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new claims 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.

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 claimants action was unreasonable, the Court may limit the claimants 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 claimants 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 childrens claims

Childrens 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 claimants 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 Governments 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.

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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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