The draft rules are now available but the MoJ has put back the implementation date to 30 April 2010. Most insurers will now be familiar with the outline of the new process but we consider a number of hot topics.
- Insurers will make savings on costs where damages are settled at above around £2,000 provided that they are able to settle claims within the timescales laid down within Stage 2. A commercial calculation will need to be carried out to weigh up the costs of allowing a specific claim proceed to stage 3 if the offer if not accepted.
- Is the IDSL Portal compulsory? Electronic exchange under the process must be secure and the portal created by IDSL is the only means on the market at present by which this can be achieved. So, by default, use is compulsory at least in the short term. A fee per claim will be payable when the claim is accepted under the process (likely to be about £1). There will be two interface methods – either by entering data directly into the portal or by application to application links from in-house case management systems.
- The timescale for admitting liability is tight. A decision must be made within 15 days of the claimant sending the claim notification form (CNF) electronically. Insurers will need to have a system in place for checking the portal for new CNFs as it appears they will not be notified separately of these.
- Small claims, which do not include at least £1,000 for pain, suffering and loss of amenity, will be excluded. However, the rules provide that, if the claimant reasonably believes that the claim is valued above £1,000 he is entitled to Stage 1 and, if relevant, Stage 2 costs. This is likely to lead to disputes over whether such a belief was reasonable or whether costs should be limited to those available in the small claims track.
- When the rules refer to a time period for a payment, this is the time by which the claimant must receive a cheque or transfer of funds. Any failure to pay will give the claimant the right to exit the process. Insurers will have to ensure that their internal processes are sufficiently tight to ensure compliance.
- Does a solicitor have to act on behalf of the insurer at stage 3? There has been much debate on this point with differing views. Concerns have been expressed that stage 3 involves "reserved legal activities" and that accordingly lawyers must be involved. However, the proposed rules make provision certainly for paper hearings to be handled by the insurer (or defendant) themselves. The rules state that the insurer may complete the acknowledgement of service and this must be accompanied with any evidence to be relied upon. This is the defendant’s case that will be considered by the judge and will need to have a statement of truth. If the insurer/defendant has confidence in the claims handlers’ drafting skills then, subject to any challenges to this approach, this stage can be completed with no involvement by lawyers. What about an oral hearing, can a barrister be instructed direct? The Bar Standards Council states that the insurer should have a licence, but obtaining one should not be an issue. In the short term it may prove that, until the process has been tried and tested, the comfort of a lawyer’s involvement will be sought. However, with time and experience the involvement of lawyers may decline.
- Where disputes arise between the parties arising out of the operation of the process, they will not be determined until a subsequent costs hearing in the conventional litigation. This is likely to lead to some delay in resolving any recurring issues, subject to these costs hearings being fast tracked.
The above is only a selection of key issues raised by the new process. As can be seen, we are about to enter a whole new regime for dealing with low value RTA claims and some of the difficulties to be encountered will only become apparent once the system is in operation. At this stage insurers who wish to take advantage of the costs savings to be achieved should ensure that they are signed up to the portal, familiar with the three stage process and ready to respond within the relevant timeframes.