The Court of Appeal has decided that a successful claimant cannot recover the full cost of an After the Event (‘ATE’) insurance policy designed to provide retrospective cover in respect of the first instance costs.

In Hawksford Trustees Jersey Ltd v Stella Global UK Ltd & Anor [2012] EWCA Civ 55, Lord Justice Rix and Lord Justice Etherton decided that the claimant, who incepted the policy shortly before the appeal hearing, could not recover the aspect of the ATE insurance premium relating to the first instance costs, particularly as the client didn’t take out cover in respect of the original proceedings. Lord Justice Etherton commented that the claimant accepted the risk of costs in the first instance and “in that respect an appeal does not create any new risk”.

The issue turned on the interpretation of section 29 of the Access to Justice Act and whether the reference to a party taking out insurance cover to protect against the risk of incurring a liability in those proceedings (emphasis added) referred solely to the appeal in this instance, or to the entire case.

Whilst Lord Justice Patten (giving the lead judgment) was of the opinion that it was “most unlikely that Parliament intended to lay down a rule ab initio that proceedings at first instance and those in the Court of Appeal should be treated as separate ‘proceedings’ within the meaning of section 29 to the end that it should be impossible to recover any part of ATE insurance against having to meet the costs below as part of the consequences of being an unsuccessful respondent to an appeal”, the agreement of Lord Justice Rix and Etherton meant that the claimant was unsuccessful in its attempt to recover the full premium.

So what does this mean? In summary (and whether you agree or disagree with the Judgment), where it is potentially suspected at the outset that an opponent is likely to appeal any win for the client, the client should be aware that purchasing ATE insurance at that stage (i.e. in respect of the first instance proceedings) will maximise their chances of recovering the ATE premium in full, should the subsequent appeal require coverage. In any event, insurers are far less willing to provide coverage for an appeal where they have not been involved to date, so the availability of cover for an appeal is certainly reduced where the first instance was not covered by After The Event insurance.

Perhaps on a more sceptical note, maybe this judgment confirms that the judicial mind-set is changing. Notwithstanding the fact that the judges couldn’t agree unanimously, you do have to ask yourself whether this judgment would have been handed down prior to Lord Justice Jackson’s recommendations with regards to civil litigation costs, when potentially thousands of personal injury ATE policies could have been affected.

Given the likelihood of the costs landscape changing in 2013, and with decisions such as this being made, it reinforces the need to ensure that your client stands the best chance of recovering their ATE premiums ahead of the implementation of the LASPO Act. Contact TheJudge to speak to an experienced broker in relation to your client’s application for ATE cover, to ensure that the most beneficial terms are secured.