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Legal developments in claims

Technical Article

Update on legal developments impacting insurance claims from the Forum of Insurance Lawyers.

LV responds to the autumn statement and the Insurance Fraud Taskforce report
A press release from LV reports that the insurer has undertaken private research on accidents over the past two years which it says confirms that the UK is the "World Capital for Whiplash". The research shows that whilst 65% of personal injury claims in the USA are for whiplash, that rises to 78% in the UK.  It also gives statistics for cold calling after an accident. LV confirms in the press release that it will pass on savings from the autumn statement to consumers and calls upon the Government to implement the reforms in the Insurance Fraud Taskforce report.
Parliamentary Roundup
The Enterprise Bill, dealing with late payment of insurance claims
Having completed its stages in the Lords before Christmas, the Bill had its Second Reading in the Commons on 2 February. The Bill will now proceed to Committee Stage in the Commons on a date to be fixed.

Riot Compensation Bill
The Bill, started in the Commons, reached Committee Stage in the Commons on 13 January and was accepted without amendment. A number of proposed amendments were withdrawn but those issues may return in later stages. (The Bill progressed to Report Stage on 5 February - full details will be included in the next issue of the Voice.)

Negligence and Damages Bill - to change the law on compensation for secondary victims and claims where expectation of life is diminished, and amend the rules on bereavement damages
This Private Member's Bill will receive its Second Reading in the Commons (where it started) on 11 March 2016.

Apologies (Scotland) Bill
The Bill was passed by Parliament on 19 January. It provides that an apology is inadmissible in certain civil proceedings as evidence of anything relevant to the determination of liability.

Cost of large bodily injury claims on the rise
Whilst much attention following the autumn statement has focused on the cost and volume of low value claims, research from the Institute and Faculty of Actuaries published in December shows that, since 2010, the average cost per policy of the most severe claims has increased on average by 11% per annum. The increase in cost per policy is attributed to increased cost rather an increase in frequency.
Research shows middle classes now most likely to bring a clinical negligence claim
Research published in January by the Nuffield Foundation, looking at the pattern of clinical negligence claims between 2001 and 2013 and focusing on the changes to funding over that period, reports that the level of claiming was much the same in 2013 as in 2001, although the introduction of Conditional Fee Agrements has had a significant effect on claims. The success rate on clinical negligence claims increased significantly between 2001 and 2009. Also seen (between 2001 and 2013) was a change in the type of claimant: by 2013 middle income social grades were the most likely to bring a claim.
New Sentencing Guidelines come into effect on 1 February
New sentencing guidelines came into effect on 1 February, governing health and safety, corporate manslaughter and food safety and hygiene offences, applicable to all offences sentenced after that date, without reference to the date of the offence. The new guidelines introduce tariffs for the first time for food hygiene and non-fatal health and safety breaches. For health and safety breaches the guidelines are likely to significantly increase the level of fines.

Fixed costs would increase risk of accidents say clinical lawyers
Following the publication of Lord Justice Jackson's proposals to extend fixed costs to all claims up to £250,000 (or even higher), claimant representatives have put forward their objections to the plans. Complaints are made that the recommendations fail to address the impact on "real people"; that fixed rates will prove to be unrealistic; and that the deterrent effect of litigation on health and safety is being ignored.  It has been reported that the Government has asked Professor Rachel Mulholland to facilitate CJC meetings on the issue of fixed costs.

New trade body will tackle the issue of driverless cars
A group of 13 UK motor insurers, together with the Association of British Insurers (ABI) and Thatcham Research, have come together to form the Automated Driving Insurance Group, which aims to present a united front as the Government considers the regulatory issues surrounding automated vehicles. It is reported that the Government aims to amend road laws by 2018 to account for driverless cars and the new group will be liaising with Government on issues including liability, date collection and the challenges of coping with vehicles at different levels of automation.  

Update on the All Scotland Personal Injury Court
Following recommendations in the Gill Report, the All Scotland Personal Injury Court (ASPIC) came into effect on 22 September 2015. Four months on, a number of cases which would have been raised in the Court of Session have been raised in the ASPIC, although FOIL has received reports that claimant firms are continuing to use the traditional Sheriff Courts especially in Aberdeen, Edinburgh and Glasgow. There has been a downturn in the number of litigated claims raised since the introduction of ASPIC, and to date, there have been no motions dealing with the sanction of counsel in claims, although these are expected over the next couple of months.

Claims against the military
The issue of claims against the armed forces reached the top of the political agenda on 22 January when the Prime Minister announced that he wanted to end the industry bringing "spurious claims" against military personnel who served in Iraq. The MOD has faced a significant number of claims brought by Iraqi detainees alleging mistreating by British soldiers. It is reported that the British Government has paid £20m to conclude 326 claims to date.

Reports on the Prime Minister's announcement on 22 January 2016 indicate that the National Security Council has now been asked to examine a number of issues concerning claims against the military including shortening the limitation period for claims; limiting the right to legal aid for those who have lived in the UK for less than twelve months; restricting the use of CFAs to fund claims; and tightening the regulatory powers of investigation of law firms said to have abused legal procedure.

On 2 February Michael Gove announced that under the UK Bill of Rights to be published "soon", the armed forces could be protected from claims for breaches of human rights arising from military actions overseas.

CMA announces market study in the supply of legal services
The Competition and Markets Authority is to undertake an investigation into the supply of legal services, focusing on "the provision of civil law legal services to individuals and small businesses in England and Wales." The CMA highlights several concerns: on service standards within the sector; on the complexity of the current regulatory regime; and on the perception that there is unmet need within the legal sector. The CMA's Statement of Scope indicates that the investigation will cover 'legal services in a broad sense'. It expressly mentions conveyancing, immigration advice, will writing, employment law services and commercial law services as potential areas of investigation: there is no mention of personal injury.   The CMA will report at the end the year.

When has a costs budget been agreed?
In the case of Various Claimants v McAlpine [2015] EWHC 3543 (QB) Supperstone J, sitting with Master Leslie and Chief Master Gordon-Saker (as an assessor), has considered the effect of wording used by a claimant representative seeking to reserve the right to challenge the budget on detailed assessment.  The judgment also considers exactly what is required if a budget is to be considered as agreed.

Bereavement damages in Northern Ireland to be increased in line with CPI
Following a consultation last year, the Department of Justice in Northern Ireland has confirmed that it intends to increase bereavement damages in Northern Ireland in line with CPI, rounded to the nearest £100, with adjustments to be made every three years going forward. Based on the CPI for November 2015, the award would be £14,400, considerably higher than the current award in England and Wales of £12,980. In its consultation response FOIL had called for the damages to be kept in line with awards in England and Wales. Legislation to introduce the change will be brought forward "as soon as Assembly time allows."

The court considers how credit hire claims should be handled under the portal - and decides what happens if the claimant is awarded less than the defendant's stage 2 offer

In four conjoined appeals, headed by Mulholland v Hughes, HH Judge Freedman sitting in Newcastle considered what should happen if the award at stage 3 of the portal process is less than the defendant offered and paid to the claimant at stage 2. Can a court then order repayment of the sums already paid to the claimant?

HH Judge Freedman found that neither the defendant nor the court is bound by any offer or counter-offer made at the end of stage 2 (unless it is accompanied by the word 'agreed'). "If a claimant chooses to go to a stage 3 hearing, he must accept the risk that a court will award less than the non-settlement payment and that he will have to refund the difference." Therefore, in one of the four cases, Saul v Fielding, where the judge had awarded lower PSLA damages than the defendant had offered, the claimant was required to pay back the difference and pay the defendant's stage 3 costs.

In the other three cases, the lower damages awarded by the court were in relation to credit hire claims. The defendant in each case had only raised 'need' at stage 3 and the court had either dismissed or reduced the claim at that stage as a result of that new allegation. HH Judge Freedman held that, if need is to be raised as an issue by the defendant, that should be done at the time the defendant's offer is made: if it is not raised then there is no need for the claimant to prove it. Overturning the original judgments in those three cases, he allowed the credit hire claims in full.

Court of Appeal to decide if indemnity costs trump fixed costs if claimant makes a successful Part 36 offer.
In an expedited hearing on 8 February the Court of Appeal was to have heard an appeal in Butler v Palmer, to decide if a claimant who makes a successful Part 36 offer should be entitled to indemnity costs in cases where fixed costs would usually apply. (There have been conflicting circuit judge decisions on the point.)  Butler v Palmer settled before the hearing and, instead, the point was considered in the cases of Broadhurst v Tan and Smith v Taylor. Judgment is expected on 23 February.

Insurance Fraud Taskforce publishes final report
The Insurance Fraud Taskforce (IFT) published its final report on 18 January and this Update gives a summary of the recommendations it contains.

The autumn statement had pre-empted any announcement on the Small Claims Track limit: the IFT report supports the announcement. It had been trailed in advance that the IFT would be considering the issue of limitation but the recommendation made was more complex than the reduction to a 12 month limit for whiplash which had been anticipated, suggesting costs penalties and other disincentives, to discourage late claims.

The report also contains recommendations on NIHL claims; the powers of the SRA; the problem of some claimant firms acting without instructions; and nuisance calls. It recommends that insurers follow the established best practice of defending claims believed to be fraudulent, rather than seeking to settle such claims cheaply. It states that "there is a strong case to reduce the number of pre-med offers." The report also makes recommendations for the insurance industry, with a view to building better consumer trust which the Taskforce believes would assist in the fight against fraud.

Lord Justice Jackson recommends fixed costs up to £250k (or higher)
Lord Justice Jackson's speech on 28 January had been widely anticipated as a call for greater use of fixed costs. The content of the lecture was therefore not a surprise but the level of detail he provided, on how a regime for claims up to £250k might work moves, the debate on and it comes with a sense of urgency. Clearly frustrated by the lack of fixed costs for non-personal injury claims on the fast track, in Lord Justice Jacksons' view the time for introducing a fixed costs regime for cases on the fast track and the lower reaches of the multi track "has now come". On time scale, "If the political will is there, this whole project could be accomplished during the course of this year."

Setting out the experience from other jurisdictions, Lord Justice Jackson highlights the problems, as he sees them, in this jurisdiction, and his proposed solutions. He details a number of rules that might be applied in a fixed costs regime and provides a costs grid, setting out possible costs bands, although he indicates that the draft figures he gives are only the first word on the issue and not the last.

Lord Justice Jackson "understands informally" that the MOJ is supportive of a fixed costs regime for all non-personal injury claims on the fact track. Justice Minister, Lord Faulks, has previously referred to legal costs as "the elephant in the room" and the chance to address that problem, coupled with the opportunity to significantly reduce the court resource needed for costs budgeting, which would no longer be necessary with a fixed costs regime, might be enough to get the Jackson proposals taken forward.

Foil disclaimer: This publication is intended to provide general guidance only. It is not intended to constitute a definitive or complete statement of the law on any subject and may not reflect recent legal developments. This publication does not constitute legal or professional advice (such as would be given by a solicitors' firm or barrister in private practice) and is not to be used in providing the same. Whilst efforts have been made to ensure that the information in this publication is accurate, all liability (including liability for negligence) for any loss and or damage howsoever arising from the use of this publication or the guidance contained therein, is excluded to the fullest extent permitted by law.

More information about FOIL can be found on  the FOIL website.