1 T&Lbulletin CONSTRUCTION TECHNICAL & LEGAL BULLETIN JUNE JACKSON REFORM UPDATE PART TWO Since our February 2013 Jackson Reforms update, we have seen the claimant lobby s Judicial Review proceedings defeated in the High Court, which has paved the way for Lord Jackson s reforms to be fully enacted in law. Following LASPO coming into force on 1 April 2013, the pre-action protocols which frame the new costs regime and electronic portal have finally been published setting out how most new personal injury claims up to GBP 25,000 in value will be handled from 31 July These reforms as a whole are intended to significantly reduce legal costs so that in turn insurers will be able to pass on these savings. However it will not be surprising for the claimant industry to adapt their procedures to exploit new and innovative loopholes and with the prospect of satellite litigation it will be some time before the full effects of the reforms become clear. There are however some early signs that rationalisation and diversification of claimant solicitor firms is already taking place with job losses and further redundancies imminent, so there is already some evidence that efficiencies are being delivered by the new regime. Key changes post 1 April 2013 A significant part of the reforms came into play on 1 April 2013, with the following key elements embodied within the primary legislation, the Legal Aid, Sentencing and Punishment of Offenders Act 2013 (LASPO). Referral fees banned for personal injury claims (but not credit hire claims) Recoverability of no win no fee CFA s, success fees and ATE premiums against defendants abolished Introduction of contingency fees or Damages Based Agreements (DBA s) capped at 25% of damages excluding future losses (50% for non-injury cases) 10% increase in General Damages for all cases settled after 1 April 2013 except where a CFA is already in force (and mesothelioma) Qualified One Way Costs Shifting (QOCS) Defendant pays own costs even if they win at trial, unless there is fraud or dishonesty, there is no reasonable cause of action, or the claimant fails to beat a defendant s part 36 offer Defendant to pay additional 10% of damages if fails to beat claimant s part 36 offer (capped at GBP 75,000 additional damages) Greater judicial enforcement of proportionality of legal costs e.g. costs budgeting
2 2 Key changes post 31 July 2013 From J-Day on 31 July 2013, the electronic portal that is currently used to transact low value motor claims is scheduled to be extended to most Motor, Employers and Public liability injury claims up to GBP 25,000 in value where the accident takes place on or after this date. Key exceptions include PL disease claims, EL disease claims where there is more than one defendant, mesothelioma claims, fatalities, clinical negligence and neglect/abuse claims. This will mean that a new fixed costs regime will apply to all claims handled within the portal. Cases can drop out of the portal for a number of reasons and where they do, higher fixed predictive costs, linked to the settlement value of the claim will apply but these will in most cases be significantly less than under the current hourly costs regime. The present 21 day period to acknowledge claims is being reduced to one day. It is still not clear if missing this deadline will cause claims to fall out of the portal as whilst the latest pre-action protocols do not provide sanctions for this eventuality, the portal lists non-compliance as a reason for cases to fall out. There is some encouragement from a previously decided motor claim, Patel v Fortis, which established that a failure to acknowledge does not justify fall-out and we may see some further clarity on this as matters unfold. However the need for speed is vitally important to ensure cases are transacted promptly as the timescales to decide liability are also falling from 90 calendar days under the existing regime, to 30 and 40 working days for EL and PL respectively. These timescales will effectively run from two days after the claim notification form is deemed to have been sent the claim is intimated. Claim Notification Form The letter of claim is being replaced with a Claim Notification Form (CNF) in which the claimant solicitor must provide sufficient detail to enable enquiries to be commenced. Certain claimant solicitors may seek to abuse the process by providing scant or misleading information claims handlers will take up the issues on defendants behalf and where appropriate reject claims and escalate to the Portal Behavioural Committee and regulatory bodies. The CNF may be delivered electronically via the portal or by hard copy and businesses should be prepared for both eventualities. On EL claims, claimant solicitors are required to check insurer details for the relevant accident date/exposure period via the Employers Tracing Office (ELTO) and in most instances they will notify insurers direct via the portal, at the same time a copy of the CNF must be sent to the defendant. For PL claims, as yet there is no such database where a defendant can be linked directly to an insurer. Defendants will need to liaise with their brokers and insurers/claims handlers to decide how they should best be identified via the portal so that claims are promptly directed to the correct handlers. Existing processes where brokers receive and send on claims will need to be re-engineered to maximise the available time and capitalise from the lower fixed portal costs. There will be a need to take into account how claims are handled within excesses/self-insured retentions and where different insurers may be involved for different layers or specific projects/jv s. Where these interactions are complex, where any element of the injury claim handling is carried out in-house, or where significant PL claims numbers are anticipated, defendants may wish to consider registering with the portalcompany. They may also elect to receive all electronic portal claims centrally within their business and then allocate these accordingly to insurers/claims handlers the portal can accommodate these arrangements. However, this approach would require a defendant to have sufficient resource to efficiently manage the portal, and to agree the processes and procedures with insurers. For that reason most defendants may not find the need to register. Alternatively, insurers/claims handlers may be able to register your details via their own portal access. Where the CNF is delivered by hard copy if the insurer s identity is not known or the defendant is not identifiable via the portal, the latest protocols have now stated that this must be sent to the defendant s registered office or principal place of business. It is essential that such locations are briefed appropriately and that they have systems in place to seamlessly forward on claims to insurers/claims handlers as liability timescales will continue to run as they do with electronic delivery of the CNF via the portal. Companies may consider advertising on their websites where PL claims should be directed or writing to firms who regularly send claims so that claimant solicitors cannot argue that they were not clear about where claims should be sent. Repeat claimant solicitor offenders will need to be identified by claims handlers and steps taken to ensure future claims are properly directed.
3 3 With the reduced timescales to decide liability, it will be beneficial to review existing claims processes as well as claims defensibility. If liability is not admitted in full within the new timescales, or arguments of contributory negligence are raised, cases will automatically fall out of the fixed portal costs regime into the higher fixed predictive costs regime. This review should not only cover internal investigations but those undertaken by insurer/claims handlers/tpa. There will be a greater focus in determining liability early on based on the accident and other documentation that is available and defendants should review processes to ensure they are fit for purpose under the new regime. It is essential that communication channels with the party ultimately dealing with the claims are fine-tuned to minimise delays. Electronic communications wherever possible are to be encouraged to pass on scanned or soft copy documents. Consider the use of shared electronic document repositories where claims handlers can access documents direct. On EL cases where liability is admitted, earnings information must be disclosed within 20 days of the admission and defendants should ensure HR/payroll are able to comply or there may be costs penalties. admissions are another area to be reviewed in conjunction with brokers, insurers and the claims supply chain. With the timescales being heavily squeezed, procedures where liability must be formally agreed will need to be revised, for example by granting a defined delegated authority to ensure that the process can be incorporated into the new regime without any fall-out of cases. Ensure communication channels are clear and direct to your insurers/claims handlers. However defendants should also not lose sight that if they have strong grounds to fight claims they can now do so with much greater cost certainty. And whilst Defendants will now pay their own costs even if they win (in most instances), claimant solicitors too will need to be sure of the cases they contest, as they will get nothing if the case is lost. Where there may be doubts about conceding a claim early on, defendants can also elect for cases to drop out of the fixed costs portal, whereby claims will revert to the old 90 day timetable for liability decisions and where predictive fixed costs will still apply to trial. It will also be necessary to carry out a cost benefit analysis to determine whether maintaining arguments of contributory negligence outweighs the increased costs that will apply. Below is a cost matrix that depicts the new costs regime for both fixed and predictive fixed costs (to stage two i.e. before the proceedings stage) and which identifies the break even position on contributory negligence. Payments There will be strict deadlines to pay costs and agreed damages/interim payments which if missed by only a day may mean that higher predictive fixed costs will be payable. It is essential therefore that claims funding and payment processes are fine-tuned in preparation. Where claims are funded directly by insurers/claims handlers they will already have processes in place to enable compliance. However, where coinsurance and self-insured retentions will impact on payments, these processes will need to be re-mapped where necessary to ensure fitness for purpose. EL/PL: Fixed portal costs v Fixed predictive costs v Contributory Negligence Break Even Damages Value EL/PL Portal EL Predictive PL Predictive Contributory Negligence Break Even 2,500 1,080 1,666 1,666 23% 5,000 1,080 2,190 2,190 22% 7,500 1,080 2,600 2,526 20% 10,000 1,080 2,976 2,826 19% 12,500 1,920 3,300 3,144 11% 15,000 1,920 3,600 3,444 12% 17,500 1,920 3,900 3,744 12% 20,000 1,920 4,200 4,044 12% 22,500 1,920 4,500 4,344 12% 25,000 1,920 4,800 4,644 12% NB. Costs are inclusive of VAT
4 4 The way forward The speed of the reforms continues at some pace and there are still areas where key detail is lacking and which is unlikely to emerge until closer to the planned go-live date of 31 July 2013 or possibly beyond. Importantly, whilst there has now been publication of the long awaited revised Pre-Action Protocols, we may still see some amendment to the final detail before J-Day. Clearly some review and resource will be required for defendants to ensure readiness for these changes, working in conjunction with their brokers, insurers and claims supply chain to maximise any potential costs savings. Consider the enclosed checklist to assist in your preparations for J-Day. Checklist for J-Day Area Action Completed Internal process in place for promptly handling any postal CNF forms received direct, both at registered office and principal trading address. Raise awareness of the new CNF e.g circulate/display specimen CNF Forms Create standard template for acknowledgement of CNF New Claim Actions Consider with insurers/brokers whether your business should register on the portal Ensure Employers Tracing Office (ELTO) details are accurate and up to date Check Registered Office address is correctly recorded with Companies House Consider including insurer/claims handler details on company website Ensure processes are streamlined to promptly notify claims direct to insurers/claims handlers Customer Service and front line staff briefed in relation to notification processes Ensure processes are in place to promptly collate and communicate key liability documents to claims handlers Ensure claims defensibility processes and documentation are fit for purpose Revise liability decision agreement processes to fit the new reduced timescales Payments /Other Ensure processes are in place for prompt authorisation and release of payments where a deductible or co-insurance is in place Ensure a process is in place for release of employee earnings details within 20 days where liability is admitted
5 5 Document Check List Submission of these documents within 5 working days of the CNF will give Insurers/Claims Handlers time to review and if necessary make further enquiries to reach a decision within the reduced investigation timescales. Document Employers Public Accident Investigation Report Accident Report/Accident Book Entry Riddor Report Witness Contact Details and Statements Photographs/CCTV Training Records Issuance of PPE records Equipment/Cleaning/Inspection and Maintenance Records Pre and Post Accident Risk Assessments Contractual documents that may impact on liability Details of Previous Complaints or incidents at accident location Earning information and details of sickness absence For further details please contact your Account Manager About JLT s Construction Division With a team in London of 135 construction insurance professionals, JLT is unquestionably the UK s leader in managing global construction risk. Our reputation for excellence built on knowledge and performance, makes us partner of choice in well over 100 of the world s major construction projects from large sporting stadium projects to mass transport systems. Our Real Estate division has a wealth of experience, recognised within both the insurance market and real estate sector. The team specialises in the placement and management of real estate focused solutions utilising market leading IT platforms that are web based and allow control of the programme and access to real time information anywhere in the world. T&Lbulletin JLT Specialty Limited 6 Crutched Friars London EC3N 2PH Tel +44 (0) Fax +44 (0) This newsletter is published for the benefit of clients and prospective clients of JLT Specialty Limited. It is not legal advice and is intended only to highlight general issues relating to the subject matter which may be of interest and does not necessarily deal with every important topic nor cover every aspect of the topics with which it deals. If you intend to take any action or make any decision on the basis of the content of this newsletter, you should first seek specific professional advice. Lloyd s Broker. Authorised and Regulated by the Financial Conduct Authority. A member of the Jardine Lloyd Thompson Group. Registered Office: 6 Crutched Friars, London EC3N 2PH. Registered in England No VAT No June