Insurers will be forced to repay claimants for after the event insurance policies in cases where the claims have been settled before court proceedings, following the Court of Appeal ruling in the landmark Callery vs Gray case, writes Amanda Swinburn.

But there is yet to be a decision on what premium may be charged. This will be decided by a costs judge who will also determine at which point in the case claimants can take out insurance.

Lord Woolf made the decision last week in the case of Manchester law firm Amelans vs Norwich Union.

On the matter of success fees, the Appeal Court has confirmed that a two-stage fee will be introduced.

There has been speculation that a small part may be payable before the insurer has accepted liability, but Andrew Parker of Beachcroft Wansbroughs, representing Norwich Union, said it had not yet been confirmed.

The decision is likely to hit motor and liability insurers hard, as thousands of personal injury cases are currently held up in the courts.

Bob Gordon, director of Greystoke Legal Services, said the stance insurers took, saying premiums were not recoverable pre-proceedings, was “unfair”.

He said: “This is about access to justice and claimants should be able to insure themselves from day one.”

As part of the Access to Justice Act, insurance premiums can be recovered from the losing defendant. It is argued, however, that they can only be recovered after proceedings are issued.