With less than two weeks to go, the new rules have been published which, with effect from 31 July 2013, implement the extension of the low value road traffic accident (RTA) scheme to employers' liability and public liability (EL/PL) claims valued between £1,000 and £25,000. The accompanying fixed recoverable costs regimes for cases settled within the pre-action protocols and for those which fall out of them have also been published.

A number of ambiguities remain in the wording of the protocols and it is unfortunate that these have not been ironed out before extension. Such uncertainties compound the challenges faced by organisations, given the significant changes to pre action behaviours and the deadlines that need to be adhered to.

The protocol: ongoing uncertainty

Ambiguity remains around some of the sanctions for a number of the requirements. This includes:

  • Failure by the claimant to re-submit the claims notification form (CNF) within 30 days of first issue to insurer (in EL and PL claim).
  • Failure to provide next day acknowledgment of the CNF or a Defendant CNF. What does the word "must" acknowledge mean without clear guidance on whether a sanction applies?
  • Failure to provide details of loss of earnings after 20 days of making an admission of liability (in an EL claim).
  • Failure to pay settlement monies within 10 days of agreed settlement, including Stage 2 fixed costs.

Whether clarity will be offered by the Ministry of Justice via the CPR Committee in due course waits to be seen. In the meantime, such grey areas represent potential risk points for insurers, insured’s and those with self insured retentions.

Fixed costs: non-protocol claims

Where a claim no longer continues under the RTA or EL/PL protocol, the "Jackson matrix" of fixed recoverable costs applies. The main points arising from the new rules and costs regime include:

  • An increase in the advocacy fee if the claim proceeds to trial: £500 for £1-3k claims / £710 for £3-10k claims /£1,070 for £10-15k claims / £1,705 for £15k and above claims.
  • Introduction of fixed costs for defendants (new rule 45.29F): where a costs order is made in favour of a defendant in cases that fall out of the protocol, the amount of recoverable costs is limited to the amount that the claimant would have received had he been successful at the same stage of proceedings.
  • Three exceptions apply to limiting the defendants' costs:
    • Where the claimant accepts the defendant’s protocol offer after exiting the protocol, the claimant will be liable for the defendant’s costs from the date the offer was made
    • Where the claimant fails to beat his own Part 36 offer on judgment, the provisions of Part 36 will apply
    • If the exceptions to qualified one-way costs shifting (QOCS) apply, assessment of the defendant’s costs will proceed without reference to the new rule. (QOCS protection will be lost where a claim is struck out and where the claim is found to be fraudulent or fundamentally dishonest). 
  • Disease claims falling outside the protocol: will be subject to hourly rate costs, not fixed costs.
  • Where a counter claim is brought in a RTA claim which includes a claim for personal injury: that counter claim will attract the same fixed costs as would be payable to a claimant if the counter claim is successful.
  • Where a counter claim is brought in a RTA claim which excludes personal injury and is successful: the costs awarded in respect of that counter claim would amount to 50 per cent of those payable by reference to the portal costs.

Looking ahead

Whilst the protocols take effect and organisations learn to understand the impact of the response times, we might see certain procedural 'behaviours' develop. For example, there may be an increase in the number of repudiations as organisations get to grips with the timelines for making decisions on liability, although we suspect this will level off in due course. The aim must always be to deal with meritorious claims within the portal and compensate genuinely injured individuals as quickly as possible and at a reasonable value.

Much has been said about whether, on a commercial basis, it is cost effective to argue contributory negligence up to a certain level and have a claim exit the protocol i.e. where is the tipping point? We anticipate that most organisations will take the view that claims with real contributory negligence should be still be run. To not do so risks sending the wrong message to their workforce and/or members of the public about taking responsibility for ones own health and safety.

In terms of other changes in a typical 'claims cycle', could we see an increase in pre-action disclosure applications and the costs associated with such applications? Such a step will allow a claimant to take a view on whether to proceed through the protocol as they can then assess if it has merit without committing resources to completion of a CNF and any associated steps.

Whilst we anticipate the impact on the rate of litigation will be neutral, we recognise the concerns of some of our clients that the extended protocol could cause a spike in claims. This follows the increase in motor claims that was seen when the online claims portal first became operative, in particular with regard to claimants' recovery of fixed costs on admission of liability (often referred to as the "£400 club"). The new rules have ironed out this potential issue on behaviours within the portal and hopefully such concerns will be alleviated.

As with other aspects of the civil justice reforms, we anticipate that the next 12-18 months are likely to bring a number of challenges which organisations will need to be alive to. Ongoing review of their claims handling procedures will be vital, to ensure efficiencies are identified and maximised in order to take full advantage of the costs savings that are available.