David Marshall, Partner
Solutions - August 2007
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The long-awaited consultation paper on streamlining the personal injury claims process contains a number of radical proposals.
The government’s recent consultation, entitled Case track limits and the claims process for personal injury claims, proposes that the small claims limit stay the same and the fast track limit be increased from £15,000 to £25,000. The government expresses its concern at the “high and disproportionate” cost of small PI claims and concludes that “doing nothing is not an option”.
The paper, therefore, proposes a radical new streamlined process for PI claims with a value of less than £25,000. The proposals are subject to consultation and thus change, and in any event some detail is missing. All references to days are to “working days”. There is no discussion of sanctions for non-compliance with timescales. Proposals include:
- early notification of the claim to the defendant or insurer (within five days);
- swift admissions (within 15 days for motor, except Motor Insurers’ Bureau, and 30 days for employers and public liability);
- admissions to binding thereafter (except for ”fraud”);
- standardisation of medical reports;
- standardisation of proofs required for special damage claims;
changes to assessment of general damages – possibly including tariff, computerised assessment tools or expanded Judicial Studies Board guidelines for smaller claims – with a forum to be facilitated by the Civil Justice Council; - within 15 days of receipt, claimants to send report and “settlement pack” including offer;
- defendants to respond within 10 days; and
- negotiation period of 20 days.
If no agreement is reached, there will be a simplified court procedure for cases up to £2,500. All papers, including the parties’ offers in sealed envelopes, will be lodged and the case listed for immediate hearing by the district judge. If the amount in dispute exceeds £2,500, it is intended that more evidence can be filed, but that the process will still be streamlined from present assessment procedure.
Although it is proposed that all claims under £25,000 have the potential to fall into the proposed scheme, if liability is disputed or the defendant does not respond within the allowed timescale (subject to “reasonable extensions”) the claim will fall outside the scheme and proceed as now.
Fixed costs are proposed for cases within the scheme dependent upon the stage settled. There is no indication in the paper of what these will be or how the government proposes they will be calculated, except that “they will not include the cost of referral fees”. There is no consideration of the point that proper marketing expense is a proper part of overhead in the calculation of costs. Fixed costs will also apply to claims within the scheme worth more than £2,500 which proceed for assessment, but these will be different to the smaller claims (presumably more).
If a claim worth less than £2,500 proceeds to the expedited hearing before a district judge, a major change to part 36 is proposed whereby to recover the fixed costs of the hearing the claimant must beat his or her own part 36 offer. However, there will be no liability to pay the defendant’s costs.
The government proposes that after-the-event (ATE) insurance should not be routinely taken out at the outset. No costs will be ordered against a claimant in any case worth less than £2,500 within the scheme, so no ATE insurance would be required. No premium for ATE insurance should be recoverable unless it is:
- taken out after liability is denied or the defendant has failed to respond within the new time limits for the scheme (and subject to reasonable extension) whatever value the claim is provided it is not a small claim;
- taken out on issue of proceedings if the claim is worth more than £2,500, but the premium should reflect the fact that only part 36 risks are being run.
The proposal to keep the small claims limit at £1,000 general damages for PI claims will be welcomed by claimants and their lawyers. Any increase would have led to a costs windfall for insurers and significant problems for unrepresented claimants operating against insurance claims professionals or alternatively to the mushrooming of claims representative organisations taking a cut out of the damages.
However, the department’s streamlining proposals are radical. They are, in effect, a “put up or shut up” offer to the insurance industry who have been arguing that they could significantly cut the time and cost of smaller clams if given a chance to admit liability early. Except perhaps in the case of straightforward, low-value motor claims, one might be sceptical about the insurance industry’s ability to deliver. There is also certainly the danger that rather than reduce the “perception of a compensation culture”, it will engender a “have-a-go” culture. Lawyers for claimants will have no incentive to check the validity of claims (as they will not be paid for doing so; whereas at present the no-win, no-fee regime encourages the prior weeding out of claims) and some potential claimants may feel that as only cursory checks will be made into the claim within the time limits allowed to insurers, they might as well “have a go”.
The proposals for a streamlined process at a fixed cost will have to be carefully considered. Costs must reflect the work reasonably required, including incentives to discourage defendants from stalling and claimant lawyers from churning work. The likely effect on the legal expenses industry, before-the-event with regard to referral fees and ATE (with potentially all “easy” cases being removed) is far-reaching. The proposal that claimants in the lower value claims should have to beat their own offers to settle to recover costs is so ludicrous that one might be tempted to assume it was a typographical error, but for the fact that it appears more than once. There would be no incentive on insurers to make any realistic offers and this would lead to mass under-settling of claims and consequent windfalls for the insurance industry.
The proposal to include all claims up to £25,000 in the scheme and covering all PI cases except clinical negligence (which will fall instead into the proposed redress process) is particularly brave. It will include significant injuries, particularly for older claimants with no loss of earnings. For example, Judicial Studies Board guidelines state: “£21,500 to £30,000: Serious injuries to joints or ligaments resulting in instability, prolonged treatment, a lengthy period of non-weight-bearing, the near certainty that arthritis will ensue; injuries involving the hip, requiring arthrodesis or hip replacement, extensive scarring. To justify an award within this bracket a combination of such features will generally be necessary”.
Even leaving aside the argument that the compensation payable for such injuries is far too low, the fact remains that these are seriously disabling life-long conditions. Is it right that claims such as these can be dealt with in the proposed scheme? It is, of course, an opt-in scheme for insurers so it might be said that in practice they will not want to admit swiftly in such cases. However, whilst piloting as such is not really practical in this instance, it might still be more sensible to test that the scheme works by beginning with lower value cases (perhaps up to £5,000) and perhaps starting with road traffic accident claims only. It would then be easy to extend the scheme if it is proved to work. The department does not, of course, have a good track record with all-embracing fundamental reform as evidenced by the so-called “costs war” which still reverberates eight years after the abolition of legal aid and introduction of recoverability of additional liabilities without piloting or careful forethought.
In April 2007 the Lord Chancellor indicated that he hoped the scheme would be up and running by the end of the year. Bearing in mind the amount of work likely to be required to fill in the gaps, this looks optimistic unless the department proceeds recklessly without due regard to the possible consequences of radical change to claimants, insurers and lawyers.
David Marshall, managing partner at Anthony Gold solicitors, is a member of the Law Society’s Council and Civil Litigation Committee.
For further information email David Marshall or call 020 7940 4000.
