Moj Issues Brief

LIFE IN THE FAST LANE? THE ONGOING REFORM OF THE PERSONAL INJURY PROCESS QBE ISSUES BRIEF JULY 2008

LIFE IN THE FAST LANE? THE ONGOING REFORM OF THE PERSONAL INJURY PROCESS BACKGROUND In April 2007 the Ministry of Justice (MoJ) published a consultation paper called “Case track limits and the claims process for personal injury claims”. The paper put forward proposals that were explicitly aimed at achieving a number of highly laudable aims: timely, proportionate and cost effective claims handling; a simplified procedure that avoids the duplication of work between the parties involved; early claim notification and, where appropriate, admissions of liability; and the institution of a fixed recoverable costs regime with strict limitations upon the application of After The Event (ATE) insurance. The paper invited responses from all interested parties and QBE, along with the other major insurers in this market, defendant and claimant solicitors, trade unions, claims management companies and many others, submitted substantial comment upon all of the proposals in July 2007. In all the MoJ received responses from 271 organisations or individuals. Since that time we have been waiting to see what account the MoJ would take of those submissions and the answer was revealed by the release last week of the Ministry’s official Response.

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• Notification – Claims will be notified direct to insurers using a standardised form (yet to be developed) that will supply a minimum amount of information, yet sufficient to allow the defendant to investigate the claim. Following instruction by his client, the claimant’s solicitor will be entitled to conduct only such investigation as is necessary to allow him to complete the notification form. The solicitor will have as long as they require to complete those investigations but must submit the form within 5 days of having done so.

THE REFORMS Hopes of an extension of the non-costs bearing Small Claims Track to claims worth more than £1,000 have been dashed. The extent of the reform of case track limits is to raise the upper limit of the Fast Track from £15,000 to £25,000. However, the reformed claims process will not apply to all personal injury claims within the new Fast Track boundaries. The reformed process will apply only to Road Traffic Accident personal injury claims with a value of £10,000 or less. It will therefore not apply to any disease, employers’ liability, public liability or clinical negligence claims for which the claims process and the attendant costs regime will remain as it is at present. Because of the further consultation that needs to be take place before the Response can be transformed into a working process there is as yet no proposed implementation date for the reforms and their precise form has yet to be determined but as they stand the major alterations to current practice are as follows:

• Liability – Decisions on liability are to be provided by compensators to claimants within 15 working days of notification. There will be no grounds for an extension of time to provide a liability decision. The liability decision will be binding, although it will be taken to be subject to arguments of medical causation as the medical evidence will not have been obtained at this stage. Arguments of contributory negligence will not be allowed within the new process and a full and final decision must be made at this stage. Should the defendant wish to argue contributory negligence the claim will fall out of the new procedure at this point. By implication the same result will befall claims where a denial of liability is made. • Settlement – The claimant will supply to the compensator a Settlement Pack containing medical evidence and a schedule of special damages within 15 working days of the claimant agreeing the medical evidence. At the same time the claimant must put forward a settlement offer.

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• Settlement Response – The compensator will have 15 working days within which to respond to the claimant’s offer or make a counteroffer of their own. • Causation – If, once the Settlement Pack has been received, the defendant wishes to raise an argument over Causation the claim will fall out of the new procedure at this point. Where a medical report identifies that more time is needed before a full prognosis can be reached the claimant and defendant should agree to stay the claim for this period of time and no substantial work should be carried out by the claimant’s representative during this time. • Negotiation – After the Settlement Response is made there follows a 20 working day window for consideration and negotiation between the parties.

• Disputes – Where quantum cannot be agreed there is the provision for a decision by a district judge, based either upon papers alone (should both parties consent) or after a hearing, at which evidence should primarily be restricted to that already present in the Settlement Pack. • Costs – The Response says only that a system of fixed recoverable costs will apply at each stage of the procedure. This should represent an improvement in the certainty and predictability of the costs process. However, no indication is provided of what those fixed costs will be. After The Event insurance premiums will remain recoverable by the claimant, as they are at present. The Government has handed the task of determining the detail of the fixed costs regime over to the Advisory Committee on Civil Costs (ACCC).

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WHAT ARE THE IMPLICATIONS FOR DEFENDANTS AND THEIR INSURERS? Although the fine detail of the new process may yet be awaited the feature of the reforms that most stands out is their emphasis on speed: speed of communication, speed of decision making, speed of settlement and resolution. All this within an environment that, we anticipate, will reward those capable of processing the claims they face (or bring) in the shortest time while penalising those who fall behind the pace set by very tight timescales. It is therefore vital that clear lines of communication are maintained between insurers, brokers, loss adjusters and insureds. There is no room in the new process for delay and the failure to make a decision could incur harsh penalties.

• Accident recording – insurers will have a much better chance of complying with the liability deadlines if, when they come to investigate a newly notified claim, they find that their policyholder has maintained a comprehensively and accurately completed accident history. • Accident reporting – to get ahead of the game policyholders should notify their insurer of all accidents resulting in personal injury that may result in a claim. That way insurers can put in train liability enquiries before a claim is even received if that appears appropriate. QBE operates a “first response” centre that can take accident reports over the telephone. • Claim notification – the Response encourages notification direct to defendant insurers, via a centralised mail, or electronic mail, address. However, should a policyholder receive notification of a claim time is of the essence and the notification must be communicated to the insurer and/or nominated loss adjuster immediately. • Claim investigation – With only 15 working days within which to provide a liability decision it is vital that insurers or their investigating adjuster have available to them at the time of the investigation all documentation relevant to liability. In practical terms this is likely to be limited to what the policyholder can provide as there will not be the time

to gather more. Also important are the necessary contact details e.g. driver’s mobile phone number, to enable the adjuster to conduct his enquiries as completely as possible. This highlights the importance of the recording and reporting stages referred to above. • Liability decision making – With time of the essence the insurer must have access to a person with the Insured’s organisation, or Fleet Management company, who can discuss the claim with them and is authorised to make a decision on liability immediately. Good channels of communication between the parties are essential. • Settlement Negotiations – The one pause allowed a defendant in the new process is while the claimant obtains his medical evidence, which process may take several weeks or even months. At the conclusion of this period the claimant will be putting forward a settlement offer and the defendant insurer needs to be in a position to assess that offer and respond appropriately within a short period. In most RTAs the claimant will be unknown to the policyholder but where circumstances permit (for example if the claimant is an employee of the policyholder, injured whilst a passenger in a works’ vehicle) it will greatly assist the insurer if their policyholder can keep them appraised of the claimant’s employment position, ongoing symptoms or any continuing disability.

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COMMENTARY A number of areas of potential reform were raised in the Consultation Paper but have not made it as far as the Government’s Response. Some of these issues are said to remain open for further consideration while others have been abandoned for good. For example: the development of an assessment tool for general damages was considered “inappropriate” at this stage but the standardisation of special damages and the setting of regional hourly care rates are to be “taken forward in discussions with stakeholders”. There is no requirement, or even recommendation, to make use of Alternative Dispute Resolution to settle claims within the new process and a decision as to what should happen to claims where a denial of liability is put forward has been explicitly postponed for consideration “at a later stage”.

The Response contains no information on what, if any, the penalties should be for a party that fails to comply with the new procedure. Just as there is no indication within the Response of how the fixed costs within the new process will be structured there is also no information concerning the costs environment that will apply to claims that leave the process at any point. With no indication to the contrary the implication must be that the claim will simply fall out of the new process and into the existing system as governed by the Civil Procedure Rules. However, this is no doubt something upon which the ACCC can be expected to report in due course. RTA claims account for between 70% and 75% of all personal injury claims and the vast majority of those will be worth less than £10,000 so the

potential impact of the new process could be significant. However, given the scope of the issues addressed by the Consultation, the large number of respondents to that paper and the length of time that the Ministry has taken to prepare its response it is somewhat disappointing that the statement issued by the Parliamentary Under-Secretary of State, Bridget Prentice, should prove to be so incomplete in terms of its coverage and relatively unformed in terms of its proposals. The Response falls far short of the wholesale reform that had been anticipated, and hoped for, by many and while it represents a small step towards the avowed aims of the Consultation paper a lot more work remains to be done if a simpler, more cost effective and more efficient personal injury claims process is to be established in its image.

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WHAT HAPPENS NEXT? The next step towards the realisation of the new personal injury claims process is for the Civil Procedure Rules Committee to consider draft rules, practice directions and pre-action protocols to allow for its implementation. In concert with the ACCC, and with the continued involvement of stakeholders, a framework for the delivery of the new process will be created. It is not known how long this stage of the process is likely to take, although it is unlikely to be completed before April 2009 at the earliest. The Government has stated that it intends to review the operation of the new claims process with a view to considering how it might be developed. This is likely to mean that should the process prove a workable success an extension to other arenas of personal injury claims is a distinct possibility. QBE will bring you news of the progress towards a new claim process as and when it happens.

Download the Case track limits and the claims process for personal injury claims consultation at http://www.justice.gov.uk/publications/cp0807.htm

ABOUT THE AUTHOR Name: Jonathan Coatman LLB (Hons) Job title & company: Claims Controller Biography: Jonathan is a liability specialist within the QBE Strategic Claims Team based in London. His role primarily involves the management of claims with significant financial value in the areas of employers' liability, public liability and professional indemnity. Jonathan also provides technical input to the risk management, underwriting and actuarial functions within QBE and on behalf of external clients through briefing notes, articles and consultancy.

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Dear reader Thank you for taking the trouble to read this publication. QBE Risk Management believe that best practice organisations are those where senior individuals facilitate and engage in the processes of sensible risk management. We make this document available to all interest parties in an effort to share knowledge and promote good practise. Our services are available only to clients insured by QBE in Europe. Our insurance products are sold through insurance brokers. We cannot offer advisory services to anyone else, however we would be delighted to hear if you have found this document useful or believe there are risk management issues that do not receive appropriate attention in the media. Regards QBE Risk Management Team email: [email protected] www.QBEeurope.com/RM

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