QBE European Operations Liability round-up of 2013
Liability round-up of 2013 Contents 2013 a year of change 1 Jackson and Ministry of Justice reforms 2 Liability 3 Mesothelioma 5 Fraud 6 Scotland 7 What s on the horizon 8 Disclaimer 9
1 2013 a year of change It was a long and expensive road to reform, but 2013 finally saw the realisation of many of Lord Justice Jackson s proposals. After much debate, the Ministry of Justice finally took the bull by the horns, resisted last minute objections, and introduced the most significant reforms to the civil justice system since Lord Woolf s reforms of the Civil Procedure Rules in 1998. Not long after, the government added the Enterprise and Regulatory Reform Act to the statute book. The aim being to cut through some of the perceived health and safety red tape and limit employers liability claims to acts of negligence. Whether the Act has a significant impact remains to be seen, but few currently see it as a game changer. Fraud remains high on the agenda and 2013 saw the continued, and welcomed, support of the judiciary. Following Summers v Fairclough Homes Ltd, judges are finally prepared to impose the most severe penalty in the civil arena strikeout of the entire claim which can be used in tandem with criminal contempt of court proceedings and custodial sentences. A number of decisions have kept fraud in the spotlight throughout 2013. Of concern, reported levels of fraud across all lines of business continue to rise, and whilst detection is improving, the penalties imposed do not appear to be acting as a deterrent to committed fraudsters. We also saw the Supreme Court flexing their muscles in Woodland v Essex County Council, by extending the scope of non delegable duties. This landmark decision could have significant ramifications for local authorities, but also underlines the increasing frequency of claimants endeavouring to push the boundaries of duty of care and vicarious liability. With so much change in the space of 12 months, an air of uncertainty is understandable and many have been left with more questions than answers. An important one is whether interested parties will be able to take stock and get to grips with the extremely fast evolving claims landscape.
2 Jackson and Ministry of Justice reforms It is worthwhile reminding ourselves of who did what, and when. Lord Jackson s reforms were introduced on 1 April 2013 and included: No win, no fee changes: nonrecoverability of success fees & ATE premiums, 10% general damages uplift (Simmons v Castle), Qualified One-way Costs Shifting (QOCS) and a ban on referral fees Revision of the overriding objective and grounds for granting relief from sanctions Procedural controls on costs: increased case management, cost budgeting and new test of proportionality Part 36 amendment to impose more severe sanctions for failing to accept a claimant s offer Damages Based Agreements (DBAs) whereby a contingency fee is taken from damages Increase the small claims track limit for non-injury cases to 10,000 (a recent government announcement has kept the personal injury limit at 1000). The Ministry of Justice reforms followed on 30 April and 31 July 2013 and included: Reduction in staged costs in RTA claims up to 10,000 Increase the upper limit for RTA claims to 25,000 New pre-action protocol and staged costs for EL/PL claims up to 25,000 Fixed recoverable costs for RTA, EL/PL cases up to 25,000 Extension of the electronic portal to include EL/PL claims. The world of low value personal injury claims in England and Wales has changed for all concerned. These changes have brought new challenges for claimants and defendants alike, with those best prepared, best placed to take advantage of associated benefits. Timescales for making liability decisions and negotiating quantum are tight, but the prospect of lower fixed costs provides a significant incentive. That said, the importance of proper investigation and arriving at the correct decision remains unmeritorious, speculative and fraudulent claims should be met with the same robust response as before. The impact of Jackson s reforms has been most widely reported following the Court of Appeal decision in Andrew Mitchell MP v News Group Newspapers. The court gave judgment in the high profile defamation claim by MP Andrew Mitchell. His claim followed the Sun Newspaper reporting of the then Chief Whip s confrontation with police officers at Downing Street. Mr Mitchell s solicitor failed to send a cost budget to the court in time, with the sanction for breach, limiting him to recovery of the court fees only (typically 2000-5000 in a large case). The budget subsequently sent totalled 506,425. Mr Mitchell was required to apply to the court for relief from sanctions. This was the first time the Court of Appeal had been called upon to decide the correct approach to Jackson s revision of the grounds for granting relief from sanctions. The intended application was to be tougher and less forgiving for breach and noncompliance and as a result, Mr Mitchell s application was unsuccessful. The importance of the decision, which properly gives effect to Lord Jackson s reforms, cannot be understated and has already been followed by courts up and down the country. The strict application of the rules will challenge claimant and defendant lawyers alike, but in surmounting its first major hurdle, the reforms have succeeded where Lord Woolf s reforms faltered parties must comply with court orders, or face the strict imposition of sanctions and relief will be the exception, rather than the norm. The reforms generally have been met with cautious optimism by insurers, but it is still too early to say whether they will succeed in reducing overall costs. There is currently no evidence that claim numbers are decreasing, and with claims farmers turning their attentions to areas such as industrial deafness, the challenges for insureds and insurers look set to continue.
3 Liability Those of you with a good memory will remember reading about the case of Woodland v Essex County Council in last year s Liability Round up (page 6). At that time, the Court of Appeal had decided it was inappropriate to extend a local authority s non delegable duty of care. The claimant appealed to the Supreme Court. The claim followed a tragic accident when a school pupil nearly drowned and was left with severe brain damage. The swimming pool was run by another local authority and the lesson was supervised by a teacher and lifeguard who were employed by a private company. Essex CC had delegated their duty of care with regard to the provision of the swimming lesson, relying upon a common law duty to take reasonable steps to ensure the teacher and lifeguard were competent. Reversing the Court of Appeal decision, the Supreme Court unanimously held that Essex CC was liable for the negligence of an independent contractor, without fault on its part. The court prescribed limited circumstances where a non delegable duty of care may arise, but the decision stems from the authority s acceptance of the pupil into its care to teach and supervise. Swimming lessons were an integral part of the school s teaching function and their control of the Claimant. In an effort to limit the duty, the Supreme Court did say that schools will not be liable for the negligence of third parties carrying out extra curricular activities, where the school has not assumed responsibility for those activities. Worryingly, by extending the non delegable duty of care, the court may have opened other avenues for claimants to pursue. What is clear from this decision is that the Supreme Court may be persuaded to overturn previous case law, where a claimant risks being left without compensation due to negligence of an uninsured third party. In Woodland, she was forced to sue the local authority due to inadequate insurance provisions of the third party independent contractors. This case serves as a useful reminder that all private contractors must have an insurance policy that contains an adequate limit of indemnity, and they agree to a binding contractual indemnity in the event of negligent acts or omissions.
4 In three similar cases, Cockbill v Riley, Risk v Rose Bruford College and Uren v Ministry of Defence and others, the claimants tragically suffered the most severe injuries and as with Woodland the importance of establishing a duty of care was fundamental. Each accident involved the claimants jumping into a paddling pool the first in a private domestic scenario, the second at a drama school events day and the third at a charity It s a Knockout. Mr Riley was holding a party for his daughter and her friends following the completion of their GCSE exams. A limited amount of alcohol was allowed and one of the friends had brought a shallow paddling pool for the garden. Mr Riley had insisted it was situated away from some steps to avoid diving. Tragically, Mr Cockbill decided to belly flop into the pool, but got his angle wrong and dived in head first, suffering a broken neck. His case was that there was a foreseeable risk of significant injury and that Mr Riley should have carried out a risk assessment. The court disagreed and confirmed Mr Riley s duty of care was limited to keeping an eye on behaviour and intervening in a reasonable manner where necessary. There was no evidence that there was a foreseeable risk of significant injury and Mr Riley was not required to tell guests not to run or jump into the pool. The second claim followed Mr Risk jumping into a small inflatable pool head first, leaving him tetraplegic. He had been attending a day of events at the defendant s drama school. Mr Risk s case was that the college owned him a duty of care to take appropriate steps to prevent him from injuring himself, to make a suitable risk assessment and to provide proper supervision. The court disagreed and decided that the college did not owe the claimant more than a general duty of care under section 2 of the Occupiers Liability Act 1957. Mr Risk was of full age, did not lack mental capacity and was not required to dive into the pool. An occupier would only owe an additional duty to protect against obvious risks or self inflicted harm where a person had no genuine and informed choice or lacked mental capacity. The claimant had created an obvious and serious risk by acting in the manner he did. Knowledge of a potential risk was only relevant in terms of breach, and in this case, the court found that the defendant had not assumed responsibility for the matters that remained within the claimant s personal sphere as they had not carried out any proper risk assessments and had not put in place any control measures. Judgment was therefore, in favour of the defendant. Finally, Mr Uren was competing at a charity day, in an event which involved retrieving plastic fruit from a shallow paddling pool. Approximately half the participants chose to enter head first. Mr Uren attempted the same, only to catch his feet on the side and hit his head on the bottom, suffering catastrophic injuries. The court concluded that any proper appraisal of the activity would have revealed a risk of serious injury. The task being undertaken, the presence of water and height of the side of the pool, meant competitors heads would be moving downwards on entry. On the balance of probabilities, if head first entry had been prohibited, the accident and injury would have been avoided. The claimant succeeded in establishing the negligence was causative of his injury. It is important to remember that each case will be decided on its facts, but on reading these cases, some occupiers may be left uncertain as to their duties. Those who voluntarily take a risk will not usually be compensated, but where occupiers are arranging events, it would sensible for them to think about the safety rules beforehand. An interesting case north of the border involved a golfer who lost the sight in one eye, after he was struck by a fellow player s errant ball. In Phee v Gordon & Niddry Castle Golf Club, the unfortunate Mr Phee sued the other golfer and the club, alleging negligence on the part of the golfer and failure of the club to erect appropriate signs to safeguard golfers safety. The appeal court in Scotland decided both defendants were liable, with the golf club bearing 80% and Mr Gordon 20%. The court considered the course layout, the safety practices and the absence of any warning signs. The failure to warn by signage meant the club must bear the greater share of liability. Mr Phee recovered damages of 400,000. The criticisms from the court should be considered by all sporting venues.
5 Mesothelioma 2013 saw a number of developments concerning mesothelioma claims. Whilst these claims were exempted from Lord Jackson s reforms so that claimants would continue to recover success fees and ATE premiums, as well as the 10% general damages uplift the government have shown a willingness to plug the gaps. To tackle the problem of victims being left without compensation, the government announced the Mesothelioma Bill, which awaits Royal Assent. Claimants who cannot trace their employer, or the insurer, will be able to pursue a claim via the Diffuse Mesothelioma Payments Scheme and will recover 75% of the average payout. The Scheme is being funded by insurers contributing 3% of their premiums. More positive action has seen the government align these claims with other personal injury claims and remove the recovery of success fees and ATE premiums from July 2014. Despite opposition from claimant lawyers, there was no sustainable argument to support a continued exemption. This action should help to reduce the disproportionate and excessive costs seen from many firms. Disappointingly, the final announcement saw the abandonment of a proposed Mesothelioma Pre Action Protocol. The hope was to create a specifically tailored protocol, which would streamline the claims process and result in less litigation. Objections from claimant lawyers forced the government to scrap the proposal and the fixed costs that would have come with it, but now under consideration is an electronic case management system.
6 Fraud QBE enjoyed successful contempt of court proceedings in the case of Airbus Operations Ltd v Roberts. Mr Roberts had claimed more than 500,000 in damages from his employer, Airbus. He said he was left severely disabled following a straightforward slipping accident, he was unable to work and required extensive care. Surveillance evidence showed Mr Roberts renovating a house without any sign of physical difficulty to the contrary, he was seen lifting a bath and other heavy items. For the majority of the footage, he was seen to be smiling, laughing, whistling and even skipping, whilst he worked. Mr Roberts reported no miraculous recovery and when faced with such fraudulent dishonestly, the court was left with no option than to sentence him to six months at her majesty s pleasure. Hot on the heels of Roberts came the contempt proceedings in Homes for Haringey v Fari. The claim in excess of 750,000 had been struck out the claimant had suffered no more than a minor injury, with damages equivalent to 0.5% of her pleaded case. The court concluded that Mrs Fari was well aware of the content and purpose of her evidence, and schedule of loss, and there had been a serious and deliberate attempt to mislead. In an attempt to send out a clear message to fraudsters, the judge said that those who made false claims should expect to go to prison. Having regard to the seriousness of her conduct, the court sentenced Mrs Fari to three months in prison. Finally came the decision in Plana v First Capital East Ltd. The claim followed a workplace accident in 2007, with Mr Plana alleging traumatic brain injury and submitting a schedule of loss totalling 3m. He claimed to require virtually constant care and supervision, with almost daily blackouts. Again, surveillance evidence was obtained and showed Mr Plana working at a car wash, without difficulty. First Capital successfully applied to strikeout the claim as Mr Plana s conduct was a clear abuse of the court process, was likely to obstruct the just disposal of the claim and therefore he had forfeited his right to pursue the case. The case has now been submitted to the High Court for contempt proceedings.
7 Scotland With those north of the border not wanting to feel left out, a number of Scottish government consultations led to the Taylor Review Report, Courts Reform Bill and the Damages Bill. Sheriff Principal Taylor reviewed funding and expenses of civil litigation in Scotland, with the aim of deciding how best to improve access to justice, but also with regard to the recoverability and predictably of expenses. He recommended the extension of DBAs, the introduction of QOCS, the recovery of expenses on an hourly rate basis and increased court management of expenses. The report is with Scottish Ministers for consideration. The Courts Reform Bill details Lord Gill s review of the Scottish justice system, with the aim of reducing delays and expenses for court users. The main recommendations are: raising the limit in the sheriff court to 150,000, creating a new Sheriff Appeal Court, creating a specialist personal injury court, improving and modernising the Court of Session and promoting Alternative Dispute Resolution. Again, the Bill will be debated by parliament and with approval it could be enacted by December 2014. The final announcement concerned the Damages Bill. This followed a recent consultation on personal injury claims and the civil law of damages. It is understood that the Bill is one of the legislative priorities of 2014 and intends to increase the limitation period from 3 to 5 years and to provide the courts with the power to impose periodical payment orders. Such an increase is likely to prolong claim lifecycles, act as a disincentive to prepare a claim in a timely fashion and increase solicitors costs. Whilst the power to order periodical payments is sensible for high value claims, it is hoped that Ministers will see sense and drop the proposal to increase the limitation period.
8 What s on the horizon reduction of 1% could add millions of pounds to the value of the largest claims. Set against increasing costs for continuing care and prosthetics, catastrophic injury claims inflation continues to spiral upwards. The government has thus far given no indication of when a discount rate decision will be made. As we have seen in Woodland, and other cases, the courts are being repeatedly asked to revisit and consider where a duty of care may apply. It is reasonably safe to assume we can expect to see this trend continue into areas such as education and abuse claims. That said, it is not all doom and gloom the Jackson and MoJ reforms present a number of clear opportunities which should be grasped with both hands. Those insurers who can come to terms with, and embrace the reforms, should be able to see a bright future on the horizon. A ripple effect from the significant changes of 2013 is inevitable the intended and some unintended consequences will be felt by all stakeholders involved in liability claims. With the stakes so high, we can expect new and innovative strategies and tactics to be employed by claimant firms who are fighting for their lives. Avoiding portal costs will be a priority. The government has recently made some bold promises on tackling whiplash claims and has already slashed solicitors costs. The effect may be two fold: firstly, claimant lawyers will have to explore other revenue avenues and secondly, fraudsters will target less well protected areas. The lucrative area of noise induced hearing loss has seen a significant spike in claims. This looks set to continue, and whilst repudiation rates are high, the sheer volume of claims presents significant challenges. A new battleground is forming. Something which is back with the government is the review of the discount rate, which is used to calculate future loss claims. The rate which has been static at 2.5% since 2001 has been the subject of government consultation, with a recently published Ministry of Justice report hinting at a decrease. Any decrease could add hundreds of millions to the aggregated compensation bill of the UK even a
Author Tim Hayward Tim joined the insurance industry in 1997, working in motor, and then liability claims, for a major UK insurer. He specialised in insurance claims litigation, studying part-time for 4 years, before qualifying as a Solicitor in 2011. Working within QBE EO Technical Claims, Tim deals with high value and complex UK casualty claims, as well as providing technical advice internally and to key stakeholders. Tim is the author of the monthly QBE publication, Technical Claims Brief. Disclaimer This publication has been produced by QBE European Operations, a trading name of QBE Insurance (Europe) Ltd ( QIEL ). QIEL is a company member of the QBE Insurance Group ( QBE Group ). Readership of this publication does not create an insurer-client, or other business or legal relationship. This publication provides information about the law to help you to understand and manage risk within your organisation. Legal information is not the same as legal advice. This publication does not purport to provide a definitive statement of the law and is not intended to replace, nor may it be relied upon as a substitute for, specific legal or other professional advice. QIEL has acted in good faith to provide an accurate publication. However, QIEL and the QBE Group do not make any warranties or representations of any kind about the contents of this publication, the accuracy or timeliness of its contents, or the information or explanations given. QIEL and the QBE Group do not have any duty to you, whether in contract, tort, under statute or otherwise with respect to or in connection with this publication or the information contained within it. QIEL and the QBE Group have no obligation to update this report or any information contained within it. To the fullest extent permitted by law, QIEL and the QBE Group disclaim any responsibility or liability for any loss or damage suffered or cost incurred by you or by any other person arising out of or in connection with you or any other person s reliance on this publication or on the information contained within it and for any omissions or inaccuracies. QBE European Operations Plantation Place 30 Fenchurch Street London EC3M 3BD tel +44 (0)20 7105 4000 www.qbeeurope.com 4787/LiabilityRoundUp2013 QBE European Operations is a trading name of QBE Insurance (Europe) Limited and QBE Underwriting Limited, both of which are authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.