Welcome to this, our second bi-annual motor update for 2014.

Transcription

1 09 July 2014 Motor Brief Welcome to this, our second bi-annual motor update for Last month at the Practical Law Insurance Forum 2014, Huw Evans, Deputy Director General of the Association of British Insurers (ABI), set out the five key issues and challenges facing the insurance industry: (i) the scale and pace of change, including in technology and geopolitics (ii) data protection and clarity of data ownership (iii) regulation, including cross-border and international capital standards for insurers (iv) political risk (v) evolution of consumers, including purchasing habits and risk profile. Evans highlighted his belief about how significant this period of change is and how it will affect the markets of the future. For insurers, he emphasised that the scale of change is not just economic, but is driven by technological advances which extends to growth in cloud computing and autonomous robotics. In the context of motor insurance, we will all readily think of innovations such as greater online accessibility for policyholders, telematics and automated emergency braking in vehicles. Such innovations, Evans said, feed into the evolution of consumers and the socalled Generation Z of younger digital native consumers. This new generation are predicted to shortly expect as the norm greater interactivity, including with dispute resolution; proactivity, especially on claims; personalisation and transparency, notably on the use of risk factors. This chimes with the CMA's current push towards greater transparency towards customers in the private motor market. Evans recognised that the impact of EU regulation should not be underestimated, nor should the political momentum to establish levies for Government initiatives. Such projects are likely to continue to pose reputational risk, prompting Evans to make a plea for the industry to be more assertive and proactive in public policy. Evans concluded with the observation that the trends experienced by the general insurance market have created a generation of industry leaders who largely understand the ever more complicated interdependencies between reputational, political and regulatory risk. We suppose the point is that change to the insurance market, with the large motor market at the front end, is far-reaching and ongoing and goes beyond civil reform. If anything, the pace of change is still increasing and we are all barely yet through the initial phase. It stands to reason that those who invest more time in Page 1 of 28

2 anticipating the road ahead and making provision for it are most likely to adapt and seize upon any opportunities further change may offer. We hope that you enjoy reading this edition and welcome your feedback. Niall Edwards Head of Motor Group In this issue Case reviews Capacity: consent order set aside Supreme Court holds that Claimant did not have capacity at the time her claim was settled for 12,500 in Dunhill (a protected party by her litigation friend Tasker) v Burgin [ ] Implications This case could have implications for all involved in clinical negligence and personal injury litigation. Lady Hale, Deputy President, giving the leading judgment, highlights: The spectre looms of many personal injury claims which insurers thought had been settled long ago being reopened on the basis of an incapacity which they had no reason to suspect at the time. Where claims have been settled at an undervalue where the claimant has been wrongly advised, the claimant can sue his own legal advisors who failed to instruct a litigation friend to conduct the proceedings on the claimant s behalf and/or to seek court approval of the settlement. Claimants do of course still have this option. However, Dunhill v Burgin opens the door to reopen any case which settled long ago without court approval where it is now discovered the claimant lacked the mental capacity to enter such a settlement agreement. This may be through no fault of the defendant, who may not ever have met the claimant in the course of the legal action before settling the case. Nonetheless, the Supreme Court has ruled that such settlements are void. Page 2 of 28

3 One significant reason the professional negligence route may not be pursued instead is that a periodical payment order would not then be available and that might disadvantage the claimant in a high value claim. For ongoing cases, particularly involving head injuries but also where the medical records or pleadings suggest an element of cognitive compromise, we recommend the claimant is assessed for mental capacity to conduct the claim before any settlement agreement is reached. It is not necessary to instruct a psychiatrist or psychologist to do this, unless such an expert is required for other aspects of the claim. Any medical expert instructed ought to be able to assess capacity. They just need to know to test whether the claimant is suffering a disturbance of the mind or brain which is rendering them incapable of making a particular decision (in this case, a decision concerning the claim itself). If there is a concern over capacity, either party should apply for court approval of any future settlement. Background The claim arose out of a road traffic accident on 25 June The Defendant, who was riding a motorbike, struck the Claimant, who was crossing the road. The Claimant suffered a severe closed head injury along with a soft tissue injury to both legs. The Claimant issued a claim on 13 May 2002 limited to 50,000. Liability was disputed. The Claimant was represented by a trainee solicitor and counsel. A compromise settlement was achieved on the day of the trial on 7 January 2003 for 12,500 plus costs partly because one the Claimant s main witnesses did not show up. On any view this was a gross undervaluation of her claim, if she could establish negligence. Her current advisers put her claim at over 2m on a full liability basis, with the Defendants accepting it is valued at around 800,000. In July 2006 the Claimant sought the advice of new solicitors. In December 2008, her litigation friend issued proceedings on her behalf for professional negligence against her former solicitors and counsel. Those proceedings were stayed. On 11 February 2009 her litigation friend issued the proceedings in question. These took the form of an application in the original action, seeking a declaration that the Claimant did not have capacity at the time of the settlement in January 2003 and that the consent order should be set aside. Decision Giving judgment on behalf of the Supreme Court, Lady Hale held as follows: Page 3 of 28

4 Test for capacity: the test for capacity to conduct proceedings for the purpose of CPR Part 21 is the capacity to conduct the claim or cause of action which the claimant in fact has, rather than to conduct the claim as formulated by his lawyers. Judged by that test, it was common ground that the Claimant did not have the capacity to conduct this claim. Effect of incapacity: given this finding, in accordance with CPR 21.10(1) the settlement and court order were of no effect. No external check on the propriety of the settlement had been carried out by the court. A settlement of a claim was an established exception to the general position in respect of a contract made by a person who lacks capacity, which is valid unless this fact was or ought to have been known. Policy issues: although there was a need for finality in litigation, and the difficulty of re-opening cases long after the events was recognised, the policy underlying the Civil Procedure Rules was clear. Those lacking capacity require and deserve protection, not only from themselves but also from their legal advisers. For more information please contact Rob Tobin r.tobin@kennedys-law.com Common sense restored: the correct approach to Mitchell - Denton and Others v TH White, Decadent Vapours Ltd v Bevan and Others, Utilise TDS Ltd v Davies and Others [ ] The Court of Appeal has signalled a fresh approach to applications for relief from sanctions, in an attempt to bring an end to the debate and satellite litigation which followed its judgment in Mitchell v News Group Newspapers Ltd [2013] [link to Mitchell. Confirming a new three-stage test, the decision softens the extremes of Mitchell by attaching greater weight to the overall circumstances of the case and by warning against Mitchell opportunism underpinned by heavy costs sanctions for ill-judged satellite litigation. We had reached an unsatisfactory state of affairs where relief from sanctions had become a niche area of law, with upwards of 50 judgments interpreting Mitchell in different ways. In practice it was becoming difficult to provide clients with clear advice on how to respond to different Mitchell scenarios. In combination with the buffer rule (rule 3.8(4) as amended) which allows lawyers to extend deadlines by up to 28 days - provided both parties agree and it does not put any hearing date at risk - we have rightly returned to practitioners being trusted with some flexibility to manage their cases. Applications for relief Page 4 of 28

5 from sanctions will hopefully become an infrequently used part of the civil procedure rules. Decision The Master of the Rolls, Lord Justice Jackson and Lord Justice Vos confirmed that the misunderstanding has occurred from the assumption that there would be an automatic failure to grant relief where procedural breaches are (i) non-trivial (now serious and significant) breach; and (ii) without good reason. Going forwards, Judges should address an application for relief from sanction in three stages: Stage one identify and assess the seriousness and significance of the failure to comply with any rule, practice direction or court order which engages rule 3.9(1). If the breach is neither serious nor significant, relief is likely to be granted (and the court is unlikely to spend much time on stages two and three). Stage two consider why the default occurred. Stage three evaluate all the circumstances of the case to determine the application justly. The Court corrected the post-mitchell emphasis on triviality - it is a useful concept but not a definitive test at stage one. Rather, the court should focus on an assessment of seriousness and significance of the breach. Whilst the court may wish to take into account the defaulting party s previous conduct as one of the relevant circumstances of the case, this should occur at stage three. Stage three will continue to include consideration of circumstances with reference to the factors of rule 3.9 i.e. the need for efficient and proportionate litigation and the need for compliance with rules, practice directions or orders. This means the court must consider the effect of the breach in every case and is likely to place weight on those factors where the breach has prevented efficient litigation, including meeting a hearing date. The Master of the Rolls and Vos LJ held that rule 3.9 clearly intended there to be particular importance placed on those factors. Interestingly, Jackson LJ dissented on the issue of construction of stage three, confirming his belief that the ultimate requirement of rule 3.9 is for the court to deal justly with the application. In practice, either approach leads to the same result. The Court took the opportunity to highlight inconsistent judicial application of Mitchell, expressing its concern that some judges have adopted an unduly draconian approach to rule 3.9, whilst others have taken an unduly relaxed approach. It recognised the consequences that have followed, including utilising Page 5 of 28

6 mistakes by the opposing party, which runs counter to the intended spirit of Jackson. The court confirmed It should be very much the exceptional case where a contested application for relief from sanction is necessary. Opportunism will be penalised in the future, including through heavy costs sanctions. Going forwards Hopefully this guidance will provide a much needed sense check for courts and practitioners. It is intended to promote the desired culture of compliance and cooperation between the parties. This is offered against a clear reminder to the courts to ensure that orders for directions are realistic and achievable, thereby reflecting the realities of litigation, the objective of achieving finality and desire to assist responsible allocation of resources for both the court and businesses. Nevertheless, the default position must remain to comply with ordered directions. To rely on the buffer rule is not ideal and best practise still means parties need to liaise closely with experts and witnesses to ensure that deadlines imposed can be complied with. Whilst there is a relaxation of approach - which must be correct looking at the circumstances of all three appeals where the breach was not serious or significant - it does not follow that breaching the rules or court ordered timetable means that you can remedy your position. Any breach that could, say, delay a deadline date for a joint expert meeting or impact upon a trial date will always put the defaulting party in a difficult position. Background All three appeals concerned the seeking of relief from sanction by one or other of the parties. In Denton, the judge granted relief to the Claimant who had filed six new witness statements long after they were due causing the trial date to be vacated. The Defendant appealed the order. In Decadent, the Claimant completed the pre-trial checklist in time but did not make payment of court fees by the appointed date. Failure to do so had been ordered to result in the claim being struck out. The judge rejected the Claimant s application for relief and, the action having been concluded, ordered the clamant to pay costs. The Claimant appealed the order. In Utilise, the Claimant lodged his budget 45 minutes late, which was inadvertently overlooked by the Claimant. The judge refused relief and ordered the Claimant was in default and his budget would be treated as seeking court fees only. The judge also took into account the Claimant s default to notify the court of the parties agreement to mediate submitted thirteen days beyond the date for notification. The Claimant appealed the order. Page 6 of 28

7 All three appeals allowed. For more information please contact Mark Burton or Tracy Head Credit hire: impecuniosity and mitigation of loss In an important decision for motor insurers, the Court of Appeal has held that the issue of impecuniosity goes to the period of hire as well as the rate. Issues relating to the burden of proof, the appropriate period of hire and when the hirer should take steps to arrange for the repair (or replacement) of his original vehicle were also addressed. The potential impact of the Claimant s comprehensive insurance policy on mitigation was considered briefly but not addressed directly - Umerji v Zurich Insurance PLC [ ] There is a now a strong incentive on defendant insurers to quickly confirm their position with regard to the vehicle inspection. They may have no intention of carrying out their own inspection of the damaged vehicle (in order to agree the pre-accident value or repair costs). Alternatively, they may decide to effect the inspection and divulge the report as soon as possible, lending support to the argument that the hire claim should end about two weeks thereafter. Taking a prompt commercial view on those options could now result in a drastic reduction in the hire (and any storage) claims presented by a pecunious claimant. Implications Impecuniosity arguments can apply to the period of hire as well as to the rate of hire. The onus at the outset of a claim is on the claimant hirer to provide documentary proof in support of an averment he is impecunious. After that point in time, it is for the defendant to show he is not impecunious. This case should help to greatly reduce wasted correspondence with credit hire organisations on this point. If a claimant hirer fails to argue impecuniosity in time and in accordance with a court order he will probably be debarred from doing so later in litigation and be considered to be a pecunious claimant (a person who is in funds). Debarring orders have become all the more possible in the post- Mitchell world of litigation. When the defendant insurer has either confirmed it does not intend to inspect a vehicle or has inspected and outlined its position on repair/pre- Page 7 of 28

8 Background accident value, the pecunious claimant should move quickly to dispose of his vehicle, repair it and/or replace it. If he does not, the defendant insurer may now have strong arguments to reduce the total period of hire. The Claimant owned a Mercedes car worth about 8,000. On 19 October 2010 he was involved in an accident and his car was damaged. It was in due course assessed as a write-off. The other driver was the First Defendant, whose insurers were the Second Defendant. Following the accident the Claimant entered into a credit hire agreement with Elite Rentals (Bolton) Ltd. He rented a replacement car for a total period of 591 days at a cost of 95,130.14, representing a rate of about 161 per day. Recovery and storage charges came to 3, He claimed that he was unable to afford to buy a replacement vehicle until the Second Defendant paid him the pre-accident value of his old car on 16 November In the course of proceedings, an order was made by a District Judge providing that the Claimant should confirm within 14 days whether he intended to allege that he was impecunious at the time of hire. The Claimant did not make any statement in accordance with this order. At a subsequent hearing, a Deputy District Judge debarred the Claimant from pleading impecuniosity. At first instance, Mr Recorder Alldis held that the issue of impecuniosity went only to the hire rate claimed but not to the duration of the hire. He gave judgment for the Claimant in respect of the entirety of the period of hire for 101,559.36, representing 92, for hire charges and 2,540 plus VAT for storage charges and interest. As the Second Defendant had by an oversight failed to adduce evidence of basic hire rates, it was accepted that the Recorder should assess damages by reference to the full commercial credit hire rates actually paid. This decision was taken to appeal. Appeal Giving the leading judgment of the Court of Appeal, Lord Justice Underhill held that the Claimant was debarred from arguing impecuniosity out of time: An averment by a claimant that he had to hire a replacement car for as long as he did because he did not have the money to buy one is a claim of impecuniosity just as much as a claim that he had to pay credit hire rates because he did not have the money to hire on the ordinary market The burden of proof was on the Claimant to prove that credit hire expenditure was reasonably incurred: Page 8 of 28

9 There is no doubt a grey area about how much needs to be pleaded and proved to establish reasonableness before the evidential burden shifts to the defendant to show that the expenditure was unreasonable. But in this kind of case it is clearly right that that a claimant who needs to rely on his impecuniousness in order to justify the amount of his claim should plead and prove it. On this basis the Claimant should only have been entitled to recover hire charges up to the date when he should reasonably have bought a replacement vehicle. It was reasonable for him to wait until an assessment had been made of whether it was economic to repair the damaged vehicle. The Defendant insurer had the opportunity to inspect the vehicle and say whether they agreed the valuation but delayed on that. Therefore the Claimant was allowed to wait until he could dispose of the vehicle on this particular case and thereafter allowed 14 days to get a replacement vehicle. Counsel for the parties was asked to agree the correct figure for damages on that basis. The appeal in respect of storage charges was dismissed. Underhill LJ encouraged claimants advisers in a similar situation to put the defendant s insurers on notice promptly that storage charges are being incurred and to impose a clear deadline after which the vehicle will be disposed of. However, he was not prepared to state that it was wrong to say that the Claimant s advisers had done enough in this case. Postscript The Court of Appeal declined to consider the issue of whether the Claimant should have claimed the value of the damaged vehicle under his own comprehensive insurance policy and used the proceeds to buy a new car. Whilst Underhill LJ recognised that the point is an interesting one and plainly of some general importance, it had not been pleaded and the relevant issues had not been explored properly in evidence. For more information please contact Niall Edwards n.edwards@kennedys-law.com Emergency stop: bus driver acted reasonably Kennedys successfully defends claim by passenger; driver had no alternative but to brake suddenly when threatened by youth on scooter - Cridland v Stagecoach (South) Ltd [ ] Page 9 of 28

10 Implications Important lessons can be derived from the outcome of this case, even if it does not establish or reinforce any particular legal principles: The case demonstrates the benefit of having liability dealt with as a preliminary issue where evidence supporting a robust defence exits. If the claim had proceeded in relation to both liability and quantum significant additional time and costs would have been incurred. The accident arose because of what the Judge described as the youth s anti-social behaviour. The bus driver was placed in a difficult position due to no fault of his own. Nevertheless, his behaviour became the focus of a claim for substantial damages. The judgment reinforces the importance of public service vehicle operators defending claims which arise in such circumstances and therefore providing support for their employees. The judgment should provide confidence to defendants and their insurers in cases where it might be assumed that the outcome would be influenced by the judge s natural sympathy for the claimant. The Claimant, an elderly gentleman with pre-existing medical problems, was also an innocent victim of the youth s anti-social behaviour. He was left with very serious injuries and sought redress from a substantial company with the benefit of public liability insurance. However, it was clear that this scenario did not cloud the Judge s judgment. Background On 5 September 2012 the Claimant was a passenger on a bus driven by an employee of the Defendant. As the bus was travelling along the driver saw a youth ahead of him, in the same lane, who was riding on a push scooter. The driver reduced his speed. As he approached, the youth did not move over on to the pavement. The driver sounded his horn. The youth then swung his scooter in the air, as if to throw it at the windscreen of the bus. The driver flinched and braked at the same time. As a result of the sudden braking, the Claimant was thrown forward, striking his head on the seat back in front of him and thereby sustained brain damage. The Claimant was too unwell to give evidence at the trial. His only witness was his partner. Part of the Claimant s case was that the bus drove too close to the youth and that immediately before braking the driver made an abusive gesture towards the youth. Page 10 of 28

11 Decision Sitting as a Judge of the High Court, His Honour Judge Birtles dismissed the Claimant s claim: Where the evidence of the Claimant s partner conflicted with the evidence of the driver or the Defendant s other witnesses, who were passengers on the bus, he preferred the evidence of the Defendant s witnesses. The driver was experienced and properly trained. He was familiar with the route in question. The bus was about seven metres away from the youth when the youth made the gesture to the driver. There was nothing amiss in being that distance behind the scooter. The driver was not driving at an excessive speed. In addition, he did not make an absusive gesture towards the youth. The cause of the accident was the youth threatening, or apparently threatening, to throw his scooter at the front window of the bus. The driver had to brake suddenly to avoid what was an obvious and apparent threat. He had no alternative. For more information please contact Charles Martin c.martin@kennedys-law.com Injury during criminal enterprise: insurer of last resort cannot avoid liability Government not entitled under European Community law to exclude cover for uninsured driver where car used to further crime; exception clause in the Uninsured Drivers Agreement allowing the Motor Insurers Bureau or Article 75 insurer to avoid paying a third party claim breached Community law; breach was sufficiently serious to warrant the payment of Francovich damages to the Claimant - Delaney v Secretary of State for Transport [ ] Factual background On 25 November 2006, the Claimant sustained serious injuries when the car in which he was a front seat passenger crashed due to the driver s negligence. The emergency services who attended discovered a bag containing 240 grams of cannabis under the front of the Claimant s jacket and a smaller quantity in the driver s sock. The driver was successfully prosecuted for dangerous driving and possession of cannabis. Page 11 of 28

12 Insurance position The driver held an insurance policy with Tradewise Insurance Services Ltd. On 4 March 2009, Tradewise obtained an order that it was entitled to avoid the policy on the grounds that the driver had not disclosed, or had misrepresented, the material fact that he was a habitual cannabis user. Accordingly, Tradewise, standing in the shoes of the Motor Insurers Bureau (MIB), became the Article 75 insurer. It was, therefore, liable to meet the liability brought about by the driver s driving; subject to it being proven that one of the exceptions set out in the Uninsured Drivers Agreement (UDA) applied. Court proceedings On 23 April 2009 the Claimant commenced proceedings against the driver and Tradewise. On 25 January 2011 His Honour Judge Gregory dismissed both claims. He held that: The Claimant s claim was barred on grounds of public policy (i.e. the defence of ex turpi causa succeeded). The Claimant knew or ought to have known that the vehicle was being used in the course or furtherance of crime, activating clause 6(1)(e)(iii) of the UDA. On 21 December 2011 the Court of Appeal allowed the Claimant s appeal on the ex turpi causa issue on the basis that the joint criminality was only the occasion, and not the cause, of the accident. However, it dismissed the appeal on the clause 6(1)(e)(iii) UDA issue. On 16 November 2012 the Claimant then brought proceedings against the Secretary of State arguing that clause 6(1)(e)(iii) of the UDA was incompatible with the relevant EU Directives - namely Article 1(4) of Directive 84/5 (the Second Directive). The Second Directive notionally allows for other exclusions but only seems to provide for one obvious exclusion: where a person voluntarily entered the vehicle knowing that it was uninsured. Decision Mr Justice Jay held that the Defendant is liable to pay damages to the Claimant: 1. Article 1(4) of the Second Directive imposes obligations on Member States in respect of damage caused by vehicles in relation to which a valid policy of insurance was taken out, but where that policy was subsequently avoided by the insurer. It is not confined to situations where there was no valid insurance taken out in the first place. Page 12 of 28

13 2. Articles 1(4) and 2(1) of the Second Directive require Member States to ensure that compensation is paid in all circumstances save those expressly set out as exclusions within the text of these provisions. Member states cannot create additional exceptions. 3. The exception in clause 6(1)(e)(iii) of the UDA is not consistent with the specific exceptions permitted by the Second Directive. The Defendant s obligations under the Second Directive were clear and it was guilty of a serious breach of EU law. 4. An alternative exclusion under clause 6(1)(e)(ii) of the UDA did not apply. The Claimant did not know that the vehicle being driven in the course or furtherance of crime is uninsured. The Judge concluded: Implications Many readers may be wondering how it comes about that a drug-dealer is entitled to compensation against Her Majesty s Government in circumstances where he was injured during the course of a criminal joint enterprise The law is clear, the Defendant is in serious breach of it, and there must be judgment for the Claimant on the issue of liability, with damages to be assessed. This decision addressed one of several exceptions under the UDA by which the MIB or Article 75 insurer can avoid meeting a third party claim. It, therefore, presents the risk that it will be used against other exceptions in order to challenge the decision to refuse compensation where there is an at fault uninsured driver. For instance, all insurers are signatories to the Articles of the Second Directive and can deal with third party insurer outlay losses under the Articles. Might, therefore, an exclusion on subrogated claims where there is third party insurer outlay be at risk of challenge? Many insurers currently obtain statutory declarations against their insured when there is a material non-disclosure or misrepresentation rendering those policies void from the start. They then seek to argue they should not pay the third party insurer outlay as it is a subrogated claim and, under the UDA, they are not required to meet third party subrogated heads of loss. This decision also brings into question whether or not certain third party credit hire claims could now be avoided under an exception clause of the UDA, again by way of a subrogated claim. The point was raised but left undecided in the case of McCall v Poulton [2008]. Page 13 of 28

14 We understand that the MIB is currently working to redraft the UDA. Whether the new Agreement can sidestep these issues and yet still comply with Article 1(4) of the Second Directive waits to be seen. For more information please contact Niall Edwards Articles EL/PL portal: one year on We are approaching the first anniversary of the extension of the Portal to lower value EL and PL claims, which occurred on 31 July Whilst the data for those claims remains relatively immature, certainly when compared to motor claims, some noteworthy observations can be made. Initially, monthly submitted claims were in their hundreds and not thousands as originally speculated. However, there has been a steady increase in the number of claim notification forms (CNFs) submitted each month since July 2013, resulting in a monthly total until 31 May 2014 of 24,618 and 40,600 for EL and PL claims, respectively. The number of EL disease CNFs remains unsurprisingly low in comparison, with a 12 month rolling figure of 8,781. Whilst the monthly increases were smaller by the end of 2013, there was a significant increase in claim numbers as we entered 2014 across all three claim types. A notable increase occurred between February and March 2014: 13% for EL claims, 12% for PL claims and 25% for EL disease claims. There was a further increase between April and May 2014, be it less significant, of 4% for EL and 6 % for Page 14 of 28

15 PL claims, respectively. Whilst disease claims increased by 11% between May and April, they decreased slightly between April and May. Impact of the new protocols Interestingly, retention figures are improving month on month. This is hopefully because claims handlers are becoming more familiar with the process and their ability to assess merits within 30 (EL) and 40 (PL) working days. Nevertheless, 46% of EL claims have left the Portal process since the time of the extension, be it at the end of stage 1, stage 2 (other than for an agreed settlement) or by using the exit process function. The corresponding figures for PL and EL disease are 36% and 31%, respectively. The proportion of claims which have left the process at the end of Stage 1, where a liability decision has to be made, including any allegation of contributory negligence, ranges from 35% to 46% across the three claim types. We are seeing claims being submitted which relate to an injury before 31 July 2013, which might explain the relatively high exit rate. This is likely to disappear as handlers get used to the process. We are, however, seeing certain behaviours emerge which suggest a deliberate attempt to remove claims from the Portal and no doubt seek to enjoy enhanced fixed recoverable costs. This includes, for example, submission of CNFs without completion of mandatory fields, such as national insurance details. With regard to settlements, a total of 1,035 EL claims have been settled at an average general damages sum of 2,969, compared with 1,082 PL claims at an average of 2,941 for general damages in the month of May The average settlement sum has increased in both claim types month on month. However, this Page 15 of 28

16 is a low average. Are the larger cases over, say, 5,000 being taken out of the Portal? Only time (and better MI) will tell. As defendants only get one bite of the cherry to make a counter offer within the initial consideration period then this may be at the top end of the valuation bracket to avoid a Stage 3 hearing. Interestingly, a total of 138 EL disease claims have now settled at an average amount of 4,894. This comes as somewhat of a surprise as the general consensus at the time of the extension was that the Portal, as currently presented, does not lend itself to disease claims. Nevertheless, we anticipate the number of settled disease claims will remain relatively low. Even those claims with one defendant will usually require the involvement of a number of insurers and thus the timelines for a response to the CNF may lead to those exiting the Portal. Exit function The main stated causes of exit where the exit function is used across the three claim types are incomplete CNF, duplicate claim or other reason. More PL claims than EL claims cite a failure to acknowledge the CNF on time as a reason to use the exit function. This is not surprising, as tracing the insurer in time to meet the requirement of next day acknowledgment may be more difficult in PL claims, which, unlike EL claims, do not have the benefit of a search through the Employers Liability Tracing Office. Other reason is the most popular tick box across all claim types and, unfortunately, provides no real data. Indeed, the Claims Portal Company has acknowledged that their simple MI capture needs refining, with more drop down options for exit reasons. On the horizon is the likelihood that there will be a consultation with interested insurers on the type of MI they want the Claims Portal company to produce. When this might occur is unclear but it is unlikely to happen before In any event, most insurers are tracking internally their own data to ensure that they can see the bigger picture and respond accordingly. The future Given the extended Portal applies only to EL/PL claims where the accident occurred on or after 31 July 2013, a further increase in the rate of claim numbers is to be expected once a suitable lead in time exists between accident and first notification. In addition, as EL/PL lawyers not experienced in volume motor claims become familiar with the new process, management of portal claims should become more efficient. Overall, it is likely to take at least a year from the time of extension for there to be data that can be used to track and trend claims experience and shape claims teams to be ready to respond. Page 16 of 28

17 Overall, the experience towards the Portal appears positive and compensators have embraced the change. Some are already reporting a saving on costs, whilst recognising the ongoing need to develop proactive practices to be ready to accept claims and make early liability decisions. Indeed, some have referred to the perception that the industry has a better reputation from being able to compensate genuine claimants more quickly. Such observations need, of course, to be weighed against the realisation that the experience with EL and PL claims will be different to that gained from motor claims. Whilst designed to simplify the claims process, the simplicity of the Portal could trip up the unwary. One can envisage satellite litigation emerging as the nuances of EL/PL claims come up against the prescriptive rules which underpin the process, for example, with regard to multiple claims being submitted. Nevertheless, the available data already suggests a steady rise in claim numbers being submitted to the Portal and we anticipate this will continue. The performance reports are available on the Portal executive dashboard. For more information please contact Tracy Head t.head@kennedys-law.com or Deborah Newberry d.newberry@kennedys-law.com Is fundamental dishonesty fundamental to the fight against fraud? Criminal Justice and Courts Bill 2014/15 The question of how the courts should deal with fraudulent claims, and in particular the grey area of gross exaggeration, has been the subject of ongoing discussion around tackling claim inflation for some time. The government has now added another dimension to the debate. Following the Law Commission s announcement that they would not be progressing work on third party fraud; on 7 June 2014, Justice Secretary, Chris Grayling, confirmed a new package of measures to tackle insurance fraudsters and dishonest claims. They include requiring courts to strike out a claim in its entirety where the claimant has been fundamentally dishonest. The measure has already made its way into Parliamentary business, by virtue of the belated insertion of clause 45 into the Criminal Justice and Courts Bill 2014/15. The Bill introduces fundamental dishonesty to be applied to personal injury claims. Page 17 of 28

18 Under the new rules, defendants would be able to file for the dismissal of a claim if the court is satisfied on the balance of probabilities that the claimant has been fundamentally dishonest in relation to the primary claim or a related claim. In such cases, the court would be obliged to dismiss the primary claim, unless it is satisfied that the claimant would suffer substantial injustice if the claim were dismissed. The court would also be required to record the amount it would have otherwise paid to the claimant in damages. Thereafter the claimant would only be required to pay any costs ordered against him where those costs exceeded the amount of damages they would have received. So where does this take us? Is the proposed legislation the silver bullet against fraud in personal injury claims? Strengthening the fight against fraud The imperative nature of the proposed legislation that the courts must dismiss fundamentally dishonest claims is a fillip for defendants and provides a clear steer to how judges should exercise their discretion in the matter. The move has, however, attracted debate. Some commentators have asked what is meant to be fundamentally dishonest and what the difference between dishonesty and fundamental dishonesty is. For example, is it the civil standard of proof as opposed to the (harder) criminal standard? We presume the burden of proof will remain consistently the civil standard in personal injury claims. However the courts may take a more relaxed approach to the cogency of the evidence upon what that burden is assessed. On the other hand, fraud in the arena of personal injury is a covert and ever changing behaviour that is not easily defined. To do so could give credibility to borderline or newly created practices whereby claimants try to exaggerate up to a perceived tolerance. The Bill also includes the provision for claims to be dismissed where a related claim is fundamentally dishonest. A related claim is defined as being a claim for personal injury damages which is made in connection with the same incident or series of incidents in connection to the main claim and by a person other than the claimant. This provision opens a number of potential avenues for applications to dismiss, including incidents where ghost or bogus passenger claims are presented or with regard to claims connected to wider fraud rings. It is not clear whether the primary claim needs to present issues pertaining to proven or suspected dishonesty when this can be demonstrated in respect of the related claim(s). Overall, there may well be a need for clarification in due course. Page 18 of 28

19 What is not covered? This draft legislation will only relate to claims for personal injury damages and in doing so raises questions as to how other heads of claim susceptible to exaggeration should be dealt with. This includes credit hire, recovery, storage, repair and damage to vehicles/property: Should a claimant who pursues a false credit hire claim of 50,000 be entitled still to recover personal injury damages for 2,000 (notwithstanding the Claimant s lack of credibility)? Will fraudulent and dishonest behaviours migrate to other compensable areas? Anomaly with QOCS Does the proposed approach dovetail with qualified one way costs shifting (QOCS)? Where the court is satisfied that dismissal of the claim would cause substantial injustice, it is proposed that the court may exercise its discretion in favour of the claimant. If the sanction is not applied, will QOCS still apply? For funding arrangements entered into after 1 April 2013, defendants, whether they win or lose at trial, will almost always have to pay their own costs. There are a number of exceptions to QOCS, which includes where the claim is found to be fundamentally dishonest, thereby exposing a claimant to enforcement of an order for costs made against him. However, under the Bill, costs will only be recoverable to the extent that they exceed the amount of damages that have been paid to the claimant had it not been for the dismissal of the claim. It is not clear whether this relates only to the genuine loss (as found) or to the entire claim as presented. We presume the former. It is understandable how this may be seen as an automated off-set in favour of a dishonest party in proceedings and incongruent to QOCS and the deterrence of dishonest claims behaviours. Yet, in a situation where QOCS would be applied it is expected that the claimant would have received some amount in damages (for the genuine part of the claim) or otherwise have had discontinued the claim. Another aspect of the Bill that potentially dulls the blade is with regard to any subsequent criminal sanction. It is suggested that courts will be required to have regard to the dismissal of the claim when sentencing for a criminal offence or contempt of court. We anticipate this may rancour with insurers and other compensators who find the courts willingness to punish offenders already somewhat muted. Page 19 of 28

20 Again, there appears to be a need for clarification. Comment Overall this is a scalpel and not a hammer-blow in the continuing fight against fraudulent claims, relating specifically to partial fraud and exaggeration after a final hearing. Whilst a positive step, everything that the Bill offers can already be achieved and it sits alongside a range of other options, including: early (pre-trial) applications to strike out the claim prior to trial as an abuse of process applications to disapply QOCS in wholly fraudulent claims or those where there is fundamental dishonesty criminal sanctions We are confident that debate will continue and it remains to be seen whether further amendment will be made. Nevertheless the Government remains keen to press this issue through in this parliament having made significant and public announcements about driving down the cost of insurance and fraudulent claims. Once enacted, it will be down to the industry to apply the legislation appropriately in the fight against fraud. Background In Summers v Fairclough Homes Limited [2012] the Supreme Court held that courts have the power to strike out a claim in its entirety as an abuse of process in cases where there was evidence of fraud, dishonesty or exaggeration. The position was confirmed and built upon subsequently, including in Fari v Homes for Haringuey [2012]. Fundamental dishonesty, in the context of QOCS, has yet to be defined. We received a hint in unreported case of Gosling v Screwfix and Anr [2014], which it is understood to have suggested that substantial exaggeration, even if of around 50 per cent of the claim, could result in a finding of fundamental dishonest, thereby exposing a claimant to enforcement of an order for costs made against him. The Criminal Justice and Courts Bill 2014/15 received its Second Reading in the House of Lords on 30 June The next event is the committee stage line by line examination of the Bill - which begins in the Lords on 14 July Page 20 of 28