Lisa Marie Percy (a protected party by her father and Litigation Friend, Richard Percy) v Michael Anderson-Young  EWHC 2712 (QB)
In 1989, when she was 16, the claimant sustained a severe head injury in a road traffic accident. Proceedings were issued in January 2009. The claimant entered into a CFA on 8 July 2009 subsequent to which she took out an ATE policy on 4 November 2009. The ATE insurance provided for £50,000 of cover and the premium was £1,114.87, rising to £2675 6745 days before trial.
Liability was never a serious issue, however by the time a joint settlement meeting took place in November 2011 it was apparent that the parties were a very long way apart on quantum (at that point the defendant’s counter schedule valued the case at £566,000, but it had indicated that a new counter schedule may reduce the value of the claim to £428,000. The claimant’s valuation was £2.35 million. The defendant’s highest offer – a Part 36 offer – was for £755,000).
Trial was listed to begin on 21 October 2013. The parties agreed to attend a mediation (although both parties’ PTR case summaries indicated that the parties did not think that a pre-trial settlement was likely). Following the PTR the claimant’s solicitor realised that the ATE cover of £50,000 was inadequate (PTR costs summaries indicated that the claimant’s costs to that point stood at £428,000 with future costs estimated at £303,000; the defendant’s past costs were put at £290,000, with future costs also estimated at £290,000).
The claimant’s ATE provider was reluctant to provide additional cover but eventually did provide a quotation on 3 September 2013 for top up cover of an additional £450,000 (taking the total cover against the defendant’s costs to £500,000, which was the maximum risk that it was prepared to take). The quoted premium was £319,315.07 up to 45 days before trial (although at that point trial was already less than 45 days away), and £533,017.13 within 45 days of trial.
Contrary to the expectations of both sides the case settled at the mediation on 27 September 2013. The claimant subsequently served a bill of costs in the total sum of £1.1 million, slightly more than half of which was accounted for by the ATE premium.
On assessment district Judge Moss found that it was reasonable for the claimant to take out top up cover when she did. However, he felt that the underwriter had mis-assessed the risk that the claimant would fail to beat the Part 36 offer of £755,000 and - primarily on that basis - he assessed the premium down to £82,513.
On appeal Mr Justice Spencer (Manchester District Registry) made a distinction between those cases where a Costs Judge decides that the level of cover is too high, and those cases where there is a suggestion that the underwriting decision was wrong. In the former kind of cases – an example of which was Kai Surrey b Barnet and Chase Farm Hospital NHS Trust  CWHC 1598 (QB) - it is permissible for the Costs Judge to apply a broad reduction, proportionate to the reduction in cover to a level thought to be more appropriate. This, the judge found, was the kind of broad brush exercise that the Court of Appeal had in mind in Rogers v Merthyr Tydfil. However, it is a wholly different thing, to employ broad brush discretion to second-guess an underwriting decision. As the Court of Appeal in Rogers v Merthyr Tydfil had made plain, Costs Judges are simply not equipped to do that. Absent expert evidence to the contrary, and provided that it was necessary for the claimant to accept the insurer’s quotation (as it was in this case), the necessity of so doing makes the premium proportionate.
The judge also rejected the suggestion that the defendant had been treated unfairly in that it had not been given an opportunity to settle the case before the additional insurance liability was incurred, saying: ‘The defendant chose not to settle this case until a very short time before trial – he could have made an additional Part 36 offer at any time in the years following the abortive JSM in November 2011, but chose not to. Any defendant who settles late, particularly this late before trial, must know that he thereby significantly increases the costs risk. An experienced defendant will know that a reasonable claimant will probably take out additional ATE insurance…… Furthermore, the defendant should have anticipated that the premium would be significant.’
The premium was allowed in full.