1 CLAIMS FOCUS RISK PRACTICE BULLETIN JULY 2014 Jackson Reforms The Changing Claims Landscape: one year on A number of months have now passed since the legal milestones of 2013 which changed the way civil claims are handled the introduction of the LASPO Act in April 2013 and the new Employers Liability (EL) and Public Liability (PL) portal. So how have these changes impacted claims handling in practice? Have the anticipated cost savings translated into reality or is it still too early to tell? The way claims are handled under the new regime has clearly changed, with shorter, stricter timescales in place and a lower fixed costs regime which is benefiting defendants who are geared up to meet the new challenges. After some early confusion by both defendants and claimant solicitors as to the finer practical details around operation of the portal, most have now embraced the new process. Defendants who have included their arrangements within the portal lookup have benefited from earlier notification than those who have not and to whom Claims Notification Forms (CNF s) are sent by post. Defendants have also benefited where they have agreed fast track notification routes with insurers/claims handlers and educated their businesses internally to fine-tune investigation and document gathering processes. It is also clear that claimant solicitors have needed to adapt to the lower fees on offer, with a number of firms exiting from the personal injury space already evident, and others who have consolidated to achieve greater economies of scale. Given the pressure on margins, claimant solicitors will inevitably cherry pick the more straightforward claims, however higher complexity claims may now be financially unviable to pursue.
2 2 RISK PRACTICE Jackson Reforms The Changing Claims landscape: one year on July 2014 Indeed defendant claims handlers have reported that they have seen increased numbers of direct claimants with no legal representation. There is also evidence of claimant solicitors having higher caseloads to offset the shortfall in fees, which in turn is leading to delays in handling, particularly between a stage 1 admission and the submission of the medical evidence with a stage 2 settlement pack and offer. This can only apply further financial pressure on claimant firms as they are not entitled to a stage 1 payment for their costs until the stage 2 settlement pack is submitted. As to longer term costs savings, mr Justice Ramsay, who has led the judiciary on implementation of the Jackson reforms since 2012, has suggested that it will be up to three years before the full impact will be clear. Furthermore, with the tail associated with liability claims, it is likely that it will be sometime in 2015 before the earliest persuasive statistical analysis of claims costs can be completed. And whilst it is already clear that average legal costs per case have fallen, until the number of new claims stabilises, the true total claims cost savings will not emerge. New ClAIm Volumes P looking at the longer term picture, the Department of work and Pensions (DwP) has recently published updated figures showing the number of new personal injury claims recorded under the Compensation Recovery unit (CRu) process, which is mandatory for all injury claims. Year CRU Statistics new claims registered (to March) Employer Public Motor , , , , , , , , , ,470 94, ,999 The figures demonstrate that there was a 16% increase in el claims in from the previous year, however Pl claims have remained relatively static in the past three years, after an earlier increase in motor claims which form by far the largest proportion of injury claims have shown a 6% reduction on the previous year. The shorter term picture can be examined by analysing the new claim figures that are published monthly by the company who operate the claims portal. whilst these are starting to paint a picture of stabilisation it is perhaps too soon to see where claims levels will eventually E settle. New el accident only claims are currently being submitted at a rate of circa 4,000 per month with an increasing trend still evident. el disease claims, where higher hourly rate fees can still be charged where cases fall out of the portal fee structure, are running at around 1,400 per month and the latest figures suggest that this figure may now be stabilizing. Pl claims numbers have recently exceeded 6,250 per month again, with an increasing trend evident. motor claims continue to fluctuate on a monthly basis but are usually in the range of 60-70,000 per month and the more recent figures remain within that bracket EL Accident only EL Disease only Public Liability Motor Claims Jul Aug Sept Oct Nov Dec Jan Feb Mar* Apr May Jun 1 5
3 Publications 3 satellite litigation As anticipated following the implementation of the reforms, there has been some not inconsiderable satellite litigation over the past 12 months. Interestingly much of this has related to stricter enforcement of court rules, timetables and costs budgeting. A key case, mitchell v News Group Newspapers was heard by the Court of Appeal in November 2013 where it was upheld that the claimant was limited to recovering his court fees only as he had failed to serve a costs budget in compliance with the timescale set out in the Civil Procedure Rules. That case led to some further adversarial point scoring between the claimant and defendant parties where non-compliance with court directions was evident. however a more balanced approach now appears likely following lord Jackson s recent ruling in another Court of Appeal case, hallam estates v Barker, combined with the introduction from 5 June 2014 of buffer orders, whereby the parties to the case are able to agree extensions of time of up to 28 days, with the proviso that the agreement has to be reached before the time limit has expired. Trivial breaches of rules, practice directions and orders were the latest Court of Appeal focus with a ruling on 4th July that with a view to reducing satellite litigation, cases will now face a 3 stage test. Firstly the failure must be deemed to be serious and significant, if it is not then no sanctions will be imposed and the further 2 stages are unnecessary. however for serious and significant breaches stage 2 examines whether the reason for the breach was acceptable and finally, stage 3 assesses how to deal with the matter justly, and with regard to conducting litigation efficiently and at proportionate cost. It remains of course to be seen whether these issues are tested further. There have also been other cases of interest where claimant solicitors have sought to gain advantage from minor technical breaches. In kilby v Brown, a low value RTA case settled at 1541, there was a mistaken shortfall of 15 in a payment for stage 2 costs which led to the claimant solicitors taking the case out of the portal and issuing proceedings, claiming a bill of 16,000 for legal costs. Fortunately, the Judge disallowed the claimant s costs for unreasonable conduct and also ordered them to pay the additional costs incurred by the defendant. key ChANGes overview RTA Portal extended to increase the limit of 10,000 to 25,000 for motor injury claims. el and Pl injury claims up to 25,000 transacted through portal for accidents on or after 31 July 2013 Timescales to decide and com - municate liability on el cases 30 working days and Pl 40 working days. lower fixed costs for el/pl and RTA cases up to 25,000 handled within the portal. higher fixed costs will apply if cases fall out of the portal. Defendants and their insurers no longer pay claimants success fees or ATe insurance premiums. Contingency fees or Damages Based Agreements (DBA s) capped at up to 25% of damages excluding future losses (50% for non-injury cases). Payment and receipt of referral fees in personal injury cases banned Qualified one-way costs shifting in personal injury cases. Defendants don t get their costs if they win cases unless there is fraud, a failure to beat a Part 36 offer or no reasonable case. Claimant s Part 36 offer enhanced by 10% for failure by Defendant to beat offer. Increase of 10% in general damages for non-pecuniary loss to compensate for the contingency fees the claimant may pay to their solicitors if successful.
4 4 RISK PRACTICE Jackson Reforms The Changing Claims landscape: one year on July 2014 The costs protection afforded to claimants under Qualified one-way Costs shifting (QoCs) was put to the test in Gosling vs screwfix. This was the first case under the new regime where there was a finding of fundamental dishonesty as a result of the Claimant significantly exaggerating his symptoms. In turn the Claimant was ordered to pay the defendant s costs on an indemnity basis. ClAImANT solicitor BehAVIouRs As was widely expected, claimant solicitors have fine-tuned their processes to work more efficiently within the new legal framework but there are some examples of cases where arguably unfair advantage is being sought. The Claims Portal Behaviour Committee continue to police this area, however, if you experience any of the following, refer to your claims handler/insurer to take action on your behalf: Inadequate portal i.d. searches and Claims Notification Forms (CNF s) being sent to addresses other than registered offices CNF s being set up in the portal but delayed posting so the clock is ticking before a defendant has a chance to respond Insufficient information being provided on CNF s to make it difficult or impossible to complete enquiries Claimants forcing claims out of the portal for a failure to acknowledge within 24 hours Claimant solicitors offering to accept contributory negligence which will lead to the case dropping out of the portal and higher fees Cases being incorrectly lodged as el rather than Pl to reduce the investigation timescale from 40 working days to 30 days Pre-action applications for disclosure (PAD s) issued shortly after denials made through the portal on el disease claims, suggesting more than one negligent employer, so case does not need to be lodged with portal on el non-disease claims and Pl claims, suggesting that multidefendant claims are not appropriate for the portal spurious additional claims being intimated shortly after settlement of a related claim Given the pressure on margins, claimant solicitors will inevitably cherry pick the more straightforward claims, however higher complexity claims may now be financially unviable to pursue.
5 Publications 5 ABOUT JLT SPECIALTY JLT Specialty Limited provides insurance broking, risk management and claims consulting services to large and international companies. Our success comes from focusing on sectors where we know we can make the greatest difference using insight, intelligence and imagination to provide expert advice and robust often unique solutions. We build partner teams to work side-by-side with you, our network and the market to deliver responses which are carefully considered from all angles. Our Risk Practice division provides risk and insurance services to corporate clients. We have regional offices across the UK, which means we have in-depth understanding of regional issues and our clients benefit from informed advice and support on their doorstep. This local service is backed up by additional expertise at the centre a unique combination that guarantees bestin-class solutions. FuTuRe DeVeloPmeNTs To watch ABI data shows that the number of dishonest motor claims increased by 34% to a record 59,900 in 2013, with a value of 811 million. The Government announced on 7 June 2014 a number of measures to combat fraudulent injury claims for all liability claims. These include: requiring courts to throw out compensation claims in full where the claimant has been fundamentally dishonest banning lawyers from encouraging people to make claims by offering them incentives like cash or ipads reducing questionable whiplash claims by improving medical assessments, ensuring they are only conducted by independent accredited professionals, and setting fixed fees for medical reports introducing new rules to restrict the practice of settling whiplash claims without confirmation of the claimant s injury Recent ABI initiative urging the Government to increase the small claims limit for personal injury claims from 1,000 to 5,000 to help ensure that the fall in motor insurance premiums can be sustained there has been an estimated 14% drop in premiums in the last year Preliminary output from Competition Commission on Credit hire suggests that the at fault insurer should be given the first opportunity to provide a courtesy/hire vehicle. Final report due september 2014 scottish Courts Reform Bill proposes compulsory application of the pre-action protocol which is currently voluntary consultation closed end June CONTACTS Pas Mariconda Partner, Claims Risk Practice JlT specialty limited +44 (0) JLT Specialty Limited The st Botolph Building 138 houndsditch london ec3a 7Aw lloyd s Broker. Authorised and regulated by the Financial Conduct Authority. A member of the Jardine lloyd Thompson Group. Registered office: The st Botolph Building, 138 houndsditch, london ec3a 7Aw. Registered in england No VAT No July This publication is 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 its subject matter but does not necessarily deal with every aspect of the topic. 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.