What Lies Ahead. Page

Transcription

1 2016 What Lies Ahead Page

2 WHILST MANY predicted 2015 would be a quiet year within the insurance sector, looking back, there were a significant number of developments both good and bad. The year started with the pivotal credit hire case of Stevens v Equity, followed by the launch - and subsequent problems - of MedCo. Then came Section 57 of the CJC Act, which introduced the dismissal of genuine elements of otherwise dishonest claims. The year was capped by the Government's wholesale changes to whiplash. With many of these still very much 'live' issues, our Partners take a look ahead at what 2016 is likely to hold for insurers. Whiplash changes gather momentum Damages Based Agreements may become the norm for low-value PI claims. Patrick McCarthy, Partner Defendant The big news at the end of 2015 was the announcement in the Chancellor s Autumn Statement concerning small PI claims and whiplash in particular. An MoJ consultation on the proposals is expected to be issued in the next quarter, although it is likely that the rise in the small claims limit from 1,000 to 5,000 - which has been considered and suspended before - is a done deal. With an increase in the SCT limit there will be even more of a drive to increase damages, particularly in claims that include vehicle-related damages (so as to exceed the 10,000 overall small claims limit). Insurers should expect to see more bad behaviours and sharp practice when this is inevitably introduced. In addition, we will probably see distinct changes in the way that the pursuit of low value PI claims are funded. One element of the 2013 Jackson reforms that has had hardly any impact to date is the availability of Damages Based Agreements (DBAs). However, in September 2015 the CJC published a number of recommendations intended to make the regime simpler and clearer. Any subsequent changes to the DBA Regulations during 2016 could, in conjunction with the rise in the SCT limit, make DBAs a much more attractive funding vehicle for the claimant community. The proposal to abolish financial compensation for 'minor' whiplash injuries was certainly unexpected, and has alarmed many in the claimant market. The consultation paper should set out the Government s thinking in this regard, and until it is issued we can expect to see a fair deal of speculation early this year both on what it will contain and its ramifications. Page 2

3 The proposed reforms will, according to Osborne, reduce motor premiums by a headline figure of 1bn per annum. But a recent report by the Institute and Faculty of Actuaries has highlighted that all claims under 13,000 would have to be removed from the system in order to reach the savings level suggested. The impact report accompanying the consultation will therefore make interesting reading! Given the timescales being suggested, the uncertainties around the nature and scale of injuries that would be affected, and the proven adaptability of the claimant market we would question any notion that the proposed changes will lead to the mass exit of suppliers of claimant services (CMCs, claimant solicitors, etc.) in the short term, and certainly not during Based on previous experience, if a significant reform agenda materialises then a pre-laspo type surge in claims may occur prior to any revised legislation. It has been suggested that it will be at least April 2017 before the whiplash reforms are fully implemented, so we would expect to see this surge commence in the third quarter of this year. However, much will depend upon whether the mooted increase in the SCT limit for PI claims occurs first. MedCo s role will significantly change On 1 February 2016, exactly ten months after MedCo was launched, comes the mandatory accreditation of all registered experts which is claimed will improve the standard of medico-legal reports. We wonder how robust the MedCo accreditation process will be. Claire Fox, Partner Defendant We wonder how robust the accreditation, which is obtained from an online examination, will prove to be. We suspect that any improvement will actually be founded in increased scrutiny of medical experts and authenticity of reports by insurers. With the latest whiplash reforms potentially making it redundant, 2016 could see MedCo's remit extended further, possibly to include other injury claim types such as NIHL or EL/PL. Concerted efforts will be made to stamp out claims farming Claims farming will continue to be a hot topic this year. There has already been a noticeable drive by insurers, the ICO, consumer groups and, indeed, ourselves to tackle this growing issue. The publicity around cases such as the imprisonment of model Amy Laban has no doubt helped raise awareness of rogue CMCs amongst the public. Page 3

4 With one such firm recently handed a 850,000 fine after making millions of nuisance calls, the ICO is making the right noises. However, with the results of the CMR review due to be published in the first quarter of 2016 we would hope this is just the start. Horwich Farrelly would welcome increased restrictions of CMC marketing techniques, a tightening of rules around referral fees and restricting the fees paid by their clients - particularly for financial loss claims such as PPI. In fraud, trends to watch out for will be claims farming and fundamental dishonesty. Paul Brandish, Partner Counter Fraud A new type of fundamental dishonesty decision will be seen 2015 was the year Horwich Farrelly secured a market-leading 79 findings of fundamental dishonesty under CPR In 2016 we'll start to see the first cases relying on Section 57 of CJCA 2015 come to trial. Under this legislation where a claim (issued after 13 April 2015) is found to be fundamentally dishonest the court must dismiss the whole claim, including any genuine part, unless doing so would cause the claimant to suffer "substantial injustice". We can therefore also expect to see the "substantial injustice" clause of the CJCA tested. In the absence of any guidance on what may amount to "substantial injustice", appeals are inevitable. The long-term future of the ABI GTA will remain in doubt In 2016, the GTA may cease to exist in its current form. Page 4 Darren Mendel, Partner Credit Hire The credit hire arena was dominated towards the back end of 2015 by the ABI GTA rates review. However, to the frustration of insurers, the negotiations around the revision of the rates appear to have reached an impasse will determine whether the GTA continues to exist in its current form. There are rumblings in the market - from both sides - that the current system is unworkable and there are threats of parties taking similar action to HelpHire and withdrawing from the GTA. We definitely expect significant changes. Credit hire disputes will continue to be dominated by BHR issues The landmark case of Stevens v Equity provided straightforward guidance on the matter of calculating Basic Hourly Rate (BHR) evidence.

5 The judgement applied a common sense approach - favourable for defendants - of asking the hypothetical question of what are the mainstream suppliers (or if there are none, local reputable suppliers) charging for the type of car hired and in the claimant s geographical area. Of course, the applicable rate will be the lowest reasonable rate. The forthcoming appeals of Clayton & McBride will determine if BHR continues to be determined in line with Stevens. Max Withington, Partner & Head of Credit Hire However the battle in respect of BHR evidence continues with two Court of Appeal cases listed for appeal in late January. These are Clayton v Varndell and McBride v UKI. The outcomes will either cement the Stevens decision or water down the current way that courts assess BHR evidence. In terms of credit hire, the proposed changes to the small claims track limit will have minimal impact on how such claims are dealt with by the courts. Of more significance may be the increasing pressure on the MoJ to cut costs by reducing the number of courts. We therefore foresee increasing judicial unease in allocating significant amounts of time to deal with credit hire matters. No doubt these matters will form the basis of discussion with insurer clients at our next credit hire forum in London on 27 January. Some welcome changes to the way in which costs are handled Changes to CPR in respect of the filing of costs budget are expected to come into force in April The agreed changes mean claims under 50,000 will be filed with the directions questionnaire and claims over this amount will need to be filed 21 days before the case management conference. We hope the new format Bill of Costs will ultimately improve the information available to clients. Nicola Critchley, Partner & Head of Costs These changes are to be welcomed as they should result in fewer contested CMCs, reduce costs and ease the burden on the court system. The ongoing rollout of the new format Bill of Costs is set to become mandatory in October. Whilst the new format is extremely complex, and requires significant investment in training for fee-earners across the UK, we hope the new approach will ultimately improve the information available to clients. Waiting in the wings is the appeal case of Bird v Acorn Group Ltd which is listed for October. The outcome should finally decide the question of the appropriate level of fixed costs payable in Portal cases which settle before reaching trial. Page 5

6 Accurate reserving assumes even greater importance in large loss cases The EU's Solvency II Directive, which concerns the amount of capital insurers must hold to survive severe financial shocks, came into effect on 1 January After more than ten years in the pipeline, insurers will no doubt have been well prepared. However, these changes will continue to be felt across the market as insurers face continued scrutiny over their risk models by the Bank of England. The Solvency II Directive, which came into force on 1 January, will bring increased scrutiny of insurers risk models. Rod Evans, Partner Large Loss As a result, with relatively few large and catastrophic loss cases typically contributing the lion s share of an insurer s loss reserves, accurate reserving will become even more important. In recent years the MoJ has come under pressure by the likes of APIL to review the discount rate - the assumed rate of interest a claimant would receive on lump sum awards. Some have argued the current rate of 2.5%, set in 2001, is too high and as a result claimant's damages are unfairly docked. Whilst the Government has previously made some noises about changing the permitted types of investments, possibly to include those offering higher rates of return, we do not envisage any changes being forthcoming in the next 12 months. At some point this year we can expect the appeal case of Knauer v Ministry of Justice to reach the Supreme Court. The case, concerning a mesothelioma claim, gives rise to two issues: the measure of loss for services dependency and the appropriate date for the assessment of the multiplier. If the decision is successfully appealed we will see a substantial increase in awards for dependency in fatal accident claims. Reform creep may be on the cards The success of the proposed reforms to the small claims track limit and whiplash injuries is likely to be measured by a reduction in claims, lower insurance premiums and the freeing up of court resources. There is no doubt that the Government would like to push the reform agenda upwards not least because it will save them (and the UK taxpayer) significant amounts of money on a number of fronts. Page 6

7 The NHSLA s Annual Report for 2015/16 showed that claimant legal costs now account for over 50% of each clinical negligence claim it deals with under 100,000 in value. The Government has made it clear it would like to see fixed fees introduced for clinical negligence cases up to 100,000 in value and has asked the CJC to explore the possibilities. With their recommendations expected during 2016 the claimant community is already preparing its opposition campaign. If change is applied in the clinical negligence area, why not other types of PI? Why stop at 100,000 in terms of fixed fees? What other elements of the claims process could be tackled in order to reduce direct cost? If the current trend continues we re likely to see access to courts only permitted when all alternatives have been exhausted. Malcolm Henké, Partner & Head of Catastrophic Injury and Large Loss This type of reform creep raises concerns to those handling other higher value PI cases should steps be taken to apply similar reforms across the board, with little thought for the impact they may have on justice. If the current trend does continue we are likely to see the imposition of more fixed fees, restrictions on the use of expert witnesses, arbitrary limits on the amount of evidence parties are permitted to call, and access to the courts being allowed only when all other forms of dispute resolution have been exhausted. The tail will be wagging the dog. We will be closely monitoring the developments in the clinical negligence area during 2016 to see if there are any pointers towards more wide scale reform of higher value PI claims. Major changes to the court system in the offing The Government's proposals to close up to 91 courts and tribunals and integrate or merge another 31 will start to bite this year. Whilst the MoJ hopes the moves will save around 30m in annual running costs, with fewer courts and staff, insurers will find it becomes more expensive and time consuming getting court applications, in particular at the RCJ. Finally, we're likely to see the first moves towards cases being heard online after last October s spending review also announced 700m to modernise the courts and tribunals system. This followed a report by the CJC in February 2015 recommending a trial of online dispute resolution with a view to HM Online Court going live in Given the Government s drive to ultimately reduce the cost of the justice system, and alongside some of the other reforms planned, the timeframe for this development may well be shortened. Page 7

8 Horwich Farrelly's 2016 Forecast If you would like to discuss any of the issues raised in this document please contact: Paul Brandish Nicola Critchley Rod Evans Claire Fox Malcolm Henké Patrick McCarthy Darren Mendel Max Withington Page 8

9 Disclaimer & Copyright Notice The contents of this document are considered accurate at the time of delivery. The information provided does not constitute specific legal advice. You should always consult a suitably qualified solicitor about any individual legal matter. Horwich Farrelly Solicitors accepts no liability for errors or omissions in this document. All rights reserved. This material provided is for personal use only. No part may be distributed to any other party without the prior written permission of Horwich Farrelly Solicitors or the copyright holder. No part may be reproduced, stored in a retrieval system or transmitted in any form or by any means electronic, mechanical Page 9 photocopying, microfilming, recording, scanning or otherwise for commercial purposes without the written permission of Horwich Farrelly or the copyright holder. Horwich Farrelly 2016