Appeal court decides that pre-action premiums are recoverable in test case

PERSONAL INJURY: details on value and timing of insurance premiums remain unclear

The Court of Appeal has given a clear indication that insurance premiums in personal injury cases are recoverable, even when they are taken out before proceedings are commenced.After a two-day hearing last week, the test case of Callery v Gray was adjourned for two weeks.

But the Lord Chief Justice, Lord Woolf - who heard the case together with Master of the Rolls Lord Phillips and Lord Justice Brooke, with chief costs judge Master Hurst in attendance - said the court would accept that recoverability of pre-action premiums was within the law.However, he went on to say that the mechanics of what amount should be allowed for premiums, and at what point - pre-proceedings - they should be taken out, remained unclear.The court also said it would consider a proposal for a two-step success fee for lawyers, to be smaller at the beginning of an action, and to be increased at a defined moment during cases, probably when liability is denied.

The mechanics for this proposal are still hazy.The court has invited submissions from the parties before 21 June.Andrew Parker, president of the Forum for Insurance Lawyers and partner with City firm Beachcroft Wansbrough, who is acting on behalf of the insurer appellant, said that although the court's indications were in general disappointing, the proposals to consider the amount and timing of premiums were interesting.David Hartley, the new director of Law Society-backed referral scheme Accident Line - who attended the case as an observer on behalf of pre-proceedings insurers - said: 'The decision in principle is good for clients, solicitors and Accident Line, and we'll be playing our part in making further submissions.'Bob Gordon, director of after-the-event insurer Greystoke, said that as the vast majority of personal injury cases settle, success fees are likely to be negligible in the future.

The Court of Appeal could sound the death knell for large success fees and conditional fee agreements in personal injury cases, he warned.See Letters, page 16Jeremy Fleming