CLAIMSadvisor. Employers & Public Liability Claims Jackson Reforms update. Background. Key changes post 1 April 2013

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1 CLAIMSadvisor RISK PRACTICE JULY 2013 Employers & Public Liability Claims Jackson Reforms update We recently provided an overview of the Jackson Reforms and the key changes in relation to Employers Liability (EL) and Public Liability (PL) claims. We can now provide you with some further information on the protocol, which comes into effect from 31 July 2013 for accidents occurring on or after this date, and for disease claims intimated on or after this date. Background One of the main objectives of the Jackson reforms is to streamline the claims handling process and significantly reduce costs for straightforward claims. Introducing EL and PL claims to the existing motor portal and extending this to incorporate claims with a value of between 1,000 and 25,000, means that a very high percentage of claims will now fall into this new system. This presents a significant opportunity to reduce the legal costs attached to these claims, which ought to allow insurers to pass on these savings when calculating premiums. However, it is fair to say that claimant solicitors will look to adapt the way in which they operate and take advantage of any opportunity to remove claims from this process. Clearly, this will mean that businesses and their insurers must work together to ensure that this is minimised. 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 (LASPO) Act Referral fees banned for personal injury claims (but not credit hire claims) Recoverability of no win no fee Conditional fee agreements (CFA s), success fees and After the event (ATE) premiums against defendants abolished 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).

2 Key changes post 31 July 2013 A new protocol will come into effect for low value EL and PL personal injury claims This protocol applies where the claim arises from an accident on or after 31/07/2013 If an EL disease claim, the protocol applies when a claim is first intimated on or after 31/07/2013 The electronic portal that is currently used for low value motor claims is to be extended to most motor, EL and PL injury claims up to 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, and if the accident occurred outside England and Wales A new lower 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 Claims Notification Form (CNF) The CNF will replace the paper letter of claim. There are different CNFs for each type of claim i.e. Employers Liability (EL1), Employers Liability - Disease (ELD1) and Public Liability (PL1). These forms are designed to be sent directly to insurers via the portal. However, there are also identical forms that are marked defendant only where the form coding is replaced by EL2, ELD2 and PL2 respectively. These forms will be sent to the defendant directly at the same time as the electronic form is processed on the portal. On EL claims, claimant solicitors are required to check insurer details for the relevant accident date/exposure period via the Employers Liability Tracing Office (ELTO). This should result in claimant solicitors having knowledge of insurer details and using the portal. However, this may not always be possible on EL claims and there is no such database to check PL insurers; therefore it is possible that the defendant only CNF may be sent to a business as the only notification of a claim (without a separate CNF being sent to insurer via the portal). Given the one day acknowledgement requirements, it is best practice to acknowledge receipt of any CNF immediately to the claimant solicitor by and provide details of your relevant insurers. This ought to ensure that the case remains within the MOJ process from the outset. 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 noncompliance 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. 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. For EL claims where an admission of liability is made, insurers will have 20 days to provide wages information to the claimant solicitor from the date of the admission. 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. What happens if the claimant is unrepresented? It s possible that unrepresented claimants could register and submit their claims on the portal, however in reality you are more likely to receive a claim (or a complaint) in writing or via . What if someone else handles our claims other than the Insurer? Self-insured clients, or where insurers employ a third party agent to handle claims, will register onto the portal to receive claims as the compensator, therefore they will receive claims via the portal in the same way insurers will.

3 When will a claim exit the portal? A claim will exit the portal and protocol process if: Liability is denied Contributory negligence is alleged Liability is not admitted in full within 30 working days (EL) or 40 working days (PL) Acknowledgement of the CNF is not received by the claimant solicitors by the end of the next business day of it being submitted A defendant fails to provide earnings details within 20 days of the admission of liability. This is not an exhaustive list, but these are the key areas that defendants have an opportunity to work with insurers in order to comply with the timescales and take advantage of the cost savings on offer. What are the cost benefits? Below is a cost matrix that highlights the costs applicable to cases that remain within the portal process and those that fall out. The matrix also highlights the economic considerations of making a contributory negligence argument, which would result in the claim dropping out of the portal. It is fair to say that insurers may look to avoid such arguments if it is economically sound to do so. However, this should not be the only consideration and the bigger picture will always need to be borne in mind before dismissing a contributory negligence argument. Thought needs to be given to other similar claims that may be waiting in the wings and whether a full admission may prejudice subsequent claims. EL/PL: Fixed portal costs v Fixed predictive costs v Contributory Negligence Break Even Damages Value EL/PL Portal EL Predictive PL Predictive 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 Contributory Negligence Break Even

4 Be prepared The importance of handling EL, PL and motor claims quickly and accurately will be much greater after the implementation of the portal and new protocols. The direct relationship between defendants and insurers will be even more critical to the efficient investigation and processing of claims. Most of our clients will have moved to a direct reporting procedure in readiness for these changes, but for anyone that has yet to make the transition, please speak to your Account Executive or Claims Executive about this as soon as possible. However, the main thing that defendants can do to make the most of the new regime is to ensure that a robust, early investigation is carried out following an accident and that all relevant documents and evidence are captured and made available to insurers, so that the right liability decision can be made early. What do I need to do now? Be ready to start receiving CNF s rather than letters of claim (remember accidents occurring before 31/07/2013 don t apply to the new protocol so you will may still receive letters of claim for up to 3 years following this date, for accidents prior to 31/07/13) Be ready to send an immediate acknowledgement to the CNF, we suggest the following text: We acknowledge receipt of the (Defendant Only) Claim Notification Form dated (insert date) and have forwarded the form to our Insurers, (insert your insurer and policy number) and send the CNF to you insurer immediately using the contacts in your JLT Liability Claims Procedure Guide (please contact your Account Executive or Claims Executive for a copy if required) Educate any office that may receive a CNF by post and of the need for immediate action Test your internal investigation process, can you provide insurers a good, detailed investigation pack within 30 days? (40 days on PL claims) Have you nominated someone in your business to control this process? If unsure, please speak to your Account Executive or Claims Executive about this as soon as possible. Overview of process Personal Injury Motor / EL / PL Claim valued up to 25,000 EL/PL accident date on or after 31 July 2013 or EL disease claim intimated on or after 31 July 2013 Solicitor completes Claim Notification Form (CNF) online CNF goes directly to insurer Insurer has one working day to acknowledge the new claim Employers Liability Claim Insurer has 15 working Insurer has 30 working Insurer has 40 working Is strict liability a thing of the past? On the 25th April 2013, the Enterprise Regulatory reform bill received Royal assent, which allows the controversial changes to the Health and Safety at Work Act 1974 to be embedded. These changes are applicable to accidents occurring on or after 1 October 2013 and in most cases see an end to strict liability when considering EL claims. The aim is to remove the right of civil action against employers for breach of statutory duty in relation to certain health and safety legislation, other than where such a right is specifically provided for. The amendment refers to Section 47 of the Health and Safety at Work Act 1974, which removes the right to bring civil claims for breach of statutory duty contained in the 1974 health and safety legislation. In most cases it will require the claimant to prove that the injury resulted from the employer s negligence or breach of a non-strict statutory duty. This is to the obvious advantage for employers and EL insurers although it is likely that only a small minority of EL accident claims will fall into the affected categories, where the only reason for settling a claim is breach of a strict statutory liability. This will create challenges for claimants and their solicitors, as the burden of proof will be upon them to establish negligence. Whilst this is seen as a positive step in combatting the perceived claims culture, there is a possibility that the removal of strict liability may in fact result in more cases falling out of the new MOJ process and cases becoming more complicated and time consuming as the claimant will have to dig deeper and rely upon things such as witness evidence to support their claim.

5 Demand Different At JLT Specialty, we believe in doing things differently. Why? Because in the world of insurance broking, risk management, claims consulting and settlements, the only way we can develop solutions that really deliver is to properly understand all the different challenges you face. And we know the answer does exist, no matter how difficult the question is. Our success comes from focusing on sectors where we know we can make the greatest difference. On using insight, intelligence and imagination to provide expert advice and robust often unique solutions. And on building partner teams to work side-by-side with you, our network and the market to deliver responses which are carefully considered from all angles. And because of this, our clients trust us. They have total confidence that the vital elements of their operations are covered, enabling their businesses to be even more ambitious and surpass expectations. We know how we work makes us different. It s quite a claim but we re driven to deliver on it every single day. JLT Specialty. Demand different. For more information about the issues raised in this bulletin, please contact your account manager, or a member of our Claims Team: Birmingham & Nottingham Peter Glaze Tel: +44 (0) peter_glaze@jltgroup.com Leeds Michael Johnson Tel: +44 (0) michael_johnson@jltgroup.com London Pas Mariconda Tel: +44 (0) pas_mariconda@jltgroup.com Manchester & Liverpool Paul Hilton Tel: +44 (0) paul_hilton@jltgroup.com Southampton & Reading Ruth Johnson Tel: +44 (0) ruth_johnson@jltgroup.com CLAIMSadvisor 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 July