and classes of litigation including personal injury, contract disputes, defamation, clinical negligence, professional negligence, intellectual property and marine disputes for both claimants and defendants."

"6. I can confirm that Temple would have offered ATE insurance for this case had it been approached for a quote in or about December 2002. We had a Binder from Lloyds of London which allowed us to rate and condition such cases up to a limit of ?250,000. On the basis of the information provided to First Assist in requesting cover I confirm that Temple would have provided a limit of indemnity of ?150,000 for a premium of ?22,400 plus IPT. The limit of ?150,000 allows for an estimate of ?120,000 adverse costs and allows for ?22,400 plus IPT cover for the premium.

7. In relation to the method of calculating the premium I can state as follows:

(i) I would pay particular attention to the advice given by the Claimant's solicitors and their counsel;

(ii) from my own experience of these cases I would then have made my own assessment of the likelihood of success;

(iii) in this case I would regard the chances of success as high;

(iv) assuming a loss of about ?112,000 I would have calculated the pure burning costs at about ?14,000;

(v) I would have added a percentage for profit and insurance administration costs of 60% or ?8,400;

(vi) the premium would be on the basis that the BTE policy (with a cover of ?25,000) would have been used for disbursements."

"Our policy would have offered deferred premium and protection for that premium within the policy cover, our policy would also have been a step premium policy. All of our policies since the beginning of 2002 or end of 2001 have all been written on a stepped premium basis, both for personal injury, commercial and clinical negligence, so the key features would have been premium payable at the end, with protection for the insurance."

"We would have added Step C premium to the limit of indemnity and then that would have calculated the limit of indemnity for us. Premium A is payable if the case settles before proceedings are issued. Premium B is paid if the case settles between the proceedings being issued and 45 days before trial, and the last window, Premium C, is payable 45 days before trial and including trial. They are the three blocks of risks that we as underwriter look at and think they are the different dynamics of the case."

The premium is payable at the conclusion of the case.

"Given that the solicitor involved in that case was a pretty good clinical negligence solicitor we would have probably covered it. The premiums probably would have been for Band A about ?5,000, for B it would have been about ?20,000 and for C it would have been about ?50,000, I would have thought so if this case had gone to trial and settled at trial we would have wanted ?50,000."

"Probably but we would need to look at the case, do our homework on the solicitor and on the medical side of things to work out, would we have covered it first, and then looked at the exposure to do a proper job on it."

"We would have queried that because if he wants to run the case and he thinks it is very unlikely to win we would have queried it ... When a solicitor tells us what the prospects are we use that as a basis for thought but we look because solicitors tell you all sorts of different things, and it is my money that is at risk, not theirs, so even when they tell us it is a great case we sometimes do not insure it because we do not believe it to be."

"That is correct, although it is unlikely we would unless it was a significant deterioration, because, remember, we are going to have to go on risk and pay all the adverse costs. It is a similar situation to the top-up thing … where there is no point in a legal expenses underwriter not providing top-up in a case. … If I have got ?80,000 exposed and a solicitor comes along and says: we've got it wrong, the adverse costs order because the other side are messing us around, it may be ?120,000, if I say, no, I'm not going to give you cover then I am going to have to write a cheque out for the costs that have already been incurred, so it is in my interests to give a top- up cover."

"I think the point I am making is that there are other underwriters out there, including us, that would see a request for higher limits as something that you have to deal with. If the case is okay - assuming that the case has not gone wrong when that request is made ... we are either going to have to write a cheque because the guy is going to abandon his claim because he will not have sufficient funds to carry on. [Mr Dutton suggested he might accept the offer of ?100,000 and recover his costs, and therefore the premium.] … I think that the solicitors would not be giving him advice to take ?100,000 if they thought that was wrong."

"Yes, but the thing about stand alone one-off premiums in those scenarios is that you are … buying cover from now until when the thing finishes. I accept with First Assist it is a sliding scale and with Temple it is a stepped premium similar sort of sliding scale type thing. With them, yes, if it settles early fine. If it settles very late then it is sort of swings and roundabouts for them and us."

"It is really not in our interests to have so few players as there really are. You heard yesterday Emmanuel Gilbert's evidence about everybody gets to see these things from Litigation Funding. The reality is, when you apply to all these different providers they cannot act. A lot of them are almost quasi-claims management type companies. They are not underwriters in the same sense that First Assist and Temple and DAS and Law Club are underwriters. If First Assist are knocked out of this market, let me assure you, it is not in our interests. "

"One of the requirements of a delegated requirement scheme is that the firm has a sufficient number of risks to insure through the scheme. We look for a minimum of six insured cases a month, so it is viable for us to monitor and audit the scheme. If you do not have a sufficient number of cases then we would be happy to receive individual submissions as long as we are assured you are not cherry picking the marginal risks for insurance."

"We are trying to discourage them from sending us all their rubbish, which, if you come to our office … you will see the enormous amount of rubbish claims that we get all the time. We do not charge a fee for that, so yes we are trying to discourage stuff, but we are also saying, come to us if there are compelling reasons. On this Dolmans one [Farr] there would have been. On the clinical negligence we would have loved to have a dialogue with Charles Russell, they are a good firm."

"(a) the increase of premiums collected in successful cases in order to allow for the lack of any premiums in unsuccessful cases;

(b) the deferral of payment of premiums until the end of the case; and

(c) the fact that cover is unlimited."

"The rating is based on the assumed total of costs at risk under the policy … ; own costs are then used only as a scaling factor to link increases in own costs with increases in the premium."

"An estimate of costs at risk which is too high relative to own costs will also lead to a premium higher than is needed to match the risk."

"For example if the estimated failure rate, when the ATE policy was incepted was 30% and the actual underlying failure rate is 20% then the premium would be 71% higher than needed."

"In placing a cost on unlimited cover, the important factor is to estimate what percentage of claim has adverse costs in excess of standard market limits and by how much they exceed these limits. For convenience I will refer to these cases as "large losses". … If the probability of large losses is low then the cost of providing this cover will be low. If say 5% of claims go to trial, 30% lose and 1% of these have costs at risk of ?500,000, the additional cost per policy of covering these large losses is ?75.

38. … Using the simple example in the previous paragraph and assuming that the initial estimates of costs at risk and own costs were accurate, Pursuit scheme methodology would calculate the premium for the large costs at risk cases on the basis of a risk amount of ?500,000. Under the Pursuit scheme, due to the method of calculation of the premium it is already the case that the larger the risk covered, the larger the premium. Therefore, there is no mathematical requirement to add any extra factor to the premium in all cases to cater for large losses."

"If he has accurate estimates to trial he will be able to accurately estimate the premium at trial, but it may be overstated before trial.

...

If the assumption of a constant ratio between adverse costs and own costs is correct, then yes ... [if the estimates are reasonable he has a reasonable basis for calculating the premium.]"

"That's why it would be good to get cases where there was in fact a swing the other way. The Test cases have … a swing the other way, but we can't tell from the [exhibit PWS3] which ones are.

...

We have seen absolutely no evidence that there are any swings the other way for First Assist."

"Well, for example, in the First Assist methodology, if the assumption is that own costs are ?25,000 and adverse costs are ?50,000, if the adverse costs go to ?100,000 you might think that is a problem, but within the First Assist methodology if the own costs have also doubled to ?50,000 the methodology will make allowance for that fact.

... It is the ratio between the adverse costs and the own costs that is important rather than the absolute amount of the estimate."

"It can be stepped. It'll be … basically mirroring and always increasing. It can only ever go up.

...

Constantly increasing, and mirroring each other in the way they step forward."

"I think the Baker case is unusual but, maybe it's not unusual I think you're basically saying that Mrs Baker had a choice between a premium with a minimum of ?8,000 to ?9,000 with an unlimited downside premium. Or a flat ?12,000 or ?10,000 or ?14,000. I personally would consider a minimum of ?9,000 with no limit on, how big it can get I personally would go with the flat ?12,000. But that's just me."

"If you're rating a flat rate premium, ATE policy, it's looking at how the adverse costs have gone relative to the estimated versus actual that's important. That's the averaging that's important to you. But in the First Assist methodology the averaging needs to be between policies which were rated too high relative to the risk and too low relative to the risk and there is nothing here to say that those policies were not rated correctly relative to the risk. So it is quite possible that all of the First Assist policies are rated too high relative to the risk. Even though some have very high pay outs, some have very low premiums, that isn't proof that they are not excessive relative to the risk presented."

"We have no way of knowing whether that is an unfair or fair premium to either side."

"Insurance companies are usually quite clever at getting around that. I mean, your bulk carrier example, for example. It could sit in port for the whole year, it could go out on a trip every day of the week and have a very high exposure. What will usually happen is that there will be a statement at the end of the year from the shipping company saying, "This vessel was out on these days. This vessel was in on these days," and an adjustment at the year end to take account of that."

"But again it goes back to the issue of a lower premium does not necessarily mean that it's not excessive. Because of the way the RSA methodology works, it's not an average between high and low, it's an average between excessive for the paying parties and excessive for RSA and I haven't seen any policies which are excessive in terms of fairness to the Pursuit policy, whereas we are seeing the cases where they are excessive relative to the paying parties.

...

I think the concept of the Pursuit policy is great … it gives the claimant access to justice, it in theory offers low premiums if the case settles early and they don't have to pay, they don't have to fund, they don't have to get into bank loans. But that doesn't mean that it shouldn't be priced fairly for the paying parties."

"I think with Mr Wait's policy or any other policy, the reason it's so expensive is because people have got to the ?100,000 limit. They've actually spent the money, that amount is at risk, definitely at risk so they need to top it up. Whereas, when people are taking it out at the start, it may get to ?100,000 or it may settle at ?1,000. So it's more a question of, "this is a definite definite risk as opposed to it's not very likely."

"The protocol follows cases over ?50,000 and we have that information to hand … and we produce monthly reports on that information, from which I've been able to produce the schedule. For the cases under ?50,000 that would involve a trawl through many, many files … Other materials, and it would have taken probably weeks, if not months."

"So the way we arrived at the final figure was to allow an element of care and conduct or success fee of 85% … at the end of the day, we wanted an economic settlement."

"They tend to be higher. What I would say on that point is that having seen cases where the claims were less than ?50,000, I have no doubt that if the exercise was performed to include those in my schedule that there are not any that I have seen from First Assist certainly and those in Mr Smith's schedule are not cases that I am aware of."

"Superficially but again, if I was running arguments on the individual cases I would say that unlimited cover was something that would not be required probably on the lower value ones that Mr Smith has been able to produce."

"I was instructed to enter onto The Judge website the criteria given for each case. I wasn't asked to comment on whether or not the fees on the various printouts meant that they were appropriate or not appropriate in each case."

1. Each Claimant signed a contract of insurance with First Assist. At the point that the contract was entered into it is a binding contract with all the essential features such as consideration.
   
   
2. Each Claimant did so after explanation of the policy and the rights and liabilities which would arise under it from their solicitor.
   
   
3. Each had an insurable interest - namely in the risks and costs consequences of losing their cases.
   
   
4. The premium was calculable during the life of the policy under the formula provided to the insured claimant prior to the inception of the policy.
   
   
5. The terms of the policy clearly set out the rights and duties of each party.
   
   
6. First Assist had a right to agree to any settlement which the Claimant proposed to enter into.
   
   
7. First Assist has a right to recover the premium from the Claimant if the claim succeeds.
   
   
8. The premium is due but not "payable" if the claim is lost. There is no suggestion that the contract fails for want of consideration.
   
   
9. The premium is both due and payable from the client under the terms of the policy in each of the Test Cases.
   
   
10. First Assist has not waived its right to premium in any of the Test Cases.
    

"(i) The permissive nature of the jurisdiction granted by Section 29 [of the Access to Justice Act 1999] recognises the interests of the Defendants.

(ii) The vital role of the Costs Judge.

(iii) The nature of the ultimate question."

"Operate so as to promote access to justice but not so as to confer disproportionate benefits on … after the event insurers or impose unfair burdens on defendants or other insurers."

(Callery v Gray paragraph 10, Lord Bingham of Cornhill).

"There is only one restraining force on the premium charged and that is how much the Costs Judge will allow on an assessment against the liability insurer."

Paragraph 43 per Lord Hoffman, see also paragraph 6 (Lord Bingham), paragraph 32 and 42 (Lord Hoffman), paragraph 60 (Lord Hope).

"It is … necessary to consider whether the claim for … premium … is reasonable and proportionate. It is in my judgment open to any insurer to calculate and charge premiums on whatever basis best suits its business. The question which I have to decide is what amount ought reasonably to be payable by the paying party in accordance with Section 29 of the Access to Justice Act 1999."

Pirie v Ayling 18 February 2003, paragraph 12.

"51. We deprecate any attempt to equate the question of reasonableness that a Costs Judge has to decide with the question of whether the Claimant's Solicitor was in breach of his duty of care to his/her client. If a solicitor gives advice which proves unsound, it will not necessarily follow that the advice was negligent. The advice will necessarily be based on information provided by the client. If the information is inadequate or inaccurate the advice may prove to be unsound without any question of fault on the part of the solicitor."

"… [a] case in which the premium is not set at the time of contract but left to the hazard of future agreement between the parties, the contract may be void for uncertainty unless (a) the contract has an effective mechanism for deciding premium later …"

"It does not however appear to be necessary that the precise amount of the premium should have been fixed and agreed to, provided that there is a definite agreement to postpone the fixing of the amount and to enter into the contract notwithstanding. Thus, the insurance may be in consideration of the premium to be arranged."

"All the parties have to do is to commit themselves to a certain arrangement for ascertaining the rate of premium."

And a little further on:

"In default of agreement between the parties the amount of the premium will be settled by the court or an arbitrator."

"The risk we take is that the case fails, that he does not obtain the damages he expects and he is incapable of paying us the premium. Would I rather have a premium of ?20,000 cash when he wins or the possibility that he will be able to pay me the premium of a higher amount or not at all at some later date? I will take the cash every time. It is the bird in the hand policy."

"I have a legitimate interest, I want to be paid my premium. That is the contract which I have with the client that he will … pay me the premium. I have given him the choice. He can take the money which is on offer, which has hit the definition of success, and he can pay me the premium. Alternatively he can carry on and I do not wish to fetter him, and had we done so in the case of Farr, Mr Farr would have been deprived of ?150,000 which evidently he is entitled to."

1. the percentage prospects of success;
   
   
2. an estimate of own costs to trial;
   
   
3. an estimate as to adverse costs and disbursements to trial.
   

1. has a difficult or complex case;
   
   
2. where there is no alternative form of funding;
   
   
3. costs at risk may be substantial; or
   
   
4. whether the claimant does not have the means to fund any alternative policy (assuming there is one).
   

1. access to the court for a meritorious claim;
   
   
2. an affordable premium commensurate with risk (the quantum of the premium and whether or not it is "affordable" is of course at the heart of this issue);
   
   
3. a deferred premium to enable the Claimant to pursue a claim which might otherwise have to be abandoned;
   
   
4. a premium sufficient to reflect the risk at the time when the case is underwritten;
   
   
5. a premium which allows for the risk increasing;
   
   
6. a premium which meets the increasing exposure risk the longer the case goes on;
   
   
7. a premium which reflects the risk (in percentage terms) at the point when the policy is written (he says that this is what makes the solicitor's and counsel's risk estimate important information for the insurer who needs to make an assessment of prospects of success);
   
   
8. a premium which both encourages all the parties to keep costs low and to settle a case as soon as possible commensurate with the merits;
   
   
9. a policy which provides sufficient cover for the case if it goes to trial without the need for the purchase of expensive top-up cover as costs increase beyond early estimates.
   

1. ask whether it was reasonable to take out the Pursuit Policy;
   
   
2. ask whether the multiplier used produces a premium which is significantly above the range of any comparators. If the premium falls into such a range it is unlikely that any further examination will be needed;
   
   
3. if the premium falls significantly outside the range, the court should ask whether, on the facts known or which ought to have been known to the Claimant's Solicitors at the time the estimates were made, whether those estimates were so unreasonable as to fall outside the range which any reasonably competent solicitor should have estimated;
   
   
4. if the court concludes that the solicitors' estimates were unreasonable, and were used by the insurer, the court should examine the premium figure with a view to awarding a reasonable sum. In doing this the court should apply the estimates as they should have been given to reach a reasonable and recoverable premium for the purposes of Section 29.
   

1. The methodology assumes a constant relationship between costs at risk and own costs.
   
   
2. Where the policy is taken out some time after the CFA was entered into the premium starts at a high level and goes upwards.
   
   
3. The premium rate is critically dependent on the relative sizes of the estimates of own costs and defendant's costs in every case. Where the ratio of defendant's costs to own costs is overstated the premium rate is too high.
   
   
4. First Assist adopt estimates of success which are the same as, or too close to, those given by solicitors for a different purpose and on a different basis and which are therefore too low for the purpose of rating an insurance premium.
   
   
5. The final premium is calculated by reference to claimant's costs as claimed however unreasonable or excessive.
   
   
6. The premium in successful cases is calculated so as to make up for the lack of premium income in unsuccessful cases.
   

1. Constant Relationship

2. Policy taken out after CFA entered into

3. The relative sizes of the estimates

4. Estimates of success

5. Premium calculated on Claimant's costs as claimed

6. Premium calculated so as to make up a lack of premium income in unsuccessful cases

"If he has accurate estimates to trial he will be able to accurately estimate the premium at trial but it may be over stated before trial … At any point in time if he knows exactly what the ratio is [between own side and adverse costs] and he knows the own costs, then by definition he knows the adverse costs … If the assumption of a constant ratio between adverse costs and own costs is correct then yes you are right [if the estimates are reasonable] he has a reasonable basis for calculating the premium."

"It is the ratio between the adverse costs and the own costs that is important rather than the absolute amount of the estimate."

"When considering whether a premium is reasonable the court must have regard to such evidence as there is, or knowledge that experience has provided, of the relationship between the premium and the risk and also of the cost of alternative cover available."

1. all were claims which, by their nature or on the evidence, were difficult to insure;
   
   
2. in all cases proceedings had to be issued because of limitation considerations;
   
   
3. in three cases (Sandiford, Clarke and Baker v Euromark) reasonable enquiries had revealed no alternative policies on any terms;
   
   
4. in Baker v Addenbrookes there was one alternative policy but at a substantial premium payable immediately which the client could not afford;
   
   
5. in Farr the Claimant was in a difficult position because his BTE limit had been used up, he reasonably selected a policy with the same insurer which enabled him to maximise the benefits of the BTE policy;
   
   
6. in three of the cases (Baker v Addenbrookes, Farr and Baker v Euromark) the Defendants were warned that insurance policies were about to be taken out and declined the opportunity to make/accept offers or admit liability before this was done;
   
   
7. in Clarke the Defendants turned down an offer made within two months of insurance being taken out and in Baker v Addenbrookes turned down an offer made before the insurance was incepted;
   
   
8. in all the cases the conduct of the Defendants in failing to make or accept offers was a factor without which the premium would have been nowhere near as high as they were;
   
   
9. in all cases the Claimants were advised by solicitors and in three (Sandiford, Clarke and Baker v Addenbrookes) by a reputable broker before taking out the policy.
   

"They are difficult to insure, you have to take these out of the normal personal injury pool because there are reasons why these are excluded from delegated authority schemes. They are viewed universally by insurers as risky cases."

"Stress at work - everything I have just said about manual handling cases you can apply a factor of 5 or 10 to stress at work cases. They are universally loathed by insurers. They are extremely difficult to arrange cover for."

"We do not consider one off personal injury cases unless there are compelling reasons to do so. We want to encourage solicitors to commit to a delegated authority scheme and work with us as a partnership rather than submit individual PI cases where there is a risk that adverse selection is applying."

1. to incur a premium which was disproportionate at the outset and could very well exceed the total damages he was likely to recover;
   
   
2. if all the costs estimates were correct spend ?5,180 on a premium to protect himself against ?7,000 worth of estimated costs at risk;
   
   
3. decide to litigate without such a premium and thereby avoid incurring a potential liability of ?5,180;
   
   
4. decide not to litigate since the cost of doing so appeared disproportionate when compared with the likely benefit.
   

1. In Deborah Baker the actual costs at risk were ?24,708 (estimated ?58,500) and the premium was ?54,651 (?52,048.98 plus IPT - 172% of normal costs)
   
   
2. In Anthony Baker the actual costs at risk were ?5,752 (estimated ?7,000) and the premium was ?8,963 (?8,536 plus IPT - 74% of normal costs)
   
   
3. In Clarke the actual costs at risk were ?15,267 (estimated ?35,000) and the premium was ?32,311 (?30,772.76 plus IPT - 123% of normal costs)
   
   
4. In Sandiford the actual costs at risk were ?29,885 (estimated ?50,000) and the premium was ?16,986 (?16,176.76 plus IPT - 160% of normal costs)
   
   
5. In Farr the actual costs at risk were ?80,233 (no estimated figures were given. First Assist used a figure of ?112,000) and the premium (adjusted) was ?115,182 (?109,697 plus IPT - 193% of normal costs).
   

1. using a simple flat rate formula producing a premium of ?14,303.12 plus IPT;
   
   
2. adopting the premium which Mr Wait said would be payable for a Temple Policy, ?22,000 - ?23,000 including IPT;
   
   
3. using the figures which ought to have been inserted in December 2002 when the premium was being rated, which produce a figure of ?18,507 plus IPT.
   

1. Deborah Baker. He refers to the two policies from LPL at ?9,922 and ?13,230, as well as the flat rate First Assist premium of ?17,550 and the Temple Policy which he put at ?20,000. He suggests a figure of ?15,000 and no more than ?20,000.
   
   
2. Anthony Baker. He suggests no more than ?750.
   
   
3. Clarke. Based on items appearing in The Judge and Litigation Funding he suggests a premium between ?220 and ?3,413. He suggests this compares favourably with the case of Sandiford where, if the Accident Line policy had been utilised, the premium would have been ?3,045.
   
   
4. Sandiford. He argues that the Accident Line premium provides the most appropriate figure at ?3,045. Alternatively, on the basis of the range of premiums apparently available for stress at work claims, the premium should not exceed ?7,323.
   

"We felt that it was a reasonable assumption … to make in broad terms, for the purpose of establishing and maintaining a consistent underwriting procedure that the level of the insured's costs and the opponent's costs would escalate for the duration of the case on a roughly equal basis … We thus arrived at the basic fundamentals of a sliding scale premium calculated by reference to own solicitors fees. The only workable assumption is that, as costs for both sides start at zero and proceed to the estimated levels at trial, the relationship between own costs and the insured's liability will remain constant throughout the action."

"If the assumption of a constant ratio between adverse costs and own costs is correct then … [if the estimates are reasonable the insurer] has a reasonable basis for calculating the premium."

"It is the ratio between the adverse costs and the own costs that is important rather than the absolute amount of the estimate."

1. Deborah Baker - ?13,042.49 plus IPT = ?13,695.
   
   
2. Anthony Baker - ?750 plus IPT = ?787.50.
   
   
3. Clarke - ?11,110.26 plus IPT = ?11,666.
   
   
4. Sandiford - ?16,176.75 plus IPT = ?16,986.
   
   
5. Farr - ?39,722.22 plus IPT = ?41,708.
   

"A contract of insurance is one whereby one party (the "insurer") promises, in return for a money consideration (the "premium"), to pay the other party (the "assured") a sum of money or provide him with some corresponding benefit, upon the occurrence of one or more specified events."

"The consideration required of the insured in return for which the insurer undertakes his obligation under the contract of insurance."

1. Deborah Baker - ?13,042.49 plus IPT = ?13,695.
   
   
2. Anthony Baker - ?750 plus IPT = ?787.50.
   
   
3. Clarke - ?11,110.26 plus IPT = ?11,666.
   
   
4. Sandiford - ?16,176.75 plus IPT = ?16,986.
   
   
5. Farr - ?39,722.22 plus IPT = ?41,708.