Jackson puts ATE insurance under pressure

The future of after-the-event insurance is in doubt after Lord Justice Jackson called for one way costs shifting in civil actions, in his review of civil litagation costs, published today.

The report recommends qualified one way costs shifting, meaning claimants will be unlikely to be liable for a defendant costs in civil claims, which could see the demand for ATE insurance fall dramatically.

In his report, Lord Justice Jackson said: "My conclusion is that ATE insurance premiums ought not to be recoverable under a costs order. The regime of recoverable ATE insurance premiums is based upon the premise that certain claimants need to be protected against the risk of having to pay adverse costs. In other words, for policy reasons those claimants should be allowed to benefit from the costs shifting rule when they win, but be protected against its adverse effects when they lose.

"The flaw in the present regime is that it is not targeted upon those who merit such protection. Any person who finds a willing insurer can take out ATE insurance, whether that person is rich or poor, human or corporate, deserving or undeserving. Furthermore, the protection which a claimant derives from ATE insurance is total. The claimant is not required to make a modest contribution towards adverse costs (as was the case under the legal aid regime, which the recoverability regime replaced in April 2000), even if he can afford to do so."

Lord Justice Jackson also recommended that success fees and ATE premiums become irrecoverable in conditional fee agreements, with the costs coming out of any damages awarded to claimants.