As 1 April 2013 approached, and with it a dawning of the "Jackson era", discussion turned to predictions about what might happen before 1 April. One assumption was there would be a surge in issued proceedings to bypass as many of the reforms as possible (and protect the claimants' solicitors' purse).
Interestingly, however, anecdotal evidence from insurers who monitor intimated claims has indicated that before 1 April, such a claims surge was not forthcoming. In the days that immediately followed "J day", the reason became clear. With some of the main claimant firms issuing multiple claims in one hit (one firm is reported to have issued in excess of 6,000 claims in one day), it is evident that those firms had (before 1 April) deployed their resources not in issuing proceedings, but in actively encouraging seeking new clients and then signing them up to the "old style" conditional fee agreements (CFAs) backed by an after the event (ATE) insurance premium.
This approach happened for two reasons. First, claimant law firms, like any business, have limited resources. Understandably given the seismic changes that they could see coming, they focussed their resources on filling their "larders" with pre-1 April CFA cases. In doing so, they sought to ensure that they could put off the day that the full impact of the Jackson reforms would hit their businesses. That brings us to the second reason. Postponing the full impact meant, of course, that each of the cases funded under the "old style" CFA would allow the claimant’s lawyer to recover a success fee on top of their "base" costs and also to recover the ATE premium.
1 April signalled the end of recoverability of CFA success fees and ATE insurance premiums from the losing party - a key component of the Jackson reforms to encourage claimants to have, as Sir Rupert put it, "more skin in the game". For CFAs signed on or after 1 April, it is the claimant who pays any appropriate success fee out of their damages.
Pre-1 April CFA funded cases will, therefore, provide claimant solicitors with a "bank" of additional costs they would not otherwise have secured, and arguably, allow their businesses some time to adapt to and proof themselves against the effects of the reform changes.
As a result of the above, and remembering claimants have four months to serve proceedings which have been issued, we are likely to see a surge of served proceedings between now and July 2013. Such litigated cases will bring with them a higher level of liability to meet the success fee and ATE premiums which will remain recoverable. The effect of this wave is likely to be significant in a number of ways. Insurers and their advisors need to be alive to the resourcing implications around managing a spike in such litigated claims. In addition, underwriters will need to factor in that this wave of litigation will delay the day that their indemnity spend reduces, and that may impact for some time on likely premium levels.
The second wave of cases which will add pressure on insurers’ systems will involve low value motor cases processed through the online claims Portal. From the end of April 2013, for cases valued up to £10,000, there was a sharp reduction in the fixed recoverable Portal costs (FRC) paid to claimant solicitors for RTA claims notified beyond that date. The new FRC regime provides for a reduction in total FRC from £1,200 to £500.
Claimant solicitors will have commenced as many of these types of cases as possible within the Portal before the end of April. They have done so in order to enjoy the much higher rate of recoverable costs. The impact of this wave on the overall claims system is likely to be modest and will most probably have a minor ripple effect.
The claims Portal is due to be further extended at the end of July 2013. Despite the fact the revised road traffic accident (RTA) pre-action protocol remains in draft from (and may not be signed off by the Civil Procedure Rules Committee until as late as June 2013), the protocol is set to be vertically extended to apply to RTA cases valued up to £25,000 notified on or after 31 July 2013.
As with the low value motor claims referred to above, the extension goes hand in hand with the introduction of FRC regimes that will apply to claims which settle within the portal process and those which exit it. Thereafter, for claims valued between £10,000 and £25,000 which settle within the Portal, the potential total costs reward will be £800 - a modest sum in comparison to the predictive costs currently enjoyed by claimant lawyers.
Therefore, in order to maximise costs recovery, claimant solicitors will want to notify insurers of as many of those higher value motor claims (valued between £10,000 and £25,000) as possible before the end of July - allowing those cases to bypass the extended Portal process (and the reduced recoverable costs it will bring).
The intention of the Jackson reforms is, as is now well rehearsed, to streamline the claims process - making it more efficient in order to control costs and ensure a shared responsibility towards those costs from all concerned parties. In turn, that should allow insurers and other compensators to promote any savings - be it in their capacity as a consumer facing or commercial entity. Compensators should remain confident that the net effect of Jackson (and related reforms) will bring those savings. However, claim surges such as those outlined above are likely to delay the process before the maximum benefits will be felt.
Indeed, it has been said that it may take two years for pre-Jackson litigation to clear the court system, and thereby properly allow the emergence of the new style of claims as envisaged by Jackson (and with them, the corresponding costs savings). It will be important, therefore, to continue to manage expectations of all affected by or who have an interest in the civil litigation system for some time to come.
Note: the claims Portal process is also due to be extended to apply to employers' and public liability claims valued up to £25,000 for accidents on or after 31 July 2013.