Posted by Steve Rowley, business development manager at Legal Futures Associate Allianz Legal Protection
I recently sat on a panel debate in Manchester, with the debate entitled – ATE insurers and sub-£250k claims. Whilst the title of the debate was probably written ahead of the government’s consultation paper to introducing fixed recoverable costs in lower-value clinical negligence claims, where £25,000 rather than £250,000 is being recommended, it nevertheless raised an interesting point on how after-the-event insurers can make premiums proportionate to damages, especially for cases worth less than £25,000.
At present, the premium assigned to an ATE policy covering the cost of expert reports to prove liability and causation is currently recoverable from the defendants. Notwithstanding what the Ministry of Justice decides to do regarding the recoverability of ATE insurance, the importance of proportionality is fundamental.
Proportionality ensures that the client receives fair compensation for the loss incurred, the law firm is appropriately rewarded with a success fee for taking on the risk of running a case under a conditional fee agreement, and the ATE insurer receives the necessary premium which accurately reflects the claims cost risk in question.
Having robust risk assessment protocols and a handle on cost management is vital when handling clinical negligence work. During the debate I spoke about the need for clinical negligence cases to be managed by expert law firms, with proven credibility and knowledge in what is a specialist, complex area.
By no coincidence, my fellow panellists, who were each from well-respected clinical negligence law firms, outlined the need for firms to do their homework and due diligence when choosing an ATE insurer, where the ATE insurer should likewise have proven expertise in underwriting ATE insurance.
What do we mean by ‘expert’? I’ve outlined below some of the considerations we as an expert underwriter of ATE insurance undertake when assessing the viability of the prospective new law firm. Likewise, I’ve outlined some points law firms should consider when assessing the market and deciding where to place their ATE work.
Expert law firms
- Post-qualification experience of the team handling clinical negligence work;
- Clearly defined processes around new case assessment, case acceptance and sign off, and case progression and review;
- Accessible data to report and monitor the cost of work in progress, win ratio, discontinued/loss ratios, and settlement times and recoveries data.
Expert ATE insurer
- Who is the underwriter/insurer of the ATE policy?
- What is their financial rating and long-term stability?
- What supportive management information will be provided?
- What is the approach to interim disbursement payments?
- What is the frequency of case updates required
- How are premium challenges handled and what approach is taken in respect of premium shortfalls.
- What is the capital provision for providing top-up indemnity and how easy is this to agree?
- What additional support will be provided?
Proportionate premiums are achievable where there is a mutual understanding between law firm and ATE insurer. This means that the risk pool is populated with good-quality and appropriately assessed insured risks. The assessment of risk can only be undertaken by experts in their field as there is too much to lose by all parties otherwise.