The extended RTA Protocol Claims submitted from 31 July 2013 Guide for claims handlers

The extended RTA Protocol Claims submitted from 31 July 2013 Guide for claims handlers

Introduction This guide provides an at a glance review of the updated Protocol. The original Pre-Action Protocol for Low Value Personal Injury Claims in Road Traffic Accidents (the Protocol) was implemented on 30 April 2010. Three years on, having survived various trials and tribulations, the rules have been updated and extended to apply to RTA claims valued between 1,000 and 25,000. The updated RTA Protocol only applies to claims where the claim is submitted in accordance with the Protocol process on or after 31 July 2013. For any claim which was submitted before that date, the original RTA Protocol will continue to have effect. The extended Protocol goes hand in hand with a revised fixed recoverable costs regime. There are costs consequences of a claim leaving the Protocol. The economics of keeping claims within the Protocol are persuasive - but not always. A new Pre-Action Protocol for Low Value Personal Injury (Employers Liability and Public Liability) Claims was introduced at the same time. Our review of this Protocol can be found in our separate booklet. We will continue to monitor the reforms and share with you what we find. Kathy Dwyer Partner Kennedys is a trading name of Kennedys Law LLP. Kennedys Law LLP is a limited liability partnership registered in England and Wales (with registered number OC353214)

Contents Topic Page number 1 THE RTA PROTOCOL 2 2 STAGE 1 - NOTIFICATION 3 2.1 Practical points 5 3 STAGE 2 - VALUATION 6 3.1 Medical evidence 7 3.2 Rehabilitation 7 3.3 Witness evidence 7 3.4 Offers 7 3.5 Withdrawal of offer 8 3.6 Practical points 8 4 STAGE 2 - INTERIM PAYMENTS 10 5 STAGE 3 - HEARING 11 5.1 Claimant fails to follow Protocol 12 5.2 Practical points 13 6 FIXED RECOVERABLE FEES 14 6.1 Claims within the new Protocol 14 6.2 Stage 3 - Protocol costs 14 6.3 Critical points 15 6.4 Claims which exit the new Protocol 16 7 RTA PROTOCOL: OTHER BASIC ISSUES 17 7.1 Additional damages 17 7.2 Children 17 7.3 Contributory negligence: non seatbelt related 17 7.4 Contributory negligence: seatbelt related 17 7.5 Credit hire 17 7.6 Decision on liability in absence of instructions 18 7.7 Documents 18 7.8 Does a solicitor have to be instructed at Stage 3? 18 7.9 Limitation 19 7.10 Medical evidence 19 7.11 Part 36 20 7.12 Signatures 20 7.13 Specialist legal advice on quantum 20 7.14 Time period for payments 21 7.15 Understated claim 21 8 FRAUD 22 8.1 Motor key fraud indicators 23 9 HINTS AND TIPS 26 10 CONCLUSION 27 11 APPENDIX 1 - PRACTICAL REMINDER: Q&AS 28 1

1. The RTA Protocol The RTA Protocols apply where the claimant s injuries arise out of a road traffic accident (RTA) on or after 30 April 2010. The original Protocol will apply to injury claims worth between 1,000 and 10,000 if the claim notification form (CNF) was submitted before 31 July 2013. The extension to the Protocol applies to claims for injuries arising out of a RTA that are worth between 1,000 and 25,000 where the CNF is submitted via the Portal in accordance with that Protocol on or after 31 July 2013. The process remains a three stage process. The management of Protocol claims is intended to be supported by an online portal system (the Portal), provided by Claims Portal Ltd. In other words, the Protocol sets out the process, the Portal is the means by which it is carried out. A success fee is not recoverable where a CFA is entered into after 1 April 2013. The extended Protocol goes hand in hand with a revised fixed recoverable costs (FRC) regime. The revised FRC regime was introduced to RTA Protocol cases valued between 1,000 and 10,000 and notified on or after 30 April 2013, reducing the total FRC from 1,200 to 500. For RTA Protocol claims between 10,000 and 25,000 and notified on or after 31 July 2013, the total FRC are 800. The value of the claim is calculated on a full liability basis by reference to general and special damages, excluding the cost of repairs and credit hire. The Protocol works slightly differently if the claimant is a child (see page 17). The Protocol does not apply to claims in relation to: MIB untraced drivers agreement. Breach of duty by a person who is not a road user. Defendant s vehicle not registered in the UK. Where either the claimant or defendant are deceased. Where the claimant is bankrupt. Where the claimant or defendant is a protected party as defined in CPR 21.1(2). The reference to days in this guide means business days. 2

2. Stage 1 - Notification Claimant s solicitor completes CNF to be submitted to insurer electronically with all mandatory boxes completed Insurer to send electronic acknowledgement next day Insurer has 15 days to complete insurer response section of CNF MIB has 30 days Insurer to apply for CRU certificate Liability admitted Insurer liable for Stage 1 fee 200 to be paid within 10 days after receiving the Stage 2 settlement pack Liability denied/causation issues/contributory negligence (other than failure to wear seatbelt) or insurer fails to respond Fraud If fraud alleged claim leaves Protocol Progress to Stage 2 Claim leaves Protocol and enters Pre-Action Protocol for Personal Injury Claims. Possibility of Part 7 proceedings issued 3

The claimant should complete all mandatory fields in the CNF including details of Injury, time off work and, if the absence is ongoing, whether treatment was sought. The claimant must make a reasonable attempt to complete the CNF. If the defendant considers that inadequate mandatory information has been provided, that will be a valid reason for the defendant to decide the claim should leave the process (if the defendant wishes to exercise that option). If this occurs and the court considers that the claimant provided inadequate information in the CNF, the claimant may incur cost penalties (CPR 45.24(4)). Where an admission is made, unless the claimant is a child, the defendant must pay Stage 1 fixed costs within 10 days of receiving the Stage 2 Settlement Pack (CPR 45.18). The court may also order the defendant to pay disbursements in accordance with CPR 45.19. There is no opportunity to re-enter the Stage 1 process once the claim leaves this, unless the claimant has sent the CNF to the wrong insurer and the process has to commence again. When denying liability, the defendant must give brief reasons in the CNF response. The claim should then proceed under the Pre-Action Protocol for Personal Injury Claims, which provides the defendant with three months to investigate liability. The CNF can be used as the letter of claim except where the claim exited the Protocol because the CNF contained inadequate information. If liability is admitted, the claim progresses to Stage 2. 4

2.1 PRACTICAL POINTS Insurer must acknowledge receipt of the CNF the next business day. If the insurer does not respond within 15 business days the claim exits the Protocol. If liability is denied the claim exits the Protocol. If contributory negligence is alleged for anything other than failing to wear a seatbelt, the claim exits the Protocol. Failure to pay (i.e. ensure receipt by the claimant of) stage 1 fixed costs within 10 days of receipt of the Stage 2 Settlement pack allows the claimant to give notice to exit the Protocol. The claimant may attempt to argue that the claim is out of the Protocol to claim increased fixed costs but to do this they must serve written notice within 10 days after the last date when payment was due. The earlier RTA Protocol provided that the defendant pay Stage 1 fixed costs of 400 at the end of the Stage 1 process. This created the 400 club whereby the claimant would collect the Stage 1 fee whether the claim proceeded to Stage 2 or fell out of the process. Some claims were never pursued further. This anomaly has been removed by the requirement for the claimant to proceed to Stage 2 before he is entitled to receive his Stage 1 fixed costs. The insurer must apply for a CRU certificate before the end of Stage 1. Any claim that falls out of the Protocol at Stage 1 should proceed under the existing Pre- Action Protocol for Personal Injury Claims. The three month period of investigation should be calculated from date of the CNF (if sufficient information was provided for it to be treated as a letter of claim). It is important for the insurer to keep copies of an inadequate CNF (and any associated documentation). Should the claim proceed to be litigated, such information may well support a defence that the claim was suitable to be resolved in the Protocol and there should be appropriate costs sanctions. 5

3. Stage 2 - Valuation Claimant s solicitor obtains medical report Medical report sent to insurer electronically within 15 business days of the claimant approving the report plus Stage 2 settlement pack and offer to settle Payment of stage 1 costs within 10 days of settlement pack: 1k- 10k = 200 10k 25k = 200 35 days total consideration period commences: insurer has 15 business days to respond to offer and the remaining 20 days to negotiate if offer rejected* D must pay within 15 days of court proceedings: D final offer plus any unpaid Stage 1 fees plus Stage 2 fees plus disbursements agreed. If pre 01.04.13 CFA add success fee Case settles Insurer liable for Stage 2 fee: 1k - 10k = 300 10k - 25k = 600 If pre 01.04.13 CFA add success fee If PSLA is less than 1,000 or exceeds 25,000, or if admission of causation is withdrawn, or if party withdraws an offer made in Stage 2 settlement pack, claim leaves process Claimant s solicitor must send to Insurer Part A and Part B settlement pack. If Insurer considers the forms do not comply they must be returned to C within 5 days giving reasons *The 35 day total consideration period can be extended by the parties agreeing to extend either the initial consideration period or negotiation period, or both. 6

Stage 2 is the critical stage of the process as it gives insurers the opportunity to put forward their best quantum arguments in response to the claim. If settlement is not agreed at Stage 2 and the case moves into Stage 3, no further evidence is permitted before the court. 3.1 MEDICAL EVIDENCE It is for the claimant to obtain medical evidence and there is no deadline for obtaining the report. The claimant must check the factual accuracy of the medical report as he will not be able to challenge the accuracy of the report after it has been sent. Claims below 10,000 will not usually warrant medical records being reviewed. The expert must state whether he has reviewed them or not. Where the claimant was not wearing a seat belt the report must contain sufficient information for the defendant to be able to calculate the appropriate reduction. It is anticipated that most claims will be resolved with just one medical report. A subsequent medical report from an expert who has already reported must be justified. If subsequent medical reports or non medical reports are required, the parties should agree a suitable stay. 3.2 REHABILITATION The claimant must set out details of rehabilitation in the CNF. The Rehabilitation Code should be considered at all stages of the process. 3.3 WITNESS EVIDENCE In most cases witness statements are not expected from the claimant or other individuals as liability has been admitted. Only where evidence is reasonably needed to value the claim should it be considered necessary. 3.4 OFFERS When making an offer, the defendant must propose an amount for each head of claim and where relevant must explain why he has offered less than the amount claimed. The defendant can exhibit documents in support of any arguments put forward, for example, relevant case law. 7

3.5 WITHDRAWAL OF OFFER If any party withdraws an offer made in the Stage 2 settlement pack after the total consideration period or further period agreed, the claim will no longer continue under the Protocol. The claimant may then start proceedings under CPR Part 7. Where the parties do not reach agreement, the claimant must prepare the court proceedings pack (Part A and Part B) form and submit this to the insurer. Where the insurer intends to nominate solicitors to accept service they must do so in the Part A form. 3.6 PRACTICAL POINTS Payment of all monies should be in the form of cleared funds within the applicable timeframe. Insurer has 15 business days to accept or reject the claimant s offer (the initial consideration period) or the claim will leave the process and the claimant will be at liberty to commence proceedings under CPR Part 7. If a counter offer is made the parties have a further 20 days to negotiate. Time periods for consideration of offers can be varied by agreement. If either party makes an offer with less than five days of the total 35 day consideration period remaining, there will be a further period of five days added to the end of the end of the window with the aim of preventing either party being ambushed into settlement. Insurers should be alive to the possibility of an unrealistic offer being made in the initial consideration period, followed by a sensible offer towards the end of the timeframe, leaving an insurer with only five days for consideration. It is useful to remember that negotiations can take place outside the Protocol process (by way of telephone and email), whilst being mindful to the advantage sought by some claimant firms to only negotiate through the Protocol. If settlement is reached the claimant must have actually received cleared funds in respect of the damages (less any deductable amount payable to the CRU and previous interim payment), plus costs and disbursements within 10 days. (Plus 12.5 per cent success fee if pre 1 April 2013 CFA). If payment of damages and costs is not received by the claimant within 10 days, the claimant can make an application to court for payment of the damages and associated costs. 8

If settlement is not reached, the insurer must pay the full amount of their best offer (less CRU) within 15 days of receiving the court proceedings pack form, together with any unpaid Stage 1 costs, Stage 2 costs and disbursements. The claimant must have received cleared funds by this date. Beware that failure to do so entitles the claimant to give written notice that the claim will no longer continue under the Protocol and commence CPR Part 7 proceedings. If insurers consider that the court proceedings pack form does not comply with the Protocol, it can be returned to the claimant within five days with a suitable explanation as to why it does not comply. The court proceedings pack form cannot contain anything that was not raised in the Stage 2 settlement pack. If the case is not going to settle, defendants must ensure at Stage 2 that they give full reasons why a head of damage is not accepted or has been reduced, together with all grounds for rejecting/reducing heads of damage, as this will be looked at by the court if the case proceeds to Stage 3. 9

4. Stage 2 - Interim payments The claimant can request an interim payment of 1,000 by submitting an interim settlement pack and initial medical report in support. Such requests are more likely where the claimant s symptoms are ongoing and a further medical report is sought. If requested, the payment must be paid within 10 days of receipt of the interim settlement pack. If requesting more than 1,000, the claimant must specify the heads of damage and reasons for the request. Usually, vehicle related damage will be dealt with outside the Protocol process. However, if the claimant has paid for vehicle related damage this may be included. The defendant may pay a sum higher than 1,000 but less than requested but must explain why the full amount is not paid. Payment is calculated by deducting any relevant CRU. For payments over 1,000, payment must be received by the claimant within 15 days of the request. If no payment is received within the relevant time periods the claimant can give notice and the claim will exit the Protocol. Where an interim payment is requested for a child, Part 7 proceedings must be commenced. No payment relating to a child is valid without court approval. Where the defendant does not have a CRU certificate that will remain in force for at least 10 days from the date of receiving the interim settlement pack, they should apply for one as soon as possible and make the interim payment within 30 days of receiving the interim settlement pack. More than one interim payment can be requested where the claim value is greater than 10,000. 10

5. Stage 3 - Hearing Quantum not agreed - application for quantum hearing by the claimant Claimant to file claim form, medical report and Stage 2 settlement pack. Comments on all heads of claim to be filed with best offers on quantum in sealed envelope Defendant s representative or Insurer (8.5 PD8B) to file acknowledgement of service not more than 14 days after service of claim Court will give 21 days notice of the date of determination on the papers hearing Court determines quantum. Paper hearing unless either party requests oral hearing. Insurer liable for hearing fee: 250 (paper) or 500 (Type A plus B). Oral hearing if C recovers more than D offer Where offer made and settlement agreed before trial fixed recoverable costs 250, agreed damages and costs to be paid within 10 business days Court will make decision and notify parties. Damages and costs become payable 11

If quantum is not agreed, the claimant may apply for damages to be assessed by applying for a quantum hearing, which will be by paper unless an oral hearing is requested by either party. 5.1 CLAIMANT FAILS TO FOLLOW PROTOCOL Where the claimant has not followed the procedure set out in the relevant Protocol, and/or the claimant has filed and served additional or new evidence with the claim form that had not been provided under the relevant Protocol, it is possible for the defendant to oppose the claim and ask the court for it be dismissed. However, should the claim be dismissed at this stage, it may leave the claimant open to start proceedings under CPR Part 7. It is prudent to seek guidance in these circumstances to explore whether a challenge is available, including seeking a cost sanction in the form of awarding fixed recoverable Protocol costs only. A party may seek to withdraw a Protocol offer at Stage 3 with the court s permission. Permission will only be given on the basis there is good reason for the claim not to continue under the Stage 3 procedure. Where permission is granted, the claim will no longer continue under Stage 3 and the court will give directions as to future conduct of the case (PD 8B para 10.1). 12

5.2 PRACTICAL POINTS Where settlement is not agreed, the claimant s solicitor sends a court proceedings pack to the insurer with details of both parties final offers. The insurer has five days to check the accuracy and provide comments before returning it to the claimant. After a period of 10 days from sending the pack, the claimant s solicitor will make an application for a quantum hearing (Part 8 proceedings), filing the claim form, medical report and court proceedings pack. Details of any offers will be in a sealed envelope. If the claimant s solicitor fails to do this then the insurer may take steps to do so. The insurer receives the notification of claim and must file an acknowledgement of service within 14 days. A request for an oral hearing is made by the claimant in the claim form or by the defendant on the acknowledgement of service. Unless either party requests an oral hearing, there is a presumption that there will be a paper hearing. The final offers will remain in the sealed envelope until the judge makes his decision. The court will give 21 days notice of the determination date. If further CRU benefits have accrued after the final offer made, the defendant must file a valid CRU certificate at least five days before the hearing date (PD 8B para 11.3). If, after the court proceedings pack has been sent to the defendant, but before the proceedings are issued under Stage 3, a settlement is reached, the Stage 1 and Stage 2 fixed costs will also include the Stage 3 Type A fixed costs ( 250). 13

6. Fixed recoverable costs 6.1 CLAIMS WITHIN THE NEW PROTOCOL Fixed fees on claim valued 1,000-10,000 Fixed fees on claim valued 10,001-25,000 Stage 1 Stage 2 Stage 1 & 2 total Stage 3 paper hearing (Type A) Stage 3 oral hearing (Type B) If claim goes to oral hearing and C recovers more than D offer then C recover: 1 + 2 + 3A + 3B 200 300 500 250 250 1,000 200 600 800 250 250 1,300 6.2 STAGE 3 PROTOCOL COSTS Type Amount Type A This is the legal representative s fixed costs for the hearing. 250 Type B This is the additional advocate s costs for conducting a Stage 3 250 hearing. Type C This is for specialist advice required to value to the claim. This will usually be where the claim is valued at over 10,000. 150 14

6.3 CRITICAL POINTS The fixed costs included in the tables above are exclusive of VAT. The claimant is entitled to a 12.5 per cent uplift on the above Stage 1, Stage 2 and Stage 3 Type A costs where the claimant lives or works and instructs a solicitor in London, or the following county court districts: Barnet, Bow, Brentford, Central London, Clerkenwell and Shoreditch, Edmonton, Ilford, Lambeth, Mayor s and City of London, Romford, Wandsworth, West London, Willesden, Woolwich and (outside London) Bromley, Croydon, Dartford, Gravesend, Uxbridge. 15

6.4 CLAIMS WHICH EXIT THE NEW PROTOCOL Where claims leave the extended Protocol process and move into the Pre-Action Protocol for Personal Injury Claims, a fixed cost regime also applies. Whether the claim settles preproceedings or the claimant issues proceedings, recoverable costs are set on the basis of the value of the claim at issue, based on a fixed value plus a percentage of damages and the stage at which the claim settles (before or after issue). Pre - issue 1,000-5,000 5,001-10,000 10,001-25,000 Post issue, pre-allocation Post allocation, Issued pre-listing Post listing, pre-trial Trial advocacy fee (subject to claim value) Fixed costs Greater of 550 or 100 + 20% of damages 1,100 + 15% of damages over 5k 1,930 + 10% of damages over 10k 1,160 + 20% of damages 1,880 + 20% of damages 2,655 + 20% of damages 500 (to 3K) 710 ( 3-10K) 1,070 ( 10-15K) 1,705 (> 15K) 16

7. RTA Protocol: other basic issues 7.1 ADDITIONAL CHANGES It is possible for the claimant to introduce claims for vehicle repair or hire between Stages 2 and 3. The Stage 2 settlement period is then extended by a further 15 days and the claimant has to send an updated settlement pack. The defendant can then make a further offer. If the claimant has indicated on the CNF that a replacement vehicle has not been hired, there is an opportunity for the insurer to intervene by offering an alternative vehicle. 7.2 CHILDREN Claimants solicitors must ensure that the person providing instructions on behalf of a child is an appropriate person and the CNF must state if the claim is for an injury to a child or an adult. Note that there is no provision for an interim payment to be made to a child under the age of 18 years. If there is a reasonable requirement for an interim payment, Part 7 proceedings must be commenced, accompanied by an application for an interim payment. If the court does not approve the award the claim will exit the process, although the hearing fee will still be due. 7.3 CONTRIBUTORY NEGLIGENCE: NON SEATBELT RELATED Where liability is admitted within the 15 day time period, the insurer must set out reasons for alleging contributory negligence in the insurer response section of the CNF. The claim will then leave the Protocol. 7.4 CONTRIBUTORY NEGLIGENCE: SEATBELT RELATED If the claimant completes the CNF and admits to not wearing a seatbelt the claim will remain in the process if liability is admitted within 15 days (at Stage 1). The defendant must then suggest a percentage reduction in respect of the seatbelt issue within the Stage 2 settlement pack. 7.5 CREDIT HIRE Credit hire claims will be included, unless there are arguments as to the validity of the agreement. With large hire claims, the claimant may seek to try and get the claim out of the process so that fixed costs will not apply. Clearly it is in the interests of insurers to keep the entire claim within the Protocol and to be aware of such attempts. 17

7.6 DECISION ON LIABILITY IN ABSENCE OF INSTRUCTIONS The period of 15 days to determine liability within Stage 1 is particularly tight. Careful consideration needs to be given when conceding liability, where it has not been possible to obtain instructions from the insured in time. Remember: conceding liability could affect the insured in relation to any uninsured loss claim. 7.7 DOCUMENTS Whilst the Protocol is intended to be paperless, in reality it is necessary and important to keep on file copies of certain documentation, including the signed agreement of medical evidence, evidence of special damages, proposed offer(s) etc. 7.8 DOES A SOLICITOR HAVE TO BE INSTRUCTED AT STAGE 3? There has been much debate on this point with differing views. Concerns have been expressed that as Stage 3 involves reserved legal activities, lawyers should be involved. The rules provide for paper hearings to be handled by the insurer (or defendant) themselves (PD 8.5). The insurer may complete the acknowledgement of service and this must be accompanied with any evidence to be relied upon in support of the defendant s case to be considered by the court. This will need to have a statement of truth. Our view is that this stage can be completed without the involvement of a lawyer, which is echoed by Law Society guidance. With an oral hearing, the Law Society s guidance is for an insurer to instruct a lawyer. If the insurer wishes to instruct a barrister, the Bar Standards Council advises that the insurer should have a licence to be able to do so directly. Obtaining a licence should not, however, be difficult. In the short term, whilst the extended Protocol beds in, the comfort of a lawyer s involvement may be sought. However, with time and experience the involvement of lawyers may decline. 18

7.9 LIMITATION Where limitation is due to expire, the claimant can issue proceedings and then request a stay so that the claim can be dealt with within the Protocol. This way, insurers can continue to negotiate with the claimant s solicitors within the Protocol and the lower fixed costs will still apply. Beware of claimants solicitors removing the claim from the Protocol on grounds of limitation and then issuing Part 7 proceedings to claim increased fixed costs. The claimant must not do this (PD 8B para 16.2). Once the claimant wants to re-start the Stage 3 procedure, the claimant should make an application to the court to lift the stay (PD 8B para 16.5). It is the claimant s responsibility to then amend the claim form and file relating documents with the court. A paper or oral hearing can then take place. 7.10 MEDICAL EVIDENCE The Protocol defines a medical expert as a person registered with the General Medical Council, General Dental Council, or a clinical, counselling or health psychologist registered with the health professional council. The definition has been extended to include physiotherapists. Given the low value nature of Protocol claims, the initial medical report should typically be provided by a general practitioner. There is no fixed timetable for the claimant to obtain a report. Additional medical reports may be obtained from other experts where the injuries require reports from more than one medical discipline. If the insurer wants to question or deny causation, the claim will leave the Protocol. Questions can then be put to experts. Costs of medical records will only be allowed as a disbursement where the medical expert has identified a need for them. If medical records have been reviewed by the expert, the claimant must disclose them with the medical report. 19

7.11 PART 36 Where a claim no longer continues under the Protocol, CPR 36.14 applies. Indemnity provisions do not apply. 7.12 SIGNATURES The statement of truth in the CNF must be signed by the claimant or by his legal representative where the claimant has authorised the legal representative to do so. It will be the responsibility of the claimant s legal representative to ensure that the CNF has been approved and for him to retain evidence of this. The electronic copy will then simply have a confirmation on it to be completed by the claimant s solicitor as to its accuracy. 7.13 SPECIALIST LEGAL ADVICE ON QUANTUM In some cases with a value of more than 10,000 (excluding vehicle related damages), an additional advice from a specialist solicitor or counsel may be justified where it is reasonably required to value the claim. The claimant can claim an additional fee of 150. If an offer to settle is made it will also be an agreement in principle to pay this additional fee. If a need for specialist advice is not accepted, the defendant will need to provide reasons why it is not justified. The Protocol does not currently define specialist lawyer. However, we anticipate this will relate to the advice of a senior lawyer in cases that involve, for example, care claims, or complex loss of earnings claims involving self employment or loss of pension calculations. The court has discretion to award the additional fee where the: Claim is issued and is resolved at a hearing. Court considers that it was reasonable for such advice to have been sought. Claimant s solicitor is entitled to costs, having successfully beaten the defendant s offer in accordance with Part 36. Where payment is not made, the claimant will be able to seek a remedy by issuing costs only proceedings (under CPR 44.12A) and it will be at the discretion of the judge whether the fee for a specialist lawyer s advice is payable. 20

7.14 TIME PERIOD FOR PAYMENTS Reference to a time period for a payment means the time by which the claimant must receive cleared funds. Any failure to pay will give the claimant the right to exit the Protocol. However, unless written notice is sent to the defendant within 10 working days of the breach the claim will continue under the Protocol. If cheques are sent by post, then the rules of service dictate that cheques must be sent out on the eighth day, at the absolute latest, in order to reach the claimant in time. 7.15 UNDERSTATED CLAIM Insurers should be alive to a number of situations where the claimant may attempt to understate a claim. He may, for example, understate the circumstances of the accident in order to secure a denial of liability, only for it to later transpire that evidence was available that would have meant that liability should have been admitted. The claimant will not then be bound by the new fixed costs regime. Conversely, claims for PSLA which are truly worth less than 1,000 and therefore not subject to any costs - may be inflated to go through the Protocol. Objections related to costs should be raised at the earliest opportunity. Where the claimant reasonably believes that the claim is valued at between 1,000 and 25,000 (and so seeks to pursue the claim through the RTA Protocol), but it subsequently becomes apparent that the value of the claim is less than 1,000, the claimant is still entitled to the Stage 1 and (where relevant) Stage 2 fixed costs. 21

8. Fraud The revised Protocol makes an attempt to introduce counter-fraud safeguards and thereby overcome the scope for fraudulent claims which the tight timelines, in particular, can create. These safeguards include: Mandatory provision of full particulars of claim, including personal details of the claimant (as compared to the previous drip feed of information). Details of passenger claims at the outset. Disclosure by the claimant s solicitors of the source of their work, in order to help identify accident management companies. Although this is not mandatory, failure to answer this question may give insurers cause for suspicion. Requirement at Stage 2 for the claimant to check the medical report for factual accuracy before sending to the insurer. There will be no further opportunity for the claimant to challenge the report. It is hoped that it will be more difficult for the claimant to provide a convincing explanation in the event that inconsistencies are revealed after the medical report has been disclosed. If there is any concern that a claim is fraudulent, it is advisable to consider removing the claim from the Protocol, rather than risk being pressured into making the wrong decision. Please see the key fraud indicators we have created on pages 23-25 to assist in your decision making. 22

8.1 MOTOR KEY FRAUD INDICATORS Name Reference Date Area to consider Accident Fraud Indicator Unlikely / implausible accident circumstances Unlikely / implausible accident location Witnesses (suspected) linked / known to claimant Policyholder driver states claimant stopped for no reason Unknown third party vehicle driving erratically, resulting in claimant slamming on. Employee driver / Policyholder driver keen to accept liability No independent witnesses No contemporaneous report of incident Accident occurred in remote / isolated area Accident occurred on entry to roundabout Vehicle has 3 or more passengers Employee driver unaware of a collision Rear end shunt collision Accident occurs at low speed 23

Claimant / Claim Pattern of involvement in number of claims (claimant, families, solicitors, experts) Claimant has financial problems Relevant accident history Claimed losses not compatible with claimant lifestyle Claimant some distance from own solicitor / accident claims company involvement Claimant eager to compromise / seeks early settlement Quick / early instruction of solicitor Self-serving medical attention CNF dated day of incident CFA dated day of incident CFA or CNF dated prior to initial GP or A&E attendance Late notification of claim (e.g. 18 months post incident) Injuries entirely subjective (e.g. whiplash / soft-tissue) Claimant description does not match ID supplied Credit hire period 89 days or more Credit hire prolonged Claimant or claimant vehicle uninsured Damage inconsistent to accident circumstances Damage between vehicles inconsistent Claimant seeks cash in lieu of repair Policyholder vehicle in first or last month of insurance Little / no damage to claimant vehicle Claimant vehicle in first or last month of insurance 24

Discrepancies Documentation: Misc Inconsistent accounts from claimant re. circumstances Inconsistent accounts from claimant re. injury / loss Inconsistent accounts between claimant and supporting witnesses Appears altered Only poor copies available Similarities in documents from different sources Common handwriting on different documents / from different sources Documents omit key / important information Basic documents missing / unavailable / not disclosed Invoices early sequential number references Aspects of documents retain same information to other documents from same source False / misleading information provided Non-disclosure of relevant information Policyholder did not notify insurer / employer of incident Policyholder did not claim on own policy 25

9. Hints and tips Reviewing your claims handling procedure to maximise efficiency is imperative. Following straightforward advice can help maximise the advantages to be gained by using the Protocol. Consider whether any improvements can be achieved in the following areas: Team structure, including clarification of roles and obligations within the organisation so lines of responsibility are clear and claims are directed correctly and efficiently. Teamwork with broker and insurer. Prompt reporting of claims, so that insurers can start investigations before the third party claim is received. All offices/locations to be on the look out for CNFs (and know what one looks like). Awareness by insureds of the need to comply quickly and substantively with insurers requests ensuring clear lines of communication to investigate claims, early supply of relevant accident documentation and the ability to track documentary evidence. Creation of a core bible of documents to support investigation and information gathering on likely issues e.g. applicable case law. Thorough investigations to allow swift decision on both primary liability and contributory negligence. Trust and empower liability decision makers. 26

10. Conclusion Our overall recommendation is to embrace the change. Insurers should compensate genuine injured claimants quickly to take advantage of cost savings. At the same time, they should be alert to those cases which should, quite properly, exit the Protocol. Substantial savings can be made on claims above 10,000 which would have been subject to assessed costs prior to the Protocol extension. Going forward, the maximum solicitor s fee (excluding disbursements) recoverable under the Protocol is 1,450 (plus VAT), where the claimant successfully recovers an award greater than the defendant s offer at an oral hearing. This applies even if the claimant recovers the specialist advice fee of 150. Compare this to a case settled at 20,000 before the extension - the fee payable would likely to have been at least three times this sum, even where an early settlement was achieved. Therefore, insurers should be alive to attempts to remove claims from the Protocol in an attempt to build costs recovery. We have identified above some of the key issues raised by the new Protocol. However, some of the difficulties arising from the new process will only become apparent once it has been in operation for some time and there will inevitably be satellite litigation to challenge certain aspects. The introduction of the new Protocol means that insurers need to review the way in which claims are handled. There needs to be increased emphasis on the front end of the process, including educating policyholders about the importance of prompt notification. Please contact us if you have any questions in relation to the challenges for organisations or in relation to the process generally. 27

Appendix 1 - Practical reminder: Q&As 1 What if a claim falls out of the Protocol? It should proceed under the existing Pre-Action Protocol for Personal Injury Claims. For cases up to the value of 25,000 costs will follow the fixed costs regime as set out in CPR 45 Table 6. 2 Is the IDSL portal compulsory? Electronic exchange of information under the Protocol process must be secure. The portal created by IDSL is currently the only means on the market by which this can be achieved. So, by default, use is compulsory. A fee per claim will be payable when the claim is accepted under the process. There are two interface methods either by entering data directly into the Portal or by application via application links from in-house case management systems. 3 What happens if there is non compliance with deadlines? In some circumstances the claimant may serve notice to remove a claim from the Protocol and revert to the Pre-Action Protocol for Personal Injury Claims. Remember that time periods may be varied by agreement, with the exception of the initial response period at Stage 1 and the five day additional consideration period at Stage 2. For non-payment of costs, costs only proceedings may be commenced. 4 Do I need to explain why liability is denied? Yes, brief reasons must be given in the CNF response. In addition, the CNF can be used by the claimant as a letter of claim. Therefore any objections to the validity of the claim should be raised within the response in order to buy some more time to investigate and respond. 5 What if the insured does not pass the defendant CNF to me in time? Where the insurer cannot be traced, the claimant can send the defendant only CNF directly to the insured by first class post (if there is no portal address). The rule states that the defendant must send an electronic acknowledgement the next working day, send the CNF to the insurer and inform the claimant of the same. The consequences of non-compliance are not specified by the rules. There are unreported court decisions from before the Protocol extension that held a failure to comply with the requirement for next day acknowledgement did not mean that a claim automatically ceased to continue under 28

the Protocol, or give the claimant the right to elect that a claim should not continue under the Protocol without being at risk as to costs. However, until such time as the court provides further clarification. Defendants and brokers must, therefore, be warned of the need to send CNFs to the insurer immediately. 6 Can I communicate with my opponent outside of the Portal? All written communications not required by the Protocol must be sent by email. The claimant will give a contact email address in the CNF. Do not forget it is still possible to try and negotiate by telephone to resolve the claim, although experience shows claimants solicitors hide behind the Portal to draw out the defendant s best offer in writing. 7 What if additional losses are claimed under the Protocol? If the original damages claimed are not settled and vehicle related damages are outstanding, the claimant must inform the defendant and provide all relevant information. The Stage 2 settlement pack should be amended with a separate offer to include additional damages. The defendant then has 15 days to consider and accept/make a counter offer. If the additional losses are not agreed, once consolidated, the claimant can start proceedings for additional damages under CPR Part 7. The Stage 3 court proceedings pack should be sent if the original damages and the additional damages are not agreed. The defendant must make payment to the claimant of their final offer in the court proceedings pack, less any payments to CRU and any interim payments made. Any unpaid Stage 1 fixed costs and Stage 2 fixed costs and disbursements must also be paid to the claimant within 10 days. 8 Can a hire claim be included in the Protocol? Vehicle hire is an additional damage item which should generally be dealt with by the insurer outside of the Protocol. If hire is included as an item of additional damage, the claim should remain in the Protocol unless the claimant notifies the defendant that the claim is unsuitable on the basis of complexity of law or fact. The court can however order no more than fixed costs in CPR rule 45.18 if it deems the claimant acted unreasonably in giving such notice. 29

9 What do I need to include in an offer? You must break down an offer into each head of loss and should include all arguments before the end of Stage 2. Nothing further can be added after Stage 2 concludes. You should also specify any offsettable CRU benefits against each head of loss and set out reasons for any refusal to pay for unnecessary reports/specialist advice. 10 What if I am not satisfied that CRU benefits should be payable by the defendant? Given the short time limits within the Protocol, it is likely to be beneficial to simply pay the CRU certificate and then appeal, rather than requesting a review (as the DWP has 90 working days to respond to a review). 11 If I make an interim payment, do I need to pay CRU, and should offsettable benefits be reduced from the interim payment? Yes, CRU must be paid within 10 days for interim payments of up to 1,000 and 15 days if over that sum. Unless specified, payment up to 1,000 is assumed to be for general damages only whereas if over that sum, the payment should be made less offsettable benefits. If CRU is not valid for more than 10 days after the request for an interim payment, you may agree a further 30 day period for payment whilst awaiting the updated certificate. 12 What costs will I receive if the claimant fails to beat the defendant s offer at a Stage 3 hearing? A court may make an order for the defendant s costs, not exceeding the fixed costs to which the claimant is entitled at that stage of proceedings, less the costs actually payable to the claimant (Stage 1 plus Stage 2 fixed costs). 13 Part 36 are there any changes? Yes, to take account of the fixed recoverable costs regime, the general rule in respect of defendants costs is that where the claimant fails to beat the defendant s offer, the claimant is entitled to costs at the level they would have achieved upon the expiry of the defendant s offer. The defendant is awarded the appropriate fixed fee at the time of settlement or judgment, less the amount received by the claimant. The defendant is also entitled to appropriate disbursements in these circumstances. 30

14 If the claim no longer continues under the Protocol, which offer is taken into account for the purposes of an offer as defined by Part 36? Offers are referred to as Protocol offers. If the claim leaves the Protocol before the court proceedings pack form is sent, it is the last offer made by the parties and the offer is deemed to be made on the first business day after the claim leaves the Protocol. 15 Where should rehabilitation costs be pleaded? These may not be included as disbursements and, therefore, should be included in a Stage 2 settlement pack as medical expenses. If the defendant has discharged rehabilitation costs, include costs within the interim payment section. 16 What if I have arguments about the claimant s solicitor s conduct? A defendant may argue that the claimant is in breach of the Protocol. The claim will therefore fall out of the Protocol and into the Pre-Action Protocol for Personal Injury Claims - with the proviso that the claimant s costs are limited to the Protocol fixed costs where the claimant acted unreasonably. Whilst there is a risk that the claimant will recover greater costs, defendants may wish to pursue conduct arguments against certain firms if suspicious patterns emerge. There is also scope for the defendant to recover standard costs if conduct is successfully argued. 17 How will claimants solicitors avoid the Protocol and/or seek costs on the standard basis? There are a number of ways in which the claimant may try to avoid the Protocol and seek higher rates of costs outside it. These include: Arguing that there are complex issues of fact or law. Issuing letters of claim against two separate parties for the same action (i.e. if a passenger, against the driver and third party). Arguing a claim is worth more than 25,000 - either prior to or at any point during the Protocol procedure thereby attempting to remove the claim from the fixed fee regime altogether. 31

18 What if there is a third party claim and the action is in the Protocol? Consider settling the claimant s claim early and commencing a recovery action, as opposed to considering a Part 20 claim. This will limit the claimant s costs to fixed Protocol costs. Ensure that the potential third party is notified of this intention. 19 Is a success fee payable? A CFA success fee will be only payable where a valid CFA was entered into prior to 1 April 2013. 20 Can I still use witness evidence? Yes, where it is reasonably required to value of the claim. It must be submitted by no later than Stage 2. 21 Can I make an interim payment of less than the amount requested by the claimant? Yes, if the claim is over 1,000. However, the claimant may start Part 7 proceedings specifically for the interim payment which would remove the claim from the Protocol. 22 What can be added at Stage 2 to support my arguments on the heads of claim? Any case law in support of the valuation for PSLA can be provided, together with witness evidence as to quantum and employment records if there is a dispute over loss of earnings. If there are various heads of claim, a detailed counter schedule may be appropriate. It is good practice to introduce such evidence at Stage 2. It may be too late to try to do so at Stage 3. 23 Are there any circumstances where the defendant can recover standard costs? Where proceedings are struck out for abuse of process/conduct issues or where a claim is fundamentally dishonest, the defendant is entitled to costs on the standard basis. 32

Key contacts Key contacts Kathy Dwyer Partner +44 1622 625 625 k.dwyer@kennedys-law.com Jennifer Harris Partner +44 124 529 9813 jk.harris@kennedys-law.com Niall Edwards Partner +44 114 253 2041 niall.edwards@kennedys-law.com Richard West Partner +44 124 529 9877 r.west@kennedys-law.com Co-author Stephanie Rogerson Litigation Assistant +44 1622 625 661 s.rogerson@kennedys-law.com 33