Sir Rupert Jackson published his report on civil litigation costs five and a half years ago expressing concern at how high these were and at the conduct that such high costs encouraged.
His observations and recommendations led to a wide-ranging programme of reform which came into force between April and July 2013 and included the claims portal system being expanded to cover most employers’ and public liability claims. We have been monitoring the impact of these changes annually to assess how they are influencing the claims environment and dynamic. Having considered that impact across the sectors, on insurers and brokers, on costs claims and on fraud, Paul Edwards and Stratos Gatzouris take a look at the new environment and at the current opportunities for further landscape change.
A quick recap
Since April 2013 legislation, rule changes and judicial practice have:
- Stopped claimants from recovering success fees and ATE premiums from their opponents. - Banned referral fees and inducements to claim. - Increased the motor claims portal limit to £25,000. - Introduced an EL/PL claims portal for claims up to £25,000. - Fixed recoverable costs for the majority of fast track personal injury claims. - Increased general damages by 10%. - Limited the scope for personal injury defendants to recover costs, via qualified one-way costs shifting (QOCS). - Introduced costs budgeting in higher value claims. - Underlined the importance of complying with deadlines. - Re-defined proportionality. - Introduced the concept of fundamental dishonesty – in the context of costs and personal injury claims. - Introduced MedCo – a selection system for medical experts considering whiplash claims.
On the ground
Changes like these take time to have an impact. What have we seen happen so far?
Limited changes in 2013
Our own statistics indicate that motor claims numbers did not really alter until 2013 (the motor portal having been in place for lower value claims since 2010), when fixed recoverable costs came in and ATE premiums ceased to be recoverable. Volumes may have dipped due to flux in the market arising after referral fees were banned forcing referral companies out of the equation and pressing claimant solicitors to restructure their business models.
Signs of adaptation - 2014
In 2014, claims volumes for all personal injury claims returned to their pre-2013 levels as surviving claimant solicitors evolved their business models to create other revenue streams for example via rehabilitation fees. The claims referral industry also showed that it could adapt so that it is no longer about approaching people in the street, it is about data mining. Pages of data are bought and sold as leads to solicitors and accident management companies with new strategies deployed to convert the leads into claims. We’ve seen a real increase in the number of duplicate CNF’s being submitted as claims are made by multiple solicitors each of which have bought the same data, sometimes then submitting claims without the claimants’ knowledge or permission. The idea is to progress the claim to stage two before writing to the claimant to confirm that liability has been accepted and there is money waiting for them. Pre-medical offers are sometimes even requested immediately to make progressing a claim more attractive to the oblivious claimant.
More unrepresented litigants
While data mining is leading the charge in the claims industry, we are also starting to see reports of increasing numbers of litigants in person. It is difficult to assess why this is - either because claimants can no longer access solicitors due to the change in funding arrangements or because individuals are increasingly legally sophisticated and confident. Ultimately reasons are likely to vary dependent on sector.
Claims values – inflation and control
As far as claims values are concerned, at its simplest we can say that, in the smaller claims at least, costs have gone down by approximately 50%, whilst general damages have gone up by about 10%. Clearly this was always likely to happen due to the 10% increase brought about by the reforms to offset against the reduction of success fees from damages and in line with the bi-annual release of Judicial College guidelines.
However we also see claimant solicitors getting bolder and more outrageous in their expectations in an effort to inflate damages and perhaps force claims out of the portal and fixed costs regime. Happily such expectations are usually abandoned when challenged.
We have seen an increase from 0.5% to 2% of motor claims progressing to Stage 3. The reason for this is unclear but it seems as if some firms are determined to progress matters as far as they can regardless. These tactics are combatted by good firm offers.
Higher value claims – a longer term prospect
The impact of the reforms on larger claims is still to be assessed and it makes sense that it could be a few years yet before these more slow moving claims filter through to a conclusion. Costs budgeting has added another layer of expense with inconsistent results across the country. Nonetheless, recently both Jackson and Lord Dyson have underlined that the process is important and here to stay. While at present some judges are robust with others barely interfering and leaving issues until detailed assessment, a working party has been set up to see what can be done to ensure that budgeting is approached in a consistent way.
Fundamental dishonesty in QOCS
Another area that is gathering momentum is that of the fundamental dishonesty exception to QOCS. For some time, it was not known how exactly this term would be defined and whilst it has not yet been considered in the higher courts, certainly at county court level there have been a number of decisions, notably that in Gosling –v- Hailo & Screwfix Direct in Cambridge. Essentially it was held that the dishonesty had to go the root of or substantial part of a claim. In that case 50% of the claim was considered dishonest which rendered the entire claim to be fundamentally dishonest and resulted in the QOCS exception being applied.
In the future
As both Dyson and Jackson highlighted recently, and as many practitioners and their clients will no doubt attest, while some aspects of the reforms have started to reap rewards in discrete areas, others need more work to ensure that they have the required effect. The world is moving on fast meaning that recommendations produced five years ago will likely only take things so far, and some elements of the reforms are receiving more opposition than others.
In the short term MedCo faces attack, being viewed as anti-competitive by some. However, if that challenge falls away, the medical portal for the provision of medical evidence may be extended to cover other fast track claims. We also await the outcome of the accreditation of medical experts in 2016. In the meantime the fixed fees for reports introduced as part of this scheme provide consistency and certainty.
New rules and legislation
The rules on offers to settle under part 36 of the Civil Procedure Rules have also received attention recently in order to tidy up the position. Some case law has effectively now been enacted in law whilst other cases have been overturned. We also have new legislation in the form of section 57 of the Criminal Justice and Courts Act 2015 aimed at penalising fundamental dishonesty in personal injury claims by striking out the primary (personal injury) claim in its entirety on the defendant’s application together with any related claim being made by those supporting the fundamentally dishonest primary claim (so long as there is no substantial injustice caused to the claiming party).This is clearly going to result in considerable satellite litigation.
In the longer term influences such as the political climate could have an effect. In the run up to the General Election the Labour party had indicated that it felt the civil justice regime had moved too far in favour of defendants and that it would look to address this.
With the Conservatives now in a majority we can expect reform to continue as before with further fixed costs. That said, priorities may lie elsewhere in the short term, with the EU referendum and the proposed Bill of Rights likely to take up considerable focus. There is also an element of ‘blue sky’ thinking going on with a proposed online court service being mooted and with the use of artificial intelligence for deciding smaller cases. This may also be in line with Sir Rupert Jackson’s vision of fixed damages with less ‘human’ intervention and is an area that we will be addressing in more detail in future articles.