Black Horse v Kelly: recoverability of ATE premiums
Kelly v Black Horse: What are the odds?
In Kelly v Black Horse [2013] EWHC B17 (Costs), the senior costs judge dealt with the recoverability of an ATE insurance premium in a claim issued in April 2011, well before the Jackson reforms kicked in. Pre-Jackson cases will continue to percolate through the system for a little while yet.
The Claimant succeeded in a PPI mis-selling claim, recovering £6,000 and having a further £5,206.63 written off from their loan agreement. The argument then turned to costs, and specifically the size of the claimant’s ATE premium. This is an issue likely to recur where courts are dealing with costs in PPI claims issued before April 2013.
The Claimant’s ATE premium of £15,900 (including IPT) was a large component of its costs bill. The defendant contended that it was disproportionate. As it turned out, the liabilities it was to cover amounted to £7,243.30 (defendant’s costs and claimant’s disbursements).
While acknowledging prior authority to the effect that judges sitting without having heard expert evidence are ill-equipped to gauge the reasonableness or otherwise of an ATE premium, the senior costs judge found the premium to be ‘wholly disproportionate’ even when applying a broad-brush approach. It appeared to relate to an expected liability in the region of £20,000. Applying a broad-brush approach, the judge considered himself able to reduce the allowable premium on the basis that the premium was out of proportion to both the probability of cover being required and the quantum of any liability.
An ATE premium, in order to be recoverable (for pre-April 2013 actions), must therefore relate to the risks which it insures against.
Are there any crumbs of comfort for receiving parties in this judgment? The costs judge accepted that the risk to which the ATE premium should be proportionate was the expected level of the opponent’s costs at the start of the action, rather than the actual level of opponent’s costs at the end of the case. So a claimant who reasonably overestimates their potential costs liability would not be penalised.
