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QBE European Operations
UK Casualty ClaimsPolicyholder guide | March 2013
2013 Jackson reforms and Ministryof Justice Claims Portal Extension
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UK Casualty ClaimsPolicyholder guide | March 2013
2013 Jackson reforms and Ministryof Justice Claims Portal Extension
Contents
Introduction 1
Disproportionate costs why things
had to change 2
Lord Justice Jackson reorms
eective 1 April 2013 3
Ministry o Justice (MOJ) Claims Portal
Extension eective 1 August 2013 4
Impact on claims handling orpolicyholders 4
Portal exclusions 5
Portal process 5
Cost comparisons
pre-litigation 6
Cost comparisons litigated 6
Disclaimer 10
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2013 Jackson reforms and Ministry of Justice Claims Portal Extension - March 2013
Introduction
This guide explains the background to
these changes; the likely inancial and
operational impact and how we and our
policyholders can best work together to
gain maximum beneit.
There will be opportunities to substantially
reduce legal costs where liability is
admitted, but compliance with very tight
timescales will need to be balanced againstputting saeguards in place to ensure that
a robust deence, contributory negligence
arguments or raud allegations are made
where appropriate. The prompt reporting
o accidents likely to give rise to a claim
and the early supply o all relevant accident
documentation is essential to enable timely
liability decisions to be made and or you
to beneit rom the signiicant costs savings
available.
Lord Justice Jackson Reformsof civil litigation costs and theextension of the Ministry of Justice(MOJ) Claims Portal are due to be
implemented on 1 April 2013 and 1August 2013 respectively and willresult in very signicant changesto the way Employers Liability (EL)and Public Liability (PL) claims inEngland and Wales are handled.
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2013 Jackson reforms and Ministry of Justice Claims Portal Extension - March 2013
Disproportionate costs why
things had to change
In 1999 the Association o British Insurers
(ABI) estimated that 38 pence was paid in
third party legal costs or every 1 in injury
damages.
By 2009 this had increased dramatically to
86 pence paid in third party legal costs orevery 1 in injury damages.
There have been numerous cases where
third party legal costs have ar exceeded
the damages paid to a claimant. One o
the most publicised cases wasSimcoe v
Jacuzzi Group (2012) where the claimant
received 12,750 in damages or repetitive
strain injury and costs o 75,000, even
though the case was settled beore trial.
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2013 Jackson reforms and Ministry of Justice Claims Portal Extension - March 2013
Lord Justice Jackson reforms
eective 1 April 2013
Lord Justice Jackson was tasked with
addressing the issue o disproportionate
costs in civil litigation and with making the
process more cost eective and eficient.
His report was published in 2010 and the
recommendations he made were taken
orward in the Legal Aid, Sentencing &
Punishment o Ofenders Act (LASPO)
2012. Part 2 o this Act embodies a number
o the Jackson recommendations including:
Ater the Event (ATE) insurance
premiums are no longer recoverable
rom deendants
Success ees in conditional eeagreements (CFAs) are no longer
recoverable rom deendants
10% uplit on general (injury element)
damages
Qualiied One Way Costs Shiting (QOCS)
deendants will now pay most o their
own costs even i a claim is successully
deended, although exceptions apply or
raud and where there is ailure to beat a
deendants Part 36 oer (up to the value
o damages awarded)
10% additional penalty on damages or
awards up to 500,000, reducing to
5% (or awards between 500,000 and
1,000,000) where the deendant does
not accept and ails to better a claimants
Part 36 oer
A proportionality test when costs areassessed by the court
Costs budgeting in multi-track cases
whereby the court will seek to control
legal costs at an early stage
Case management by judges who will be
stricter about delays and imposing court
sanctions
Banning o reerral ees.
The reforms aim to reduce the
overall legal costs burden and to
rebalance cost liabilities between
claimants and defendants, but
without reducing access to justice.
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2013 Jackson reforms and Ministry of Justice Claims Portal Extension - March 2013
Ministry of Justice (MOJ) Claims
Portal Extension eective 1
August 2013
As part o a package o interlocking
measures designed to reduce legal costs
and speed up settlement timescales, the
Government is introducing additional
reorms or EL and PL personal injury
claims arising rom accidents occurring
on or ater 1 August 2013 in England and
Wales. These reorms will have signiicant
inancial and operational impacts including:
EL and PL personal injury claims (except
EL disease where there is more than
one deendant, and all PL disease)
valued rom 1,000 up to 25,000 will
be transacted via an online electronic
portal and will be notiied directly by
the claimants solicitor to the insurer
where identity o the insurer can be
established. Claimant solicitors must use
the Employers Liability Tracing Ofice
(ELTO) database to identiy the relevant
EL Insurer
Low, ixed, recoverable costs or claims
that remain in the portal
A new predictive costs regime or EL
and PL claims worth 1,000 to 25,000
that all out o the portal (excludes single
employer disease claims which will revert
to an hourly rate basis)
Predictive costs are cheaper than the
current costs regime, but are up to
six times more expensive than portal
costs i the case proceeds to litigation.
For example, the new base costs or
an EL claim worth 25,000 would
increase rom a maximum o 2,100
to a maximum o 13,430 i settled at a
hearing
Insurers (or policyholders where they
receive notification outside the portal)
must acknowledge receipt o a new
Claim Notiication Form electronically
within 24 hours (currently 21 days). The
deemed service date o the claim is the
next day i sent by 1st class post
For EL claims, the timescale to admit
liability and communicate a decision rom
date o claim notiication receipt, whether
served on the insurer or policyholder, is
30 working days (currently 3 months)
and or PL claims the timescale is 40
days otherwise the claim drops out o
the portal with an increase in costs
Admissions must be in ull with no
contributory negligence arguments or
raud allegations permissable otherwise
the claim drops out o the portal with an
increase in costs
Admissions on EL claims must be
ollowed up with disclosure o earnings
details within 20 working days o the
admission.
Impact on claims handling for
policyholders
The prompt reporting o claims and
the early supply o all relevant accident
documentation is essential or liability
decisions to be made promptly and to
ensure compliance with the very tight portal
timescales. I the portal timescales are not
complied with, claims will not be kept within
the portal and the opportunity or signiicant
costs savings will be lost.
Close co-operation between us and our
policyholders is critical.
Policyholders should:
Ensure all accidents/incidents
are recorded promptly; accident
documentation is entirely actual without
conjecture; all relevant documentation,
including accident reports, locus
photographs, witness statements, risk
assessments, training records etc. are
readily accessible; and a thorough
investigation is undertaken
Collate earnings details promptly
ollowing any accident that is likely to
give rise to a claim
Provide us with pre-claim accident
notiication i you believe a claim is likely
to ollow. This will allow us to complete
enquiries about liability beore any claim
is received
Prioritise compliance with the new
rules over any contrary risk handling
arrangements already in place. We will
contact any policyholders who have
such arrangements that may need to
be revised
Acknowledge new claim notiications
within 24 hours i they are received direct
and ensure we are notiied immediately
Provide points o contact and details or
investigating purposes when notiying us
o a claim Respond promptly and ully to any
requests we make or inormation or
site investigation
Be prepared to amend any existing
claims handling procedures to help us to
deal with your claims in the most eficient
and eective manner that will maximise
the beneits available under the reorms
Review any sel-insured retention
or aggregate policyholder own
claims handling arrangements so as
to best respond to the reorms, asrecommended in this guide
Trust us our claims adjusters, claims
inspectors and service providers are
expert claims handlers and decision
makers. Claims will be dealt with
proessionally and expediently.
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Portal exclusions
The ollowing are excluded rom the portal:
PL claims against an individual
Claims under 1,000 or over 25,000
in value
EL disease claims with more than
one deendant
All PL disease claims
Where the deendant or claimant is
deceased or a protected party
An accident or breach o duty outside
England and Wales
Abuse claims, mesothelioma,
clinical negligence
Where the claimant is bankrupt
Where the deendant is insolvent
and uninsured.
Portal process
The portal consists o a 3-stages process:
Notification - Valuation - Hearing
Stage 1: Notifcation
EL Claims: 30 days to admit liability; Stage
1 costs o 300
PL Claims: 40 days to admit liability;
Stage 1 costs o 300.
Stage 2: Valuation
I liability is accepted under Stage 1,
the claimants solicitor will obtain amedical report and should send it to the
deendant together with special damages
documents and a proposed settlement
igure as part o a settlement pack
The insurer will have 15 days to accept or
reject the oer. I rejected, a counter oer
must be made within a urther 20 days.
I these timescales are met, then Stage
2 costs will be 600 (or claims between
1,000 and 10,000), or 1,300 (or
claims between 10,000 and 25,000)
plus VAT and disbursements .
Stage 3: Hearing
I the quantum is not agreed, then either
party may seek a hearing. The claimants
solicitor will ile a claim orm and medical
report and both parties will submit their
best oers on heads o claim in sealed
envelopes. Stage 3 costs are 250 or
a paper hearing or 500 or an oral
hearing.
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Cost comparisons
pre-litigation
There are substantial savings on third party
costs to be achieved i the decision made
is right irst time and comply with the new
timescales.
The ollowing table sets out base costs
excluding VAT and disbursements, such as
the cost o medical reports.
Claim
Value
EL
inside
Portal
EL
outside
Portal
Outside
Difer-
ential
2,000 900 1,300 144%
7,500 900 2,168 240%
15,000 1,600 3,000 188%
25,000 1,600 4,000 250%
Claim
Value
PL
inside
Portal
PL
outside
Portal
Outside
Difer-
ential
2,000 900 1,300 144%
7,500 900 2,105 234%
15,000 1,600 2,870 180%
25,000 1,600 3,870 242%
Cost comparisons litigated
The table below illustrates the signiicantly
increased cost o running a claim to trialwhere the claim is ultimately settled. Again
the igures shown are base costs excluding
VAT and disbursements.
Claim
Value
ELinside
Portal
EL
outside
Portal
Outside
Difer-
ential
2,000 1,150-1,400 5,365 420%
7,500 1,150-1,400 7,220 566%
15,000 1,850-2,100 9,815 497%
25,000 1,850-2 ,100 13,430 680%
Claim
Value
PLinside
Portal
PL
outside
Portal
Outside
Difer-
ential
2,000 1,150-1,400 4,825 378%
7,500 1,150-1,400 6,542 513%
15,000 1,850-2 ,100 8,950 453%
25,000 1,850-2,100 12,315 624%
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Contributory negligence A
case study
Employee Mr Hapless sticks his hand into
an unguarded machine
Primary liability is admitted
The claim is realistically worth 15,000 to
20,000 (ingers damaged, but not lost)
Mr Hapless is an experienced employee
who admits he knew he should not have
stuck his hand into the machinery
Our solicitors advise that a judge
would award around 10% contributory
negligence
Is it economically worthwhile arguing
contributory negligence when this will
mean the claim alls out o the portal and
into the higher predictive costs regime?
Economics o arguing contributory negligence:
Damages
saving
Litiga-
tion
Stage
CostsInside
Portal
CostsOutside
Portal
Increasein
Costs
Costofarguing
Contributory
Negligence
Best
Case
Worst
Case
1,500-2,000Not
issued1,600 3,000-3,500 1,400 -1,900
600
saving
400
cost
1,500-2,000 Hearing 1,850-2,100 9,815-11,930 7,965 -9,8305,965
cost
8,330
cost
The savings achieved by successully arguing a reduction in damages or 10%
contributory negligence are likely to be more than oset by the increase in costs. Unless
there are other considerations, such as discouraging other potential claimants, this would
be a good case in which to concede liability in ull. Fraud
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Economics o alleging raud:
Settlement DamagesStage2
Pre-issue-Cost
Stage3
Listed-Cost
Stage3
Hearing-Cost
Inside Portal 5,000 900 1,150-1,400 1,150-1,400
Outside Portal 5,000 1,116 5,780 6,470
Dierential Nil 226 4,630-4,380 5,070-5,320
I raud is alleged, multi-track costs will apply which could be double or treble the portalcosts igure.
Fraud has always been expensive to ight and dificult to prove. Where raud is proven a
deendant is likely to get an order rom the court that the claimant must pay their costs,
although recovery will only be possible where the claimant has unds or assets to recover.
To not ight raudulent claims however, is to invite more raud. Our specialist raud
teams are expert in identiying raud, calculating the cost o ighting it and assessing the
prospects o success. We rely on our policyholders to help us investigate suspicious claims
and to alert us to their concerns over the authenticity o claims.
A Case Study
Employee Mr Dodgy alls over some
machine parts let in a walk way by his
colleague Mr Pal
Mr Dodgys solicitors say that he is not
badly hurt and will settle quickly or
5,000
There are no witness to Mr Dodgys all
He has a report rom his GP saying that
he suered sot tissue injuries and Mr Pal
conirms that he let an obstruction in the
walk way
A CUE PI check reveals that Mr Hapless
has six previous claims with ormer
employers over the last 10 years and that
he and Mr Pal are known to be riends
Should we make a protocol admission?
Should we challenge the claimant to
prove his allegations o how the accidenthappened and that he really was injured
(pushing the claim out o the portal) or
directly allege raud (pushing the claim
out o the predictive costs regime into
the even more expensive multi-track
regime?).
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How we have prepared
In preparation or the reorms we have:
Embedded the new timescales in our
claims handling processes to maximise
the opportunities presented by
the reorms
Made our claims processes more
proactive and eficient
Ensured panel loss adjusters are working
to the new timescales
Implemented more robust raud
identiication procedures
Ensured a disciplined approach to
liability decision making and contributory
negligence arguments in accordance
with our philosophies
Instigated more monitoring and
perormance review procedures to
ensure high levels o customer serviceand quality standards are maintained
Introduced new technology to enable
even more eficient claims handling
Initiated a review o all claims handling
arrangements with policyholders to
identiy where these might be improved
in order to best operate within the new
claims regimes
Kept policyholders updated on the
reorms and committed to doing so in
uture. For urther updates please visit:
www.qbeeurope.com/risk-management/
technicalclaims.asp
The big picture
The Jackson and MOJ Portal reorms
provide an opportunity to make some
substantial costs saving, but are not
wholly good news or insurers and their
policyholders. In an eort not to penalise
claimants or reduce access to justice, the
Jackson reorms will bring in:
A 10% increase on General Damages (in
addition to the current underlying annualinlation in awards o 8% to 9%)
Qualiied One Way Costs Shiting (QOCS)
that will greatly limit the amount o costs
that winning deendants can recover
rom claimants and will prevent any
recovery at all in many cases
A penalty o 10% additional damages (up
to 50,000 or the majority o cases)
where a deendant declines a claimants
Part 36 settlement oer and the claimant
is awarded as much or more by
the court.
The overall claims environment also
remains dificult with high levels o raud,
courts that appear to be easily persuaded
by claimants and the threat o a reduction
in the discount rate, which could see a
leap in the cost o lump sum settlements.
Our claims experts are here to help
policyholders make the most o theopportunities that the reorms oer and
overcome the challenges that they
also present.
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4271/QBECasualtyClaims/JacksonReorms/March2013
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a division o the QBE Insurance group. All three companies are authorised and regulated by the Financial Services Authority.
Disclaimer
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QIEL is a company member o the QBE
Insurance Group.
Readership o this publication does not
create an insurer-client, or other business
or legal relationship.
This publication provides inormation
about the law to help you to understand
and manage risk within your organisation.Legal inormation is not the same as legal
advice. This publication does not purport
to provide a deinitive statement o the law
and is not intended to replace, nor may it
be relied upon as a substitute or, speciic
legal or other proessional advice.
QIEL has acted in good aith to provide an
accurate publication. However, QIEL and
the QBE Group do not make any warranties
or representations o any kind about the
contents o this publication, the accuracy or
timeliness o its contents, or the inormation
or explanations given.QIEL and the QBE Group do not have any
duty to you, whether in contract, tort, under
statute or otherwise with respect to or in
connection with this publication or the
inormation contained within it.
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obligation to update this report or any
inormation contained within it.
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QIEL and the QBE Group disclaim any
responsibility or liability or any loss or
damage suered or cost incurred by you
or by any other person arising out o or in
connection with you or any other persons
reliance on this publication or on the
inormation contained within it and or any
omissions or inaccuracies.
QBE Insurance (Europe) Limited and
QBE Underwriting Limited are authorised
and regulated by the Financial ServicesAuthority. QBE Management Services
(UK) Limited and QBE Underwriting
Services (UK) Limited are both Appointed
Representatives o QBE Insurance (Europe)
Limited and QBE Underwriting Limited.