The after the event (ATE) insurance market is likely to face further turmoil after the Court of Appeal said it was unable to issue general guidance on the “reasonableness” of premium levels for this type of legal cover.
The court was asked in the case of Callery vs Gray to determine whether a £350 premium charged to a motor accident claimant, Mr Callery, by Temple Legal Protection, was “reasonable”. Although the court decided the £350 premium in Callery's case was “reasonable”, it indicated other policies should be settled on a case-by-case basis.
The reason, it said, was because there was insufficient data to properly assess the relationship between premiums and the risks associated with ATE cover.
This is despite the court considering a report, which it commissioned from costs judge Master O'Hare, that it said “revealed disputes between the various parties about the recoverability of certain elements of ATE premiums.”
The court explained how it reached its decision: “Master O'Hare did his best to investigate premium rates in the market. He found it was not possible to state standard or average premiums for different classes of business.”
Lawyers and members of the ATE insurance industry reacted with disappointment at the court's judgment, which was handed down on Tuesday (July 31).
Underwriting director of Temple Legal Protection, Chris Wait, lamented the court's lack of guidance on premiums.
He said: “Guidance on the reasonableness of premiums is urgently needed to avoid the issue of ATE cover becoming another legal wrangle similar to Dimond vs Lovell (the long-running credit hire case).”
Wait questioned the inference the court had drawn from Master O'Hare's report: “The court appears to have side-stepped many of the issues raised by Master O'Hare's fair and balanced report.”
He also took issue with the argument advanced by Norwich Union's lawyers in Callery vs Gray, that the maximum premium Temple should have charged in the case was £160.
He said: “This is complete nonsense. If Norwich Union is suggesting a maximum premium of £160 for road accident cover, then why isn't it offering cover at this price?”
Chairman of the Forum of Insurance Lawyers (Foil) costs special interests group, Jason Rowley, agreed that the court had failed to offer general guidance on ATE premiums.
He said: “The judgment offers little clarity on the issue of what should be the appropriate level of premium for ATE insurance.”
However, Martin Cockx, partner in Manchester law firm Amelans, which fought the case on behalf of Callery, argued the judgment did provide clear guidance.
He said: “The judgment will make life much easier for lawyers acting for personal injury claimants and proves we have been acting correctly all along.”
A spokeswoman for Norwich Union said it was considering the detail of the judgment and was unable to respond at the time Insurance Times went to press.