Reform of the personal injury claims process
This guide is based on the law of England and Wales.
It was last updated on 19th September 2008.
When, in April 2007, the Government announced a wholesale review
of the way personal injury claims are handled by the court,
the insurance industry hoped for radical change.
In particular, it wanted the Government
to address problems of cost and delay in a
system where the amount of compensation awarded is often
significantly lower than the claimant's recoverable
costs of bringing the claim.
Launching the consultation exercise in 2007, the then Lord
Chancellor, Lord Falconer, spoke of "reform which initiates a
culture change…People will see justice being delivered in a timely,
proportionate and cost-efficient way".
The paper asked for views on a new, streamlined process for all
personal injury claims (other than clinical negligence) worth less
than £25,000.
Early notification, early admission of liability, fixed time
periods and, importantly, fixed recoverable costs would reduce
delays, cut down on unnecessary work and avoid the "frontloading"
of claimant costs in the early stages of a claim.
There were also proposals for amending the case track limits,
which determine how cases are processed by the court and depend on
the amount and complexity of the claim.
The small claims track limit (for claims handled with minimal
legal involvement) would remain at £1000 for personal injury claims
and £5000 for all other cases. But the upper limit for "fast track"
claims (cases needing some legal and expert involvement but
unlikely to last over one day at trial) would be raised from
£15,000 to £25,000.
Cases above that level, or of particular complexity, would continue
to be assigned to the "multi-track".
The modified proposals
The consultation ended in July 2007. One year later, the
Ministry of Justice (MoJ) published a summary of responses and
outlined a modified set of reforms.
It is now proposed that the streamlined process will only apply
to road traffic accident personal injury claims worth between £1000
and £10,000. Motor claims over £10,000, clinical negligence,
disease, employers' liability and public liability claims will all
be outside its scope.
The increase in the fact track limit to £25,000 remains,
however. The other case track limits will stay at current
levels.
The MoJ says road traffic accident cases account for about
70-75% of personal injury claims and that they lend themselves to
the new process because they are usually relatively
straightforward.
Employers' liability and public liability claims, however, are
more complex. The paper states: "EL cases, in particular, involve a
different dynamic in terms of the economic and power relationship
that exists between an injured employee making a personal injury
claim and her employer".
But many insurers are disappointed that the initial proposals
have been watered down. Stephen Haddrill, the Association of
British Insurer's Director General, commented:
“Many claimants will remain stuck in a slow, complex and
expensive system, that denies them speedy compensation and
care.
"Even the motor reforms do not go far enough, and will only have
a small impact on the 10% of motor insurance premiums that are
swallowed up in legal costs. And the exclusion of workplace-related
claims, which take on average three years to settle, is illogical
and bizarre. Trade union pressure must not be allowed to block
change.”
The streamlined process
One of the main criticisms of the new process concerns the
strict time limit imposed on defendant insurers to admit
liability.
The claimant's solicitor has five working days from obtaining
"all the required information to complete the claim notification
form" to email it to the defendant/insurer. The MoJ has yet to
decide what this entails and the wording has been criticised for
its ambiguity.
The insurer then has 15 working days to respond with a binding
decision on liability. The paper does not specify when time begins
to run, but the MoJ has decided there should be no leeway on
this 15-day limit.
To avoid any delay between the defendant receiving the form and
passing it to his insurers, it is suggested that each insurer could
have a central email address (or central post box) specifically for
personal injury claims.
Many respondents argued that it was unfair to require insurers
to reach a binding decision at such an early stage, before any
medical report has been prepared. The MoJ, however, says an
admission of liability is only an admission of a breach of the
defendant's duty of care. Once it has seen the medical report, the
insurer can still question whether the accident caused the injuries
alleged.
If the insurer admits liability, the claimant's solicitor has 15
working days to provide the insurer with a "settlement pack",
including a medical report, a schedule of special damages and an
offer to settle. The process will allow for the provision of
additional reports where necessary.
The insurer then has 15 working days to accept the offer, or
reject it by making a counter-offer. If a counter-offer is made,
the parties have a further 20 days for consideration and
negotiation.
If the parties cannot settle the amount of damages, or if
the time limits are not met, either party can make a final offer
and apply to the court for a hearing on quantum, when the matter
can be decided on paper if both sides agree.
Each stage of the new process will attract fixed recoverable
costs, at levels to be decided by the Advisory Committee on Civil
Costs and kept under regular review.
The Government has rejected its original proposal to prevent
claimants from recovering the cost of their After the Event
insurance premium from the defendant where the defendant admitted
liability or the claim was worth less than £2,500. The ATE
position, therefore, will remain unchanged.
Coming out of the process
If the insurer fails to respond in time, denies liability, or
admits liability but alleges contributory negligence, the claim
will be taken out of the streamlined process. The same applies if,
having reviewed the medical report, the insurer wants to raise
issues of causation.
Fixed recoverable costs will cease to apply as soon as the claim
leaves the new process. The MoJ is considering whether, in cases
where an issue can be resolved, the case should be able to rejoin
the streamlined system.
Next steps
The Civil Procedure Rule Committee will consider the draft
rules, practice directions and pre action protocols needed to
implement the new process.
No timetable has been announced, but unofficial sources have
indicated the Government would like the new rules to be in
place by October 2009.
Contact: Chris Fitton (chris.fitton@pinsentmasons.com
/ 0121 335 2934)
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