Client Bulletin. June 2013 Ministry of Justice Reforms update and practical guidance

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1 Client Bulletin June 2013 Ministry of Justice Reforms update and practical guidance This bulletin provides an update to our previous bulletin about the proposed Ministry of Justice Reforms and follows publication of the Civil Procedure Rules (CPR). These confirm the changes to be made to the procedures for civil claims for personal injury compensation. As mentioned in the previous bulletin these changes will operate in tandem with the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO). Both were effective from 01 April The latest update does not materially change the overall picture and the principles of streamlining procedures and capping of costs are still maintained. The update does however clarify some of the important detail that was previously unclear. In addition an Appendix to this Bulletin outlines some practical guidance for those involved in handling claims. Scope of court proceedings The reforms for the time being will apply to proceedings in the county court, the Chancery Division and the Queen s Bench Division (but not currently the Admiralty or Commercial Courts). However there is an important additional feature see Proportionate Costs. Proportionate costs The Courts are already obliged to deal with cases justly but the new rules introduce the phrase and at proportionate cost. New procedures will ensure that the courts are given the power to exercise control over costs. Both sides will be required to file and exchange their budgeted costs within agreed time frames but at least seven days before the first case management conference. The judge will be empowered to make revisions to the cost budgets. Estimates of an expert s fees will be required when applying for permission to rely on one. The Courts will monitor both sides adherence to budgets and where deemed necessary impose a cost capping order on future costs, which will limit the amount a party may recover. The courts will be unlikely, when making final assessment and apportionment, to accept costs that exceed the last approved budget. Both parties will have to ensure that budgets are accurate and allencompassing and if they have to revise their budgets they must do so early and obtain either the court s approval or agreement from the other side. N.B. The costs management process outlined above will not apply to cases in the county court, the Chancery Division or the Mercantile Court where the amount at stake exceeds 2,000,000 Page 1 of 2

2 Qualified one way costs shifting (QOCS) The process of QOCS is confirmed and will apply in respect of personal injury claims. As outlined in our earlier bulletin this system means that losing claimants will not have to pay towards defendants costs provided that the claimant has acted properly. The defendant can however pursue claims against the claimant in certain circumstances such as where the claim was made fraudulently. Damages-based agreements (DBA) DBAs, which are no win no fee agreements where the lawyer s fee is taken from the damages awarded, are also confirmed. As also previously mentioned the indemnity principle still applies and any inter-party recovery will therefore be capped at the total amount permitted to be paid under the DBA. Fixed costs The judicial review, instigated by the Association of Personal Injury Lawyers (APIL) and Motor Accident Solicitors Society (MASS) that challenged the proposed fixed costs regime, was rejected in the High Court in March. This means that the fixed recoverable costs in respect of those motor claims currently handled within the Claims Portal reduced from 1,200 to 500 as planned with effect from 30 April Expanded Portal The extended Portal scheme will apply to motor claims up to 25,000 and to employers and public liability claims up to the same value from the end of July Conclusion The latest update does not materially change the overall picture but merely adds more of the missing detail. What also remains is the inevitable desire of the solicitors of claimants to seek ways to drive claims out of the relevant portal to take advantage of the higher costs available to them outside. The need for all companies to adopt swift and efficient claims handling processes remains essential to prevent claimants lawyers taking advantage of such delays. Aon will keep you informed as more detail emerges but in the meantime please talk to your usual advisor should you require assistance or more information. Author: John Topliss for and on behalf of ARS UK, Retail Broking, Technical As your insurance brokers we advise you on your insurance requirements and claims procedures; we cannot and do not purport to give you legal advice. Please contact your lawyers should you require legal advice on any issues set out in this document. Published by Aon UK Limited. Registered office 8 Devonshire Square, London EC2M 4PL. Aon UK Limited is authorised and regulated by the Financial Conduct Authority. This publication is intended for the general guidance of UK-based clients only, as the law and practices may be materially different elsewhere. While this publication uses sources that are believed to be reliable, it is provided with no warranty or representation as to its accuracy, adequacy, completeness or fitness for any purpose and with no acceptance of liability for any loss whatsoever incurred by any person who may rely on it, regardless of the cause of the loss. Recipients shall be entirely responsible for the use to which they put this publication. This publication has been compiled using information available to us up to June Copyright Aon UK Limited 2013 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any way or by any means, including photocopying or recording, without the written permission of the copyright holder, application for which should be addressed to the copyright holder. Page 2 of 2

3 Appendix Ministry of Justice Reforms 2013 Client Readiness Practical Guidance 1. The Reforms apply to Employers Liability (EL) and Public Liability (PL) personal injury claims where general damages for pain and suffering, special damages and future expenses are between 1,000 and 25,000. The Reforms also apply to single defendant disease claims except for mesothelioma. The existing upper threshold for Motor Claims handled within the portal will also increase to the 25,000 level applicable to EL and PL Claims 2. The intention is for all claims in 1. above to be dealt with electronically via the Claims Portal (portal) which can be accessed directly or by , thus ending any disputes about whether faxed communication is appropriate. Claims are initiated by the claimant or their solicitor completing a Claims Notification Form ( CNF ) 3. For defendants, once the CNF is received the timescale for making a decision on liability is reduced from the current 3 month period to: (a) EL response on liability 30 working days (6 weeks) (b) PL response on liability 40 working days (8 weeks) (c) Motor personal injury response on liability 15 working days ( 3 weeks) 4. The Reforms will follow three key stages with defined costs associated with each stage; Stage 1: Providing early notification of claims to defendants and insurers The CNF will be sent electronically to the defendant's insurer (where known). The claimant s solicitor or claimant will sign a Statement of Truth on the CNF. All mandatory fields in the CNF should be completed before submission with the only exception being the referral source field. The defendant or its insurer must acknowledge receipt of the CNF within 24 hours. The15 business days afforded to the defendant or its insurer to respond electronically in respect of motor personal injury claims is extended to 30 days for Motor Insurers' Bureau cases. Stage 2: - Medical evidence, offers to settle and negotiation Following admission of liability by the defendant or its insurer the claimant s solicitor will obtain a medical report there is no defined time frame for its provision. The claimant may request an interim payment at this stage of 1,000 or more. Specialist advice, additional medical and other expert evidence can be obtained but those costs will only be recoverable where the report or advice was reasonably required. The Stage 2 Settlement Pack Form will be completed by the claimant and sent electronically to the defendant or insurer, together with the medical report and any receipts/evidence of special damages claimed. The defendant or insurer has 15 business days from receipt of the Stage 2 Settlement Pack to either accept or make a counter proposal. Where a counter proposal is made, a maximum of 20 working days are allowed for negotiation between the parties. A total of 35 working days is allowed for consideration of the Settlement Pack. Fixed recoverable costs must be paid within 10 days of receiving the Stage 2 Settlement Pack. Stage 3: Where quantum cannot be agreed If quantum cannot be agreed within Stage 2 time frames, the claimant s solicitor will prepare a Stage 3 Court Proceedings Pack for a hearing where an application will be made to the court to determine quantum. The claimant must include the final schedule of the claimant s losses, the defendant s responses and final offers and counter offers which must be sent to the defendant or insurer for consideration. The claimant cannot raise further issues not already addressed in Stage 2. The Appendix: Page 1 of 3

4 defendant has 5 days to return the Court Proceedings Pack and object (if necessary) otherwise it will be assumed the defendant has no further comment to make. The defendant can continue to make offers of settlement up to the commencement of the hearing. The table below demonstrates the fixed fees payable if claims are settled within the portal: Claims of 1,000-10,000 Claims of 10,000-25,000 Motor claims EL/PL claims Stage 1 Stage 2 Total Stage 1 Stage 2 Total ,300 1, Denying claims or raising contributory negligence under Stage 1 will cause the claim to exit the portal and be subject to higher costs so careful consideration should be given as to whether to raise contributory negligence as any saving made on damages will be reduced by the additional legal costs that will be payable 6. For EL claims you will be asked to provide loss of earnings details within 20 working days of the admission of liability. 7. When Does This Happen? This will come into effect for all new qualifying claims that occur after 31st July How Will It Work? a. Employers Liability Claims i. You will no longer receive letters of claim for new EL claims that occur after 31 st July ii. The claimant solicitors will be able to trace your insurers via the Employers Liability Tracing Office (ELTO) and will complete a CNF sending this to your insurers via the electronic Claims Portal. iii. The claimant solicitors will also issue a Defendant Claims Notification Form (DNF) to you so that you are aware of the claim. iv. Insurers will contact you following receipt of the claim via the Claims Portal to commence investigation. b. Public Liability Claims i. You will no longer receive letters of claim for new PL claims that occur after 31 st July 2013 but you may receive a CNF from the claimant solicitors at any one of your locations if the claimant solicitors following reasonable enquiry are unable to trace your insurers. ii. You will need to acknowledge the CNF electronically within 24 hours of receipt. If you do not acknowledge receipt within this timeframe the claim will exit the Claims Portal and will be subject to higher costs. iii. It should be noted that if a claim does fall out of the portal there is still a fixed cost regime in place thus some savings should still be made in comparison to claims made prior to the reforms. 9 Preparing For the New Process a) Ensure you have a clear claims reporting process in place internally and with your insurers. b) Investigate early and if possible obtain the following for all accidents, storing the material in a secure location to support your defense should a claim materialise: Pre & Post Accident Risk Assessments and Accident Investigation Paperwork Pre & Post accident method statements Accident Book Entry Internal Accident Investigation Report First aider report and surgery record Personnel file / OH file including contact details for relevant personnel Appendix: Page 2 of 3

5 F2508 HSE Forms / RIDDOR report to HSE (Depending on occurrence. For more information visit Photographs / video evidence Provision of personal protective equipment Training records c) Consider including some guidance and contact information on your company web site to direct public liability claims to a controlled source. This will help avoid the risk of claims being sent to multiple locations. d) Agree points of contact for provision of information and liability sign-off s within your company and ensure that all nominated staff understand the need for urgency under the new process. e) Ask yourself if you have the capability to answer questions and provide relevant documentation to insurers to enable them to make a decision on liability within 30 (EL) or 40 (PL) days. f) Be in a position to disclose wages information within 20 days of admitting liability. g) Insurers will have a more pro-active approach and are likely to make telephone calls rather than sending s. Are your team confident in dealing with this, do they need any training or support in responding? h) Any investigation visits will happen quickly so you need to be available at short notice and be in a position to answer questions promptly to enable insurers to comply with the new timescales. i) Maintain an up to date contact list for insurers, nominated solicitors and Aon so you are able to communicate quickly if required. Authors of the Appendix: Lee Armstrong and Declan Crehan for and on behalf of ARS UK, Claims Management Executive As your insurance brokers we advise you on your insurance requirements and claims procedures; we cannot and do not purport to give you legal advice. Please contact your lawyers should you require legal advice on any issues set out in this document. Published by Aon UK Limited. Registered office 8 Devonshire Square, London EC2M 4PL. Aon UK Limited is authorised and regulated by the Financial Conduct Authority. This publication is intended for the general guidance of UK-based clients only, as the law and practices may be materially different elsewhere. While this publication uses sources that are believed to be reliable, it is provided with no warranty or representation as to its accuracy, adequacy, completeness or fitness for any purpose and with no acceptance of liability for any loss whatsoever incurred by any person who may rely on it, regardless of the cause of the loss. Recipients shall be entirely responsible for the use to which they put this publication. This publication has been compiled using information available to us up to June Copyright Aon UK Limited 2013 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any way or by any means, including photocopying or recording, without the written permission of the copyright holder, application for which should be addressed to the copyright holder. Appendix: Page 3 of 3