CASE TRACK LIMITS AND THE CLAIMS PROCESS FOR PERSONAL INJURY CLAIMS
A response by Bond Pearce LLP
This submission is made in response to the Ministry of Justice's consultation paper on the case track limits and the claims process for personal injury claims, issued on 20 April 2007.
Bond Pearce LLP
Bond Pearce LLP is a leading commercial law firm, with a strong regional presence in the South of England. Our principal offices are in Bristol, Exeter, Plymouth, Southampton and London and we also have offices in Cardiff, Edinburgh and Leeds.
Our specialist expertise spans a wide spectrum: including banking, finance, retail, leisure and transport. We represent national and international clients across a broad range services, including corporate, commercial law, intellectual property, e-commerce, technology, human resources, and property. We have a strong insurance sector and a long established personal injury practice.
We believe that our experience in handling personal injury claims on behalf of both claimants and defendant insurers affords us an unusually clear perspective on the issues raised by this Consultation Paper.
The need for change
It is incontrovertible that the cost of small claims is too high. We agree with The Lord Chancellor's sentiment, expressed in his recent speech to APIL
...'That something needs to be done in this area is not in doubt'.
The costs issue has been with us for many years. One need only look back 12 years to Lord Woolf's Interim report:
'The problem of cost is the most serious problem besetting our litigation system. It is directly related to access to justice: if litigation is too expensive claimants will not proceed or will use alternative means of resolving disputes'
Arguably, legal costs remain the single most important unresolved objective from the Woolf reforms.
Accordingly, we completely identify with the Government's three core aims of:
- Providing early notification of claims
- Promoting early admissions and settlements
- Removing duplication of work
A change in culture
The Lord Chancellor has called for a reform that initiates a culture change . Better and earlier co-operation between claimant and defendant representatives are needed.
It is easy to understand the concerns of the insurance industry. They appear to be facing increasing claims numbers and trenchantly high legal costs. They have also borne the cost of a number of recent government initiatives, such as the recovery of success fees, the introduction of a court power to impose periodical payments for future loss and the recently extended ambit of NHS costs recovery scheme. Insurers are naturally concerned to limit their exposure where possible. One area where this can be achieved is in making the claims process more efficient, an aim shared by many self insuring institutions that routinely compensate personal injury claims.
Early notification of claims provides an obvious solution. It is said that some claimant practitioners delay notifying a potential defendant of the claim until a relatively advanced stage of preparation. Where the claim is clearly merited and likely to be admitted, much unnecessary work can be saved by means of prompt notification and a short moratorium to enable the defendant to consider the claim. It is wrong that insurers should be ambushed at a relatively late stage of a claim and then be obliged to pay the full cost of preparatory and investigative work made redundant by an admission of liability; one that would have been readily offered at a much earlier stage, had such an opportunity been afforded them.
Equally, it is essential that all parties involved in the process respond promptly to claims and in a proactive and constructive manner. Delays in responding to correspondence and a reluctance to commit to admissions, when these are clearly justified, are the principle reasons why many claims endure for as long as they do and costs accrue to such high and disproportionate levels. Significant costs savings can be made if liability or other discrete issues within a claim are conceded promptly.
There has undoubtedly been considerable friction between different claimant solicitors and defendant insurers in this area of practice over the past few years. The legal press and journals are replete with allegations and counter allegations that we don't intend to repeat here. Suffice it to say that all these issues fall away before our shared responsibility for processing the claims of injured claimants in a timely, fair and efficient manner. We believe that the vast majority of claimant solicitors and insurers share a common interest in this goal. Our general experience is that there is a high level of co-operation and even mutual trust.
We are surprised that mediation is not considered by the consultation paper and believe that this has a significant role to play. We agree that work needs to be undertaken to improve the opportunities for the rehabilitation of injured claimants but suggest that the DWP and NHS be more closely involved in the formulation of a cross-government initiatives to deliver this.
1. 20 April 2007
2. Interim report 1995, chapter 25, paragraph 1
3. Consultation Paper 08/07 paragraph 56
4. The Lord Chancellor's speech of 20 April 2007
Our key proposals
Stage 1: identifying claims that will not be defended
Early notification of the potential claim
- Prompt notification of the claim
- A short moratorium on further investigation and preparation of the claim whilst the opponent considers the claim
- A clear deadline for the response to the claim
- The claim automatically falls out of the streamlined process where:
- Response not made on time
- Liability is denied
- A right to restore the claim to the streamlined process, subsequently by:
- Admitting the claim, and
- Payment of fixed costs within 14 days, based on the amount of work that a solicitor could reasonably have undertaken and claimed under the fixed fee regime during that period. To avoid satellite disputes, the costs penalty should be prescribed and possibly staged to reflect the notional or actual work likely to have been undertaken during this time: the longer the delay in admitting the claim; the greater the defendant's liability for costs.
Stage 2: Claim preparation
Automatic allocation to the streamlined process to be confined to claims best suited to a streamlined procedure. Certain categories of claim should either be specifically excluded or all categories of claim should be subjected to a more detailed allocation guidance than is currently provided for the current fast track procedure under CPR r 26.8.
Stage 3: Quantum hearings
The streamlined process should only continue for uncomplicated low value claims. The existing provisions within Parts 1, 3, 26, 36 and 44 will apply, perhaps with some additional guidance (see our response to Q9).
Our key reservations
- The timescale for submitting the claim form. We feel strongly that a certain amount of initial preparation is necessary before a claimant solicitor can safely submit his client's claim form. It is vital that the client submit a detailed proof of evidence and that the solicitor should have sufficient time to prepare this and to undertake other professional requirements, including setting up a fee retainer, before submitting the claim form. Furthermore, the claimant's right to decide whether or not to act on the solicitor's advice within the time prescribed by the Limitation Act 1980, should not be compromised. We are confident that these concerns are capable of being met within a streamlined process.
- The timescale for a reply. Past experience indicates that insurers are unable to respond to our detailed letters of claim within the 3 month period prescribed by the pre action protocol. Whilst some can and although many might be able to indicate admissions of liability within an earlier time frame, we consider the 15 / 30 day period is unworkable. If claimant solicitors are expected to police this deadline and to accommodate extensions of time where they are reasonably sought, then the fixed fee regime must be sufficient to fund this necessary work.
- The range of cases affected. We see no reason why the initial stage 1 should not be applied across the board: applying to all personal injury claims with an estimated value under £25,000. However, for reasons that we expand upon in our responses below, we do not consider that the streamlined process from stage 2 onwards, is suitable for every kind of personal injury claim. Possibly it should be restricted to road accident injury claims initially, which we understand amounts to some 70% of all personal injury claims. Alternatively additional guidance should be offered to identify which cases are suited to this process.
- We appreciate that there is necessarily a lack of detail in the scale and levels of the fixed fees, this cannot be provided until the streamlined process has been clarified. However, we think that it is vitally important that time is given for detailed proposals to be debated; they must be seen to be fair by those upon whom they are to be imposed.
- Given our past experience with fixed trial costs, it is vitally important that there be a simple and predictable mechanism that allows the fees to escalate in line with an earnings index that accurately reflects inflation.
- If the majority of relatively risk free claims are taken out of the ATE equation, this will increase the cost of premiums for those claims where liability is denied. This will in turn impact on the time taken to risk assess such claims and to secure appropriate cover. The insurers reporting procedures are likely to become more detailed and the funding process more costly to administer.
- We are concerned that there has been no regulatory impact assessment of the implications of this reform.
Referral fees
Their existence should be acknowledged but not funded within any fixed fee regime. Client capture by intermediaries is a different issue.
Injured victims are a special category of claimant
It is common ground that innocent victims form a special category.
A decade of change
The proposals should not be considered in isolation. Their impact on the personal injury claims arena must be carefully assessed. It is our view that the sustainability of many professional personal injury practices are vulnerable to the effects of further reform.
The past decade, following the publication of Lord Woolf's Access to Justice interim report, has been period of profound change on a breathtaking and unprecedented scale, especially for those practicing in the field of personal injury claims. First came the Civil Procedure Rules 1998 (CPR), this was the remedy to the ills diagnosed within the Access to Justice Report. This radically modernised the civil justice System in England and Wales; one that had survived largely unchanged since the Judicature Acts 1873 and 1875. Along with this came entirely new concepts. The innovations were many and include the high principled overriding objective; proportionality; that precision tool of settlement - the Part 36 offer to settle and ultimately a series of pre action protocols, designed to encourage less partisan and more open handed pre action behaviour. These reforms were largely welcomed by claimant and defendant alike.
Unfortunately the effects of these reforms have been obscured by a succession of developments that have each to some extent influenced the outcome of the reform, by influencing the conduct of the opposing parties in different ways. The most signal of these reforms was the Access to Justice Act 1999 and the ill conceived and poorly drafted Condition Fee Agreement Regulations 2000, now revoked; which unleashed a disastrous and damaging costs war. The way that increasingly exacting standards of unpaid pre contractual BTE inquiries have been imposed, culminating in the Myatt ruling have vexed many practitioners and threatened ruin to many others. A plethora of other initiatives have followed, to list just a few: 44 amendments to the CPR that have detracted from the simplicity and brevity of the original concept, fixed costs in road accident claims, predictable costs in other classes of injury claims, the duty to consider rehabilitation and mediation, the NHS Redress Scheme, the introduction of a new court power to impose periodical payments under the Courts Act 2003, The Compensation Act 2006, the Legal Services Bill. Some of these have been welcome developments; others not.
However the government is certainly not responsible for every ill wind. Our profession only has itself to blame for the legitimisation of referral fees, a phenomenon that is arguably one of the principal banes threatening the independence and financial viability of many legal practices in this field. It was this development, in conjunction with the attraction that success fees offered, that encouraged and fed the new army of intermediaries who are so adept at marketing, as opposed to the provision of legal services. It has been these phenomena, acting in combination with the lay public's new appreciation of the apparent convenience of direct marketing and doorstep client capture practices that has altered the age old solicitor client relationship. Now, a very substantial proportion of new claims, that formerly came to solicitor's practices direct from a limited but reliably inexpensive sources, such as Yellow Page advertisements, passing custom or personal recommendation, are now mostly captured by a variety of means by intermediaries.
The identity of these intermediaries can be claims management companies, before the event insurers or a wide range of consumer and interest groups. Each intermediary charges a substantial proportion of a solicitor's profit costs, often in return for doing little more than assigning the right to represent a client. The moral benefit of this new trade in the patrimony of injured claimants is not always obvious to discern. Its drawbacks are easier to identify. These fees have distorted the claims process in several ways. The most obvious has been to induce some solicitors to 'front load' their claims investigation work beyond that justified by the pre action protocol, (often prior to notifying the defendant of the claim) in order to recoup their investment in the referral fee. Yet there have been some positive effects flowing from the advent of these intermediaries: they advertise extensively, offer timely initial interviews often out of office hours; a service and a convenience that is clearly appreciated by many injured claimants. Viewed from a different perspective, referral fees are in effect a marketing expense. However, such is the dearth of new work from the traditional routes that many solicitor feel compelled to pay the going rate, a rate that appears to have less to do with the cost of advertising and initial claims processing and more to do with what the market can bear. We agree that the fixed fees should not accommodate referral fees.
A consequence of these different and often interacting developments has been to undermine the profitability of many practices that offer a professional personal injury claims service. We have seen a significant number of medium to large sized practices pull out from this area of work entirely. Increasingly, new injury claims are being referred to fewer (larger) practices. In order to secure a return on their investment (in the referral fee) and to fund the disbursements, these businesses employ a much higher ratio of unqualified staff and automate the claims process by the use of case management systems; often never meeting their clients. Many of these technical innovations are beneficial in so far as they reduce costs and maintain standards but it is a question of degree.
We are not resistant change. On the contrary we acknowledge the need to streamline small personal injury claims and to cut out unnecessary duplication of work. What we are concerned to avoid is the prospect of the detailed workings of the reform being formulated in response to this consultation process without any further debate or consultation. We have seen this approach before with the former conditional fee regime and with dire results.
We call for a regulatory impact assessment of the effects of the streamlined process and the Legal Services Bill and how these developments may independently or in combination alter the distribution of litigation risk on claims funded by conditional fee agreements. We refer to our response to Q 18 for a more detailed exposition of our concerns.
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