UK: Claims Process Reform – A Step In The Right Direction?

Last Updated: 21 November 2007
Article by Alistair Kinley and Tim Smith

In late April 2007, the government (Ministry of Justice) issued a consultation paper entitled Case Track Limits And The Claims Process For Personal Injury Claims which set out ambitious proposals for reforming how personal injury claims are handled by compensators and lawyers alike.

The package of reforms marks a further step towards the concerted aim of preventing a ‘compensation culture’ from taking root in the UK. It is not overstatement to say that the proposals could represent a once in a generation opportunity to shape a new approach to claims resolution and costs issues. The overall aims of the proposals appear to be universally supported. These are to achieve faster resolution of claims and to save costs and unnecessary duplication of work, whilst preserving access to justice and fair compensation for worthwhile claims. It is unlikely that there will be complete agreement among stakeholders on the detailed reforms that will be introduced to achieve this.

The new claims process

The focus of the proposals is on low to moderate value personal injury claims. Legal and other costs in these claims are widely accepted as being disproportionate, and the paper states that ‘the current system cannot continue’. Defendants and insurers alike have welcomed this – often with these low value claims up to 50% (or more) of the total payout is said to be for claimant solicitors’ fees rather than for compensation for the injured person.

The consultation paper issued by the Ministry of Justice (MoJ) sets out a new way of dealing with these claims, in order to achieve quicker settlements – for genuine claimants – at a more appropriate cost. The process set out in the consultation paper is briefly outlined below.

  • Standardised notification forms for presenting claims.
  • Tight timetables for presenting claims – within 5 daysof the claimant seeing a solicitor.
  • Quick decisions on liability – 15 days (motor claims) or 30 days (non–motor claims) for the defendant to decide, during which the solicitor is not to generate ‘unnecessary work’.
  • Introduction of a ‘settlement pack’, based on standardised medical evidence and standardised
  • items of claim.
  • Obliging the claimant to make his offer first, when sending the settlement pack to the defendant.
  • New shorter timetables for counter offers (10 days) and negotiations (20 days), to avoid cases dragging out.
  • A new process for district judges quickly to determine compensation when liability is admitted.
  • Adoption of fixed legal costs throughout the new process.
  • The extra success fees in ‘no win, no fee’ cases are not recoverable until later stages.
  • Retention of the present small claims track limit of £1,000.
  • Increased fast track limit of £25,000 (from £15,000).

BLM organised a seminar and workshop for around 40 clients in London in June to discuss the proposals in the consultation paper in detail. The formal consultation period closed on 13 July.

The timetables for admitting liability will – if they remain largely unchanged as is expected – mean that defendants, insurers and third party claims administrators will need to re-design claims notification and communication protocols and service level agreements. It is beyond doubt that there will be initial investment and management costs associated with such changes. That will very probably prove to be a justified and necessary expense, given that operating within the new periods for admission is the key to controlling overall costs within the process set out in the MoJ paper.

The balance of opinion is that the combined savings on claims lifecycles and transactional costs is likely to outweigh any investment needed to meet the new periods.

So perhaps the MoJ has met head on the industry’s challenge to reform the claims process by saying, albeit not quite in these terms: Here’s the new streamlined process you wanted, but now you need to invest in it a little to achieve the savings you sought.

Approaches to costs

The consultation paper is either silent or lacking in detail on the costs provisions that will underpin the new approach to these claims. What it does clearly propose, however, is a staged approach to fixed recoverable costs in all mainstream personal injury cases, which is a departure from the current scheme under CPR Part 45, which is limited to road traffic accident claims only and the costs are not staged. In fact, ATE premiums have to date been the only staged element recoverable between the parties, following Rogers v Merthyr Tydfil.

The necessary data, research and methodology for setting these new staged fixed recoverable costs is not covered in the paper – it does not say how the figures will be reached nor what they will be in practice. These aspects are crucial, for two clear reasons:

  • At policy level, the figures will need to be set at a level appropriate to drive efficient processing across a broad portfolio of injury claims whilst also achieving fairness and preserving access to justice in individual cases.
  • At an economic level, the figures will quite simply dictate what sums claimant firms will recover from the process, so it is not surprising that this will be a controversial area.

Given the sensitivities associated with costs, the data and analysis required to set the new figures must be scrupulously independent and seen to be so. One practical approach here might be to re-examine the case for establishing a separate body to oversee this activity. The

Civil Justice Council first proposed this back in 2005, recommending that such a body should:

... establish and renew annually the recoverable fixed fees in the fast track and guidelines hourly rates between the parties in the multi-track.

Recently, this approach seems to have found favour with the MoJ. The Minister (Bridget Prentice MP) issued the following statement in early September 2007:

In response to a recommendation from the Civil Justice Council, I am establishing an ad hoc Advisory Committee on Civil Costs to provide independent advice on costs in civil claims. Advice provided will be based on evidence and economic analysis, and the Committee will

be chaired by Professor Stephen Nickell, with whom I look forward to working. I will make a further announcement on the membership of the Committee and its programme of work in due course.

A broadly constituted advisory committee should, if empowered with appropriate terms of reference and adequate funding for necessary economic research, indeed assist in this sensitive and politically charged area.

From the indications in the Minister’s statement, it appears that government is alive to the need for sound independent and transparent advice in setting up the new fixed cost regimes. Whilst this is a positive development, in order to maintain the momentum for reform the advisory committee should begin its work without delay.

Conclusion

The likelihood is that by early or mid-autumn civil servants will have analysed the various consultation responses and advised ministers on the way forward. A synthesis of responses received would normally be published at this stage as well.

If this timetable is kept, then as early as April 2008 we should expect to see regulations and new procedural rules implementing some of the changes that have been proposed.

The consultation paper is generally silent on whether reform is likely to be introduced all at once in a ‘big bang’, or alternatively in a more phased manner. Given the sheer breadth of the proposals it would appear that some form of phasing is almost inevitable. It is not clear at present what the first new regulations expected next spring might actually cover.

Quite what will be the first step in introducing this important overall package of process and costs reforms will be remains a fertile area for debate and speculation. As with the best cliff hangers, the interim conclusion is ‘to be continued …’

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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