UK: The Civil Justice Revolution: Is This the Trigger for a Hard Market?

Last Updated: 15 February 1999
Editorial

The wholesale shake-up of the way the Courts dispense Civil Justice has been described as the most radical change for over 100 years.

More fundamentally it profoundly affects litigant's rights to have their disputes resolved by due forensic process.

The reforms will affect not only lawyers. All underwriters, claims managers and brokers need to take stock of how the sweeping changes to the Civil Justice system will affect them too.

It is possible that the effect of the reforms on the economic ground rules of the Insurance Industry may be the catalyst that finally brings about a hardening of rates!

Woolf at the Door

Why will it affect Insurers?

  • Most cases will be resolved significantly earlier
  • The period for investment of underwriters' funds will be substantially reduced
  • Case handling will be "fast and furious" resulting in early payments-in and settlements.
  • Claimants' offers to settle ("Part 36 Offers") will increase the value of claims with exposure to:

- punitive interest on the award (up to 10% above base rate)

- indemnity costs

- claimants' solicitors' success fee on conditional fee arrangements

- claimants' premium for after the event insurance

- further punitive interest on all of the above

  • The enforced use of protocols to drive early settlements will require much earlier instruction of solicitors; decisions on tactics will have to be made at a stage that would now be regarded as premature: the wrong response or no response at all could prejudice the right to defend and will certainly have cost implications.
  • Claimants will have much wider access to the Insured's documents (possibly including policy details) as a result of the pressure for disclosure before litigation.
  • It will be much easier for claimants to get Summary Judgments: the Courts can even take such steps on their own.
  • Most of the work on a case will be done in the early stages - hence "front end loading"
  • The new rules on interlocutory costs and about court appointment of experts and assessors will require ready access to funds at short notice.
  • Policy coverage will be radically affected. Protocols and Claimants' Offers will put new pressure on wordings and create new tensions with the Insured over when and if to settle
  • The Insured will have to be very closely involved from the start - someone is going to have to sign the Statement of Truth (a term of art if ever there was one!)
  • The concept of the Claimant's Offer tilts the scales so much against the Defendant that it is bound to encourage claimants with weak cases to "have a go"

What Next?

The new reforms provide new opportunities for those who are prepared, BUT:

  • Underwriters must re-assess all their cash -flow implications
  • Policy wordings must be reviewed
  • For all in the Insurance Industry, the claim handling regime will have to change. More claims handlers will be required to adopt the pro-active and "hands on" stance required by the Reforms (eg attending case conferences and ADR, response to claimants' offers, response to expert selection)
  • Everything will have to be "front end loaded". Once a claim has been intimated, even if no litigation is imminent, there will have to be a full assessment of potential liability and quantum
  • The capacity to give immediate instructions, or wide delegated authority, will become a necessity.
  • Merely noting a claim and hoping that it will go away is not an option. Claimants' solicitors will have been working hard to prepare the case; ambushes will be laid; up-front Claimants' Offers will be flying in.

Woolf - In Brief

Lord Woolf's reforms, which come into force on 26 April, are intended to speed up, simplify and reduce the costs of the Civil Justice system in the UK.

Key changes include:

  • variable track jurisdictions
  • judicial case management
  • the concept of "proportionality" in all steps taken in court
  • Claimant's Offers backed up by draconian costs
  • high emphasis on pre-action correspondence and disclosure

For further information please contact David Simon, e-mail: Click Contact Link , 2 Park Lane, Leeds, LS3 1ES, UK, Tel: + 44 113 284 7000

This article was first published in the February 1999 Hammond Suddards Insurance Newsletter

The information and opinions contained in this article are provided by Hammond Suddards. They should not be applied to any particular set of facts without appropriate legal or other professional advice.

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