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New process for low value injury claims arising out of RTAs
9 October 2009
On Tuesday, the Government published its proposals in relation
to the new claims process for low value personal injury claims
arising out of road traffic accidents. To see the Government’s full
paper,
click here.
As the countdown to implementation in April 2010 begins, we look
at the latest draft of the process which leaves many questions yet
to be answered.
Key features
The revised process, which is due to come into effect in April
2010, will apply to Road Traffic Act claims involving an element of
personal injury which are valued between £1,000 and £10,000. This
valuation excludes vehicle damage and hire costs, so that the
process is likely to apply to a broad range of claims.
Whilst the core process is focused on dealing with
straightforward personal injury claims, modifications to the
process are set out which cater for up to four medical reports,
seat belt related contributory negligence and claims involving
children. (Claims involving protected parties will not fall within
the process.)
The process falls into three stages:
- Stage One runs from initial notification to a
decision on liability
- Stage Two deals with the exchange of quantum
evidence and negotiations
- Stage Three permits for referral to the Court
for a determination of quantum either on the papers or at an oral
hearing
We have prepared an outline of the process which you can
view here.
There are a number of circumstances that will bring a claim
outside of the process, most notably, allegations of contributory
negligence, disputes in relation to causation, refusal of interim
payments and failure to comply with deadlines.
Where claims do fall outside the process, fees will generally be
higher and is likely that some claimant solicitors will therefore
seek to remove claims from its ambit. Insurers and other defendants
must be aware of potential pitfalls and must have policies in place
to ensure that that these do not lead to significant levels of
costs leakage.
Costs
The Ministry of Justice (MoJ) announced the bare bones of the
costs provisions some weeks ago. However, at that stage no
information was given in relation to key areas such as Success
Fees, disbursements and Part 36/other penalties for unreasonable
behaviour.
Key fee levels for claimants will be:
| |
Fixed fee
|
Success fee (where CFA) |
| Stage 1 |
£400 |
12.5% |
| Stage 2 |
£800 |
12.5% |
| Stage 3 |
|
|
| - on papers |
£250 |
100% |
| - oral
hearing
|
£500 |
100% |
In addition, where a claimant or his solicitor is London based,
a 12.5% geographical uplift will apply, as under the existing
predictive fees scheme.
Uncertainty remains!
There are a number of areas where further clarification is
urgently required.
Disbursements - There is no clear statement as
to whether disbursements will be recoverable, though this is
implied in the draft process. Clarification is required as to what
disbursements a claimant may recover.
ATE premiums - Given the recoverability of
success fees, at all stages, it is likely that ATE premiums will be
recoverable as a disbursement.
Advocacy costs – It is our view that the stage
3 hearing fee should include all advocacy costs, and that counsels’
fees for attending an oral hearing should not be recoverable in
addition. However, the draft is silent on this point.
Success fees – The draft consistently speaks of
‘hearings’ at stage 3 and goes on to state that a 100% success fee
will be recoverable where a claim goes to ‘trial’. It is unclear
whether a deliberate distinction is to be drawn between a hearing
and trial and, if so, what its relevance might be.
Weaknesses in the process
There are many areas in which the process is less than clear,
and this may only be resolved when final rules are drafted for the
purpose of implementation or through test cases.
However, there are also a number of failings in the process,
which will detract from its effectiveness in progressing claims and
controlling costs.
Fees – Fees for a routine claim concluding in a
stage 3 oral hearing, costs will be in the region of £2,600
(including success fees and geographical uplift) plus
disbursements. Claims at the lower end of the spectrum will
continue to cost more in fees than in damages.
Stage 3 success fee - This is unsatisfactory.
By the end of stage 2 the claimant will have access to full
evidence and will be in a position to assess the risks of a stage 3
hearing in detail. Only the strongest claims will proceed and so
the risks do not warrant the 100% success fee proposed.
Part 36 – We, and many stakeholders, have
argued that Part 36 is not suited to this process, and that a
simple, codified system of penalties should form part of the
process. This view has not been followed, meaning that there will
be limited incentive on the claimant to put forward reasonable
settlement proposals.
Special circumstances
Additional medical reports
Typically, only one medical report should be required for claims
in this process. However, the claimant is entitled to seek up to
two, at his discretion, and four where so advised by an expert.
Further, where an expert recommends that a claimant should
undergo treatment or be allowed further recovery time before a
final report, there is a procedure for the parties to agree a stay
and interim payment while a final report is awaited.
The precise processes are not clear, but this is likely to be
resolved in the final draft rules.
Interim Payments
Where additional time is required whilst an addendum medical
report is secured (for example following treatment) then a claimant
is automatically entitled to an interim payment of £1,000.00,
unless the claimant is a child.
A claimant may seek a higher payment and, if this is refused,
may issue Part 7 proceedings for such a payment, bringing the claim
outside of the process. If the Court subsequently finds that the
claimant’s action was unreasonable, the Court may limit the
claimant’s costs.
Vehicle damage/hire charges
The process recognises that these heads of loss are often dealt
with by insurers and credit hire organisations (CHOs) at a
pre-action stage. In the circumstances, they need not be included
in a claim progressing through stages 1 and 2 of the process.
However, at stage 3 all claims must be consolidated and so the
onus is on the claimant’s personal injury solicitor to contact
insurers and relevant CHOs with a view to taking conduct of their
claims before preparing the stage 3 settlement pack.
Disputes over the rate and period of credit hire will remain
within the stage 3 process but other disputes such as challenges to
the validity of the hire agreement or other technical arguments
will place a claim outside the process.
Seat belt contributory negligence
Where a claimant has failed to wear a seat belt, the question of
a reduction for contributory negligence can be handled within the
process. The defendant will make an admission of liability, with an
allegation of contributory negligence. Presumably, the defendant
may also make such an allegation at later stages.
The solicitor will then obtain a medical report and, with that
information, the parties will seek to negotiate settlement at stage
2 in the normal way. If settlement is not agreed, the Judge will
determine the issue of contributory negligence at stage 3.
Approval of children’s claims
Children’s claims (although not those of protected parties) can
be dealt with through the process. Specific rules are set out to
cater for these:
- As interim payments require approval, they will not be made as
a matter of routine where additional expert evidence is
required
- In appropriate circumstances, the claimant may apply for an
interim payment, bringing the claim outside of the process
- Infant claims which are settled at stage 2 will be approved
through an application and oral hearing akin to a stage 3
hearing
- A modified fee system will apply to hearings relating to
infants
Litigants in person
As a general rule litigants in person should be encouraged to
seek independent legal advice and additional guidance is to be
published in this regard. Where offers are made, claimants must be
clearly informed of relevant time limits and of their entitlement
to seek advice.
Limitation
Where a claim is commenced close to expiry of the limitation
period, a claimant’s solicitor is required to issue proceedings and
seek a stay for the purpose of proceeding through stages 1 and 2 of
the process. If the claim is not settled in this way, the existing
Court proceedings will be utilised to proceed to stage 3.
Exchange of information and the use of
forms
A number of draft forms have been published which the parties
are to use in exchanging information throughout the claim. These
include a claim notification form (which the claimant is required
to complete in full, save that the ‘referral source’ box may be
left blank), settlement pack forms and forms for negotiations.
Initial notification forms are to be sent electronically by
secure exchange and the Association of British Insurers is
developing a system for this purpose. Stakeholders are currently
defining the specifications for the system but insurers must be
aware that they will need to be in a position to receive large
volumes of claims electronically in the near future.
Challenges & opportunities
Whilst there are a number of details yet to be worked out in
respect of this process, it remains likely that it will be in place
in six months time.
We do not yet know the final form that this process will take.
The Government’s response includes some unexpected surprises and
more may be on the horizon. However, the MoJ paper gives us the
best indication yet of what is to come in April next year.
The process has the potential, if used properly, to result in
significant costs savings but these will easily be lost if
defendants are not fully prepared to deal with the new process from
day one. The short and strict time limits set out within the
process will be a real challenge to handlers and will require, in
many cases, a change in claims handling culture.
Over the coming months, we will be continuing to update clients
as new information in respect of the process is released and we
will also be rolling out a training module, available as e-learning
or in workshop format, to assist our clients and their claims
handlers in preparing for the new process.
If you would like to discuss the new process, have any queries
or are interested in further guidance or training then please
contact our team.
talk to us
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