Having taken soundings from our clients, we make a number of initial observations in our response, including:
- Has the Scheme been a success? - given the lack of available data after such a short operation time, the intelligence that our clients can provide is vital (if not ideal in undertaking an impact analysis).
- Are all EL/PL claims suitable for the Scheme? - given the greater complexity of EL/PL claims (and in particular, surrounding capture of evidence) we highlight the types of factors that the MoJ must be alive to, and recommend an initial limit of £10,000. In addition, we suggest there are certain types of claims that may require specific consideration e.g. disease, product and construction cases. It remains to be seen if any extension is qualified by reference to claims type – we suspect not.
- Scheme deadlines – we confirm that the current 15 day response time is wholly unworkable for EL/PL claims and suggest 60 days from the date of notification.
- Stock-take – we suggest a proper review and analysis of how the Scheme is working for EL/PL cases after 18 months, to ensure success and make any necessary modifications.
- Entry point arrangements – observing that duplicate claims and multiple applications has been a common feature.
- Portal stability – highlighting the initial difficulties experienced and the need to ensure reliable IT support before any extension.
- Progression of cases through the Scheme - here we have highlighted the common concern of cases getting “stuck” at the end of Stage 1, leaving delay and uncertainly about whether a claim is progressing. We suggest the claimant should be subject to tighter timelines and be incentivised to continue. There should be a long stop for claims to progress, failing which they are debarred from proceeding further – stagnation at Stage 1 benefits none of the parties not least the claimant.
- Enhancing counter fraud techniques – by imposing a prerequisite that the claimant must sign the claim notification form (CNF) in person and with proof of identification.
- Behaviours - we call for an increased scope of investigation by the Behaviours Committee, looking at negative behaviours on an individual basis as opposed to the current requirement of systematic and/or endemic behaviours.
Our answers can be summarised as follows:
- Extension of current Scheme to RTA claims – yes, potentially to £15,000 with fixed costs remaining the same (but with a warning about a further increase).
- Extension to EL/PL claims – yes, but with reference to issues of concern and to an initial limit of £10,000 with a stock take after 18 months. Modifications to include payment of Stage 1 fixed fee on entry to Stage 2 only.
- Extension to clinical negligence cases – no, not suitable. Should they be included, modifications must address requirements for the claimant to provide a comprehensive case on causation and financial information.
- Fixed recoverable costs – agreement to Jackson’s suggested system (or “matrix”), but subject to a number of observations surrounding the detail, including not tying costs to the value of a claim plus it appears too complicated/unwieldy.
- Mandatory pre-action directions – yes, in principle, and for claims up to £100,000. Engagement with the claimant is to be welcomed but the parties should be left to choose the most appropriate form of ADR. We suggest compulsory mediation “assessments”.
On the basis that the portal Scheme is extended (horizontally and vertically), the implications which we consider are most relevant include:
- Education of insureds – to ensure immediate notification of a claim to be investigated.
- Reviewing now your KPIs for investigations, so that when the changes come into force your claims team/investigators are already working to the likely revised timelines.
- Consideration of setting up a dedicated portal team?
- Identifying now your “star” negotiators within your claims team. Who is best placed to deliver ADR pre-action? Consider training and development in mediation skills.
- Impact on cash flow – including payments of £400 per claim for Stage 1.
- Impact of increased number of claims – 700,000 motor portal claims were made in first 13 months (95% of all RTA claims). CRU statistics show an increase in motor claims of 17% for 2010/2011. Will EL/PL follow suit if the portal is extended?
- Potential increased operational costs at outset.
- One off costs plus ongoing costs associated with introducing portal (including those associated with improved technology).
We will continue to work with our clients in ensuring that their businesses (and ours) are responsive to the changes that are likely to come.
Referral fees: a symptom of “a rotten suing culture”
As recommended by Jackson LJ some 18 months ago, the Government appears to be putting its mind to banning referral fees. Justice Minister, Ken Clarke, has told the Commons that he and junior minister Jonathan Djanogly will consider a ban.
We have repeated the call for a ban of referral fees in our response and urge the Government to move forward with this. Given the profile referral fees have been given by the interventions of Jack Straw MP, who has described them as “a racket” and a “dirty little secret”, we suspect that this “priority issue” is now firmly embedded on the political agenda.
AXA has added to the debate, announcing last week that it will no longer accept referral fees from personal injury lawyers. Group Chief Executive, Paul Evans stated “I believe this move will be a positive first step in making the system more equitable and, ultimately, benefit customers through more affordable motor premiums”.
On 21 June 2011, the Legal Aid, Sentencing and Punishment of Offenders Bill (the “Justice Bill”) was introduced to the Commons. A second reading has already taken place and it appears that the Government’s aim is for the Bill to be finalised in spring 2012 and brought into force in autumn 2012.
As anticipated, few concessions were made on legal aid cuts and the Government confirmed its support of the Jackson recommendations, proposing the abolition of the recoverability of CFA success fees and ATE insurance premiums (with the exception of insurance premiums for obtaining expert evidence in clinical negligence cases).
However, there are missing elements of the Jackson package, namely:
- 10% increase in general damages.
- Implementation of qualified one way costs shifting.
- Changes to the test of proportionality in costs assessments.
There is some uncertainty as to the extent to which these could be introduced by judicial dictat and changes to procedural rules.
Uncertainly also attaches itself to other key aspects. For example:
- Recoverability - it is unclear when and how the removal of the recoverability of success fees and insurance premiums will be achieved. Will there be a “guillotine date” or will the CPR provide for a cut-off for agreements made after a certain date? Will there be any provision for retrospective arrangements and/or a transition period? Looking at the wording in the proposed enabling legislation, we suspect there will be a guillotine date, which will prevent recovery of success fees, even if an agreement was made before the provisions were enacted. If this is the case, it will be relevant to insurers when assessing the impact of the reforms and timescale of the effects.
- Part 36 “bonus” to equalise incentives – the implication is that the award will apply to Part 36 offers made in respect of liability as well as quantum. However, there is the potential for uncertainty about the extent of the courts’ discretion in making an award of an additional sum (particularly in monetary claims). Similarly, satisfaction of “prescribed conditions” is envisaged as a factor for making an award (in both monetary and non-monetary claims) but those conditions themselves are currently couched in discretionary terms. The risk exists that defendants will be concerned about the additional penalties of proceeding to trial, which suggests an increase in settled claims but at a higher value than at present.
It remains to be seen how the missing elements and uncertainties will be addressed. The Government should bear in mind that any ambiguity could pave the way for a plethora of cases proceeding through the courts seeking clarification.
We are taking steps to develop our thought leadership campaign as a means of continuing to influence policy and shift the policy debate. It is our intention to continue to develop our public affairs contact programme in order to maintain ongoing dialogue with MoJ officials.
As with any legislation, there remains a significant distance to cover before a working system is in place. Despite the Government’s determination to push through these reforms, it must take proper consideration of the detail surrounding the changes. We look forward to continuing to working with our clients and providing information and support as this journey unfolds.