Insurance: First Assist's policy legal but premiums cut

Both sides of the major challenge to a leading after-the-event (ATE) insurance policy have claimed victory after the senior costs judge last month upheld the legality of the product but found serious flaws in the way premiums were calculated.


The Gazette's sister publication, Litigation Funding, reports this week that the 127-page ruling on five test cases validated First Assist's Pursuit policy in the face of a challenge by insurers Allianz Cornhill, AXA, Norwich Union and Ensign, together with the NHS Litigation Authority. Judge Peter Hurst rejected arguments that the policy was void for uncertainty, unlawful on the grounds of champerty and in breach of the indemnity principle.


However, he heavily slashed four of the premiums, saying First Assist's premium rating methodology was 'inherently and seriously flawed' as it relied too heavily on estimated costs, 'which are very likely to be inaccurate'. A fairer approach would be to use the actual costs, he said.


Peter Smith, First Assist's technical director, said the company was pleased by the ruling. He said it had been unable to use actual costs previously because the unknown level of the defendant's costs would have voided the contract for uncertainty. The judicial backing meant it could now proceed on that basis.


Andrew Parker, head of strategic litigation at national firm Beachcroft Wansbroughs, which acted for four of the defendants along with City firm Kennedys, insisted their position had been broadly vindicated in that 'it was always our case that the premiums were too high'.


However, he said it did not offer any hoped-for clarity on premium levels across the market. 'It's pretty narrow in effect,' he said.


But First Assist's solicitor, Adrian Bingham of City firm Hextalls, said it had helped by upholding the principle that a sliding premium scale is valid and by the decision on using actual costs.