‘Pre-med’ settlements have long been a weapon of choice in road traffic accident claims. However, the Government is seeking to discourage ‘pre-med’ offers in such claims. Given the increasing use of ‘pre-med’ offers in casualty claims (employers’, public and product liability), John McKie analyses why they are used, the possible benefits and dangers of making such offers and the procedural changes on the horizon.
The good: benefits
Pre-portal, claimant costs were often the significant and disproportionate liability in claims spend. As such, achieving an early settlement, without recourse to an ‘independent’ medical expert, meant claimant firms were not given the opportunity to generate excessive (and sometimes unnecessary) costs. This helped reduce overall indemnity spend and the cost of claims. Avoiding the formal medico-legal examination route not only saves on costs (both solicitor costs and disbursements), but it also helps reduce claim lifecycles and alleviates the risk of:
- special damages escalating (spurious special damages are often not in the claimant’s thought process at the early stages of a claim);
- CRU benefits accruing;
- complex causation arguments developing; and
- proceedings being commenced to resolve quantum related disputes.
These benefits are still true on Ministry of Justice (MOJ) portal claims. Lifecycles can still be contained, disbursements avoided and stage three quantum disputes bypassed.
So, with reduced average cost of claim, reduced lifecycles and litigation containment, surely ‘pre-med’ offers are a useful tool for insurers or insured’s with an element of self-retention in their claims programmes.
The bad: dangers
‘Pre-med’ offers are not always the answer and claims should be carefully selected for the use of this tactic. Blanket offers across a number of risk/admitted claims could lead to (amongst other things):
- perception change, particularly in the workplace, and more claims being made which offsets potential savings (‘I got a pay-out within a few weeks of bringing my claim and didn’t even have to see a doctor…’);
- linked to perception change, a possible rise in staged/fraudulent claims; and
- more recently, the risk of later claims revival (due to capacity arguments).
Consideration should be given to the type of claims to make ‘pre-med’ offers on. For example, some considerations may include:
- whether there is a contemporaneous record of the incident;
- does liability clearly attach? – vicarious, strict (pre-Enterprise & Regulatory Reform Act), slipping claims with no documented system of inspection and/or witness evidence;
- injury types; and
- serial claimant/fraud indicators.
It is important to be strategic and define parameters in order to maximise the benefits, while also managing the dangers/risks of ‘pre-med’ offers. But, will ‘pre-meds’ be around forever?
The ugly: future uncertainty
At the end of 2013, the MOJ confirmed that they are considering putting an end to the ability to use ‘pre-med’ offers, with a focus on RTA claims. The latest report from the Transport Select Committee states that ‘… (they are in) no doubt that fraudulent and exaggerated claims have been encouraged by the insurers’ practice of paying out for (whiplash) claims without requiring a medical examination.’
The MOJ have since published The Civil Procedure (Amendment No. 6) Rules 2014 which stop short of formally banning ‘premed’ offers. Instead, they restrict the costs consequences of any offer made without medical evidence so that there will be no adverse costs consequences unless, and until, a medical report is served. This amendment is restricted to soft tissue injury claims. However there is a risk that this could in time be extended to a complete ban, or to other types of personal injury claims. It is very much a case of ‘watch this space’ at present – but, if ‘pre-meds’ are abolished across the board, there will undoubtedly be an impact felt in relation to claim costs, lifecycles and litigation… the extent of which will depend on the strategy previously set and the frequency at which such offers have been used.