Friday, 14 October 2011

Motto for insurers..

The Court of Appeal has just dealt another blow to accident victims and those who help them fight insurers for the compensation they deserve.

One of the Court’s decisions in the case of Motto v Trafigura is that what we term “costs of funding” should not be recoverable from paying parties – normally defendants' insurers.

These costs relate to setting up a conditional fee agreement (“CFA”), arguably all the related work that is required once such an agreement is in place and, most surprisingly, the time spent dealing with after the event ("ATE") insurers whose policy against adverse costs complements the CFA.  In contrast, the policy premium paid to insurers is recoverable.

The decision appears to settle an issue that has been undecided for a number of years now.  Up and down the country and even within the Senior Courts Costs Office in London judges responsible for assessing claims for costs between parties have been at liberty to take conflicting views - and have done so.

The basic principle that recoverable costs within litigation do not include any time your solicitor spends helping them workout how it will be funded is centuries old.

After what proved to be the hideously complicated CFA Regulations arrived in 2000, many costs judges were sympathetic to the argument that “times have changed” and the requirements of Access to Justice demanded that this ancillary work be done by the solicitor.  Sometimes it runs into hundreds or thousands of pounds in the course of a case.

And why should that not be recovered from the person legally responsible for the injury?  Without their error or omission, none of it would be necessary.

But no – the Court of Appeal has wound everybody’s clock back a few hundred years and decided that this significant cost burden shall not be met by the losing party, almost certainly the one who caused all the litigation to happen.

Time will demonstrate whether this is another expense that claimant lawyers absorb as part of winning work or whether – as the Appeal Court seems to suggest – it is factored into overheads and passed on by an increase in the hourly rates chargeable across the board.

One can only hope that district judges up and down the land will be more receptive and encouraged by the powers to be in London to accept that hourly rates should be higher than they are.  The present torpor in the Lord Chancellor’s Department that sees us waiting until nearly Christmas for the guideline rates that are to be applied throughout 2011(sic) has to be cured.

I think it’s unlikely to happen and in fact we have here yet another bunch of flowers for the insurance industry.  Slightly different market perhaps, but it’s hard to ignore the point that the ATE premium in this case was allowed in full.