introduction april 2010 - blm reforms_apr10.pdf · § if there is no element of personal injury the...

Introduction April 2010

A major change is imminent in the handling of road traffic personal injury claims valued up to £10,000. The new claims process is scheduled to apply to claims arising from accidents occurring on or after 30 April 2010.

This e-briefing provides detailed commentaries on the new process which have beenprepared by BLM´s motor specialists.

The new process will complete a widely-known programme of reform which was launched by the Ministry of Justice (MoJ) back in 2007. Key elements have been known for quite some time, for example: that claims information will be shared electronically, that liability decisions should be made within 15 days as opposed to 90 under the present Protocol, and that legal costs will be fixed and recoverable on a staged basis.

The new claims process should – if implemented effectively and operated efficiently by stakeholders – streamline the handling of these claims and see an end to marginal liability arguments and to counter productive ‘haggling’ on quantum or contributory negligence.

In return for making quick and binding decisions within the new process insurers should anticipate:

(a) significant savings on claimant solicitors’ costs, in conventional claims over £2,000 and in infant claims over £5,333 (see chart below) and

(b) potential indirect savings in overheads arising from a swifter and largely paperless process.

BLM has analysed the MoJ’s proposals in detail. The flow charts and commentaries, for which you will find the links below, will help you understand the MoJ’s three stage process and to identify key issues now. We are sure you will find much more to consider as you read through.

A new Pre-Action protocol, together with amendments to the CPR have been introduced to govern the new process.

BLM will be at hand to continue to provide best advice and support both during the development of the Rules and after the implementation of the reforms. Please feel free to contact any of the team listed on the left for further information.

Contacts

Mike Dobson Kerris DalePartner, BLM Birmingham Partner, BLM [email protected] [email protected]: 0121 633 6638 DDI: 02920 477 640

Chris Coughlin Rodney WilsonPartner, BLM Leeds Partner, BLM [email protected] [email protected]: 0113 261 5551 DDI: 0151 471 5421

Jenny Moates Ruth GrahamPartner, BLM London Partner, BLM [email protected] [email protected]: 020 7865 3342 DDI: 0161 838 6741

Andrew Hibbert Tony WaltonPartner, BLM Southampton Partner, BLM [email protected] [email protected]: 023 8038 2613 DDI: 01642 661 686

Contents

Stage 1Stage 2Stage 3Credit hireFraudExit points commentary

http://teamshare.blm.scapesoft.co.uk/mailcampaign/mc_redirect.asp?linkid=30780&uid=%7b3CEF7300-8D22-4619-85F1-7E10C08249F7%7d








Stage 1 - Flowchart

Stage 1 - Commentary

Scope of the new process

§ The process applies only if general damages for injury and associated special damages (excluding damage to the vehicle and hire costs) fall in the bracket £1,000 to £10,000.

§ If there is no element of personal injury the claim falls outside the process and CPR will apply. So a claim for hire only does not follow the new procedure.

Claim Notification Form

§ Not all parts of the Claims Notification Form (CNF) are mandatory. In particular the claimant need not provide details of the referral source.

§ Even where the requirement is mandatory some claimants may not provide complete information (eg TBA). Insurers should either seek any further information which is needed or decide that the claim should no longer continue under the new Protocol.

§ If the claimant does not provide sufficient information so as to enable the insurer to make the liability decision within 15 days (30 days for MIB claims) then the claim exits the process – and cannot return to it subsequently – but if the information omitted should have been readily obtained by the claimant's solicitor the ultimate costs may be limited to those within this process.

§ It would appear that an insurer could, by admitting, waive any non-liability related defects so that the claim would stay in the process.

§ If the insurer considers that the small claims track would be the normal track for that claim if proceedings were issued then it should notify the claimant of this and the claim will then exit the process.

§ Therefore, there could be satellite litigation on what information should or should not be provided/obtained. Persistent abuse here could/should be monitored and if necessary raised as a conduct issue with potentially adverse costs consequences.

§ Note that the claimant's motor insurance details are not specified in the CNF.

Liability decision within 15 business days of receiving CNF (30 days for MIB claims)

§ The admission is standardised and there is no option to qualify the admission in the CNF response form (form RTA 1). The defendant is required to admit that:

Accident occurredCaused by the defendant’s breach of dutyCaused some loss to the claimant, the nature and extent of which is not admitted

§ Fraud screening should therefore be conducted at a very early stage.§ If there are some positive fraud indicators then it may be better not to respond at all

so that the claim exits the process and falls back into the Personal Injury Pre-action Protocol.

§ The claim exits the process if liability is not admitted. Reasons need to be given.§ If the claim exits the process at this stage it is deemed to be at the start of the 90 day

admission period in the Personal Injury Pre-action Protocol.§ If there is a claim for credit hire then insurers should consider sending the claimant a

mitigation questionnaire and seek details of any alleged impecuniosity of the claimant. This information will almost certainly be needed before the insurer can make an offer at stage 2.

Contributory negligence

§ If contributory negligence is alleged (other than a failure to wear a seat belt) the claim exits the process.

§ If there is a significant costs saving to be made by staying in the system then it may be preferable to concede liability in full rather than argue for a small discount for contributory negligence.

§ A cost/benefit analysis will be required in each claim. It seems unlikely, however, that arguments of, say, 10% contrib in cases not involving seat belts would be worthwhile.

Stage 1 costs following admission

§ If liability is admitted then unless the claimant is a child the insurer must pay the stage 1 fixed recoverable costs of £400 within 10 days from sending the CNF response to the claimant.

§ It is essential that wherever possible a fraudulent claim is identified before any admission is made, given that payment of stage 1 costs follows automatically after admission.

§ Insurers will need procedures in place to comply with this payment deadline. If costs are not paid by the due date the claimant may give written notice that the claim no longer continues under the new Protocol.

§ If the claimant does not give written notice with 10 days of the due date for payment of the stage 1 costs the claim stays in the process.

§ Insurers should make it clear when paying these costs that they expect to be reimbursed if the claim is not pursued.

§ Consideration should also be given to what may happen if at stage 2 it transpires that the claim falls outside the bracket £1,000 to £10,000. See stage 2 commentary.

Analysis of stage 1 liability options and outcomesInsurer action Impact on the process Costs consequences

1. No response or late response Exits Nothing to pay2. Admit Stays in Pay £400 stage 1 costs3. Contrib – generally Exits Nothing to pay4. Contrib – seat belt case Stays in Pay £400 stage 1 costs5. Not admitted - must give reasons Exits Nothing to pay6. Inadequate information or small claim Exits Nothing to pay

Stage 2 - Flowchart


Medical report

§ Following an admission at stage 1, the claimant obtains the medical report in the prescribed format.

§ There is no prescribed time period during which the claimant’s solicitors are to obtain and disclose the medical report. The absence of a time limit may introduce unnecessary delay.

§ Where the claimant was not wearing a seat belt, the medical report must contain sufficient information to enable the defendant to calculate the appropriate reduction.

§ The medical report is to be sent to the insurer within 15 days of the claimant confirming its factual accuracy. This is the only opportunity for it to be checked. Note that there is currently no provision for either party to put questions to the expert.

§ The completed settlement pack, with documents in support of special damages, plus the claimant’s offer to settle are sent with the medical report.

Stage 2 settlement pack and offer

§ Within 15 days of the medical report being confirmed as factually accurate the claimant’s solicitors complete a stage 2 settlement pack which is sent electronically to the insurer.

§ Evidence relating to special damages must also be sent at that time, together with receipts for disbursements incurred as a result of the claims process.

§ The settlement pack will include a gross and a net (ie net of CRU) offer from the claimant. If relevant – and it will only be so in seat belt cases – the offer will reflect any discount for contributory negligence.

§ Any offer to settle by either party will automatically include stage 2 fixed costs, an agreement in principal, to pay disbursements and a success fee.

§ The settlement pack may include a claim for unpaid costs (£400) which were due at stage 1.

§ A reasoned withdrawal of an offer will cause the claim to exit the process.§ Despite being placed on notice via the CNF that the claimant intends to present a

claim for hire charges and repair costs, it is only on receipt of the settlement pack that insurers will be provided with the details.

§ Given that the valuation of the claim (for the purposes of this process) excludes vehicle related damages at stage 2, insurers could be met with a substantial claim for credit hire/repair costs, in the event that these remain outstanding at stage 2.

15 days to respond to settlement pack

§ There is a 35 day period for negotiation of the stage 2 settlement pack known as the total consideration period.

§ However, insurers have only 15 business days from receipt of the settlement pack to consider and either accept the claimant’s offer or make a counter-offer. This is known as the initial consideration period.

§ Unless the parties have agreed to an extension beyond the 15 day period, the claim will exit the process where the time limit for responding to the first offer has not been adhered to. It is likely that claimant’s solicitors will seek to take full advantage of the strict time limits to exit the process and commence Part 7 proceedings.

Counter offer and 20 day negotiation

§ If the claimant's offer is not accepted, the insurer must make a counter-offer using the settlement pack form. The defendant must propose an amount for each head of claim. The insurer will give details of both the gross and net offer.

§ Parties then have a further 20 days for negotiations, beginning when the 15 day period has closed. However, the parties can agree to extend this time period.

§ Insurers should also be aware that their counter-offer made at stage 2 transposes automatically to stage 3. This should encourage insurers to make these offers as competitive as possible.

§ To avoid last minute offers, any stage 2 offers made inside the last five days of the 35 day total consideration period will result in a further 5 day period (after the close of the 35 day period) for the relevant party to consider the offer. During this time no further offers can be made by either party.

§ If a party withdraws an offer made in stage 2, the claim will no longer continue under this process and the claimant may commence Part 7 proceedings.

CRU

§ If, at the date of acceptance of an offer, the defendant does not have a CRU certificate which will remain in force for at least 10 days, the defendant must apply for a fresh certificate and pay the value of the offer within 30 days of the end of the total consideration period.

§ If the insurer agrees to make an interim payment, but does not have a current CRU certificate, the insurer must apply for one and make payment no later than 30 days from the date of receiving the interim settlement pack.

Vehicle related damages

§ Notwithstanding vehicle related damages (ie the pre-accident value of the vehicle; repairs; excess and hire) are excluded for the purposes of valuing the claim, they can be recovered as an element of special damages within the process. Vehicle related damages can form part of the claim on the outset, where the claimant's solicitor has completed the relevant sections of the Claim Notification Form.

§ However, where the claimant’s solicitor has not included the vehicle related damages at the start of the claim and settlement of the personal injury damages cannot be reached at the end of stage 2 negotiations, and there is a continuing claim for vehicle related damages, the claimant must arrange to bring these elements of the claim into the process.

§ The claimant's solicitor must notify the insurer that this separate claim is being considered and obtain all necessary documentation. However, no time limit is stipulated as to when this information must be provided by the claimant’s solicitors.

§ The claimant is then to make a separate offer by amending the stage 2 settlement pack to include the vehicle related damages.

§ The insurer has 15 days from receipt of the amended settlement pack to either agree the offer or make a counter-offer, unless the parties have agreed an extension of time.

§ However, if the vehicle related damages are of significant value and/or the whole claim is considered too complex to proceed to the stage 3 procedure, then the claimant can elect to leave the process, but will be at risk as to costs, if the court subsequently decides that the stage 3 procedure would have been appropriate.

§ If vehicle related damages are included from the outset and the personal injury damages are agreed within the 35 day time period, but the vehicle related damages are not agreed, the claimant may then start proceedings under Part 7 in relation to the vehicle related damages.

§ If vehicle related damages are brought into the process at stage 2 and these damages are agreed, but there is no agreement on the personal injury element then the claim will proceed to stage 3. The insurer is required to pay the vehicle related damages within 10 days of agreeing those damages.

§ A claimant’s solicitor is not entitled to any additional costs in dealing with vehicle related damages if they are brought into the process at stage 2.

Raising causation

§ On reviewing the medical report, the insurer may wish to question or deny causation. Reasons should be given and the claim will leave the process.

§ The decision whether to raise causation as an issue will require the insurer to undertake a cost benefit analysis, having regard to– the likely value of the claim and– the stage 2 and 3 costs when compared to the present ‘predictable’ costs regime (CPR 45.9) which will apply if the claim exits the process.

Small claims valuation?

§ On reviewing the medical report it may become apparent to the insurer that the personal injury element is below £1,000 and therefore the claim falls within the small-claims track.

§ This creates a potential windfall for the claimant’s solicitors in such cases – they would already have received £400 by way of stage 1 costs. They may also be entitled to stage 2 costs of £800 if the claim settles and there was a reasonable expectation that the personal injury element was >£1,000.

§ Currently there appears to be no provision / mechanism for an insurer to recover the stage 1 costs (over)payment where the claim exits the new process into the small-claims track.

Paying offer and costs at end stage 2

§ Within 10 business days of the end of the negotiation period (ie 15 or 20 days) the insurer must pay the full amount of its offer by way of an interim payment, subject to CRU deduction. If the CRU certificate will expire during this payment period then the insurer will have 30 days to make the interim payment (having refreshed the CRU certificate).

§ Currently there is no detail available as to the prospect/mechanism of the insurer recovering money should a lower sum be awarded at stage 3.

§ Stage 2 costs of £800 plus disbursements and success fee will also be paid at this point, together with any unpaid stage1 fixed costs.

Relevant additional stage 2 provisions

Medical records and notes

§ The cost of obtaining medical records will only be allowed where the medical expert has identified a need for them. The probable consequence may be that the claimant’s solicitors will be less likely than previously to obtain GP records.

§ A medical expert may decide he/she wants to review the records, but they might no longer be provided by the claimant as a matter of course.

§ Any request by an insurer for the medical records to be considered will not (in itself) cause the claim to exit process.

Subsequent medical reports (same discipline)

§ A subsequent medical report may be obtained and the cost recovered where the initial report indicates the need for a further examination at the end of a specified period, either where ongoing treatment is necessary, or the period is needed to establish final prognosis.

§ If, however, a subsequent report is obtained without the recommendation from the medical expert, there may be a cost penalty. The defendant can refuse to pay the cost of a further report at the end of stage 2 or the court may not allow the cost at stage 3.

§ Notwithstanding that the parties may agree a stay in relation to the personal injury element of the claim, it is expected that the claimant's solicitors may conduct work in relation to the non-personal injury element eg vehicle and hire claim (if applicable).

§ The parties can agree a stay in the event that an updated medical report is necessary. However, the claimant may request an interim payment once a stay has been agreed.

Further medical reports (different discipline)

§ Where it is clear that an additional medical expert is necessary from a medical expert of a different discipline, a second report may be obtained from a medical expert in that discipline.

§ A third or fourth medical report can only be obtained on the recommendation of either of the two medical experts of different disciplines already consulted. No further reports will be allowed at that stage.

Interim settlement pack (cases with more than one medical report)

§ An interim settlement pack is used when sending the first medical report. Within 10 days of receipt of it, insurers must make an interim payment of £1,000 which is paid in respect of general damages.

§ The claimant must also send evidence of pecuniary losses and disbursements. This may assist the defendant to consider whether to make a final offer at that time.

§ The claimant may request an interim payment of more than £1,000. The amount in excess of £1,000 is only in relation to pecuniary losses eg where a claimant has paid for vehicle related damages, this sum may be included in their request for an interim payment.

§ A defendant may refuse to make a payment in respect of pecuniary losses, but must provide reasons. However, there is a residual obligation on the insurer to pay the sum of £1,000 within 10 days of receipt of the pack.

§ A defendant may refuse an interim payment request and must provide reasons.§ If the claimant elects to pursue the full amount of the interim payment, the claim will

exit the process. However, this is only subsequent upon the claimant giving notice that the claim will no longer continue under the protocol within 10 days of the defendant failing to pay an interim payment of £1,000. If the court subsequently finds that it was not reasonable for the claimant to pursue the interim payment over £1,000, the claimant's costs may be limited to the fixed recoverable costs of the process (iestage 1 and stage 2 costs).

§ Where the claimant is a child and an interim payment is reasonably required, proceedings must be started under CPR Part 7 and an application made in those proceedings.

Analysis of stage 2 quantum options and outcomesInsurer action Impact on the process Costs consequences

1. Raises causation Exits Nothing to pay2. Failing to respond to settlement pack Stays in Nothing to pay

3. Accept claimants offer Exits Pay stage 2 costs and any unpaid stage 1 costs

4. Counter-offer Stays in Pay stage 2 costs5. Interim payment refused Exits Nothing to pay

Stage 3 - Flowchart


Stage 3 – Quantum-only determination initiated by claimant

§ It begins only if agreement on quantum has not been reached by the end of the 20 day negotiation period set out at stage 2. Stage 3 is initiated by the claimant. The idea that the insurers could do so has been dropped.

§ The claimant prepares the stage 3 settlement pack, to include:– final stage 2 offers (sealed); and– claimant solicitor 'comments' so the judge is made aware, of each disputed head of damage, the amount in dispute and the reasons for the dispute.

§ It is critical to note that the insurer’s offer and comments in the stage 3 settlement pack will in practice amount to the counter-schedule.

§ The comments are the only opportunity to explain the reasons for the amounts/heads of damages claimed and in dispute. There will be no further opportunity in stage 3 to provide new documents or evidence save where ordered by the judge.

5 days to respond to stage 3

§ The insurer has only 5 business days from receipt of the stage 3 settlement pack to:– check the accuracy of the stage 3 settlement pack– provide further brief comments where necessary; and– return it electronicallyas noted above, the insurer responses here will effectively be the counter-schedule.

§ There is no extension to the 5 day period save by agreement. As this is an extremely short period the key for insurers will be to get everything organised, in advance, at stage 2.

§ Where the insurer fails to return the stage 3 settlement pack within the time period, the claimant can assume that the insurer has nothing further to add.

The stage 3 application

§ 10 business days from the date that the claimant sent the stage 3 settlement pack to the insurer, the claimant may apply to the court for the amount of damages to be determined whether or not a response has been received from the insurer.

§ The application to the court is through a modified Part 8 procedure.§ The claimant will file the following at court:

– claim form– medical report– stage 3 settlement pack form (A) and (B)– receipts supporting claims for special damages and disbursements– a notice of funding.

§ The filing of the claim form and documents set out above represent the start of the stage 3 process for the purposes of fixed costs.

§ The claim form must state whether the claimant wants the claim to be determined by the court on the papers (except where a party is a child) or at a stage 3 hearing.

§ All infant claims will require a stage 3 hearing to approve the settlement terms.

RTA protocol offer

§ Both parties are able to make an RTA protocol offer, which is set out in Part B of the court proceedings pack form.

§ It represents the final total amount of the offer from both parties. § The RTA protocol offer is deemed to be made on the first business date after the

court proceedings pack is sent to the defendant. § The offer is treated as exclusive of all interest.§ It is not communicated to the court until the claim is settled. § For the purposes of determining whether an RTA protocol offer is beaten, the court

will consider the net judgment figure ie after deduction of relevant benefits.§ Costs consequences following judgment are similar to the provisions of Part 36. A

claimant failing to beat a defendant Protocol Offer will have to pay the defendants fixed costs at stage 3 plus interest (calculated on the first day after receipt of the protocol offer).

§ Where a defendant fails to beat a claimant protocol offer, the court will order interest on the whole of the damages (not exceeding 10%), commencing on the first day after receipt of the protocol offer, together with fixed costs and interest on fixed costs (not exceeding 10%).

Acknowledgment of service

§ The defendant must file and serve an acknowledgment of service, not more than 14 days after service of the claim form.

§ The defendant must file and serve a notice of funding and a current CRU certificate. § The completion of the acknowledgment of service form allows the insurer the

opportunity of requesting the claim to be determined on the papers. § The defendant can also object to the use of the stage 3 procedure. The reasons must

be identified in the acknowledgement of service eg the claimant has not followed the RTA protocol or served additional or new evidence with the claim form. The court has the power to dismiss the claim and the claimant may start Part 7 proceedings, although the claimant is at risk of only recovering fixed costs applicable to the new process.

The stage 3 hearing

§ The court will give parties at least 21 days notice of the date of the determination on the papers or the date of the stage 3 hearing.

§ There is a presumption in favour of a paper hearing at stage 3 unless the judge directs otherwise or either party requests an oral hearing (which would be in person, not on the phone). No further new documents or evidence should be provided save where ordered by the judge.

§ Stage 3 settlement pack offers are to have the effect of Part 36. How Part 36 impacts on cases where only staged, fixed fees apply needs clarification.

§ This provision highlights the need to be making accurate counter and final offers at stage 2. Offers made in negotiations subsequent to that offer will not be carried forward to stage 3.

§ Where an award is made of a sum less than the sum already paid to the claimant, there is a risk that the claimant has spent the money and is not good for the refund.

§ The stage 3 settlement pack (B) will be lodged in a sealed envelope which will be seen by the judge only after a decision is made.

§ Where there is a paper hearing the court will notify parties of its decision with written reasons. The court will decide the interest to be awarded, if any.

§ An appeal may be made in the usual way (in accordance with the general CPR) from the stage 3 determination.

Stage 3 fixed costs

§ For claimant’s solicitor (and same for defendant solicitor):– paper hearing - £250– oral hearing - £500– a fixed success fee of 100% (CFA only) may apply for these stage 3 costs only(where the claimant has won after either variant of the hearing).

§ The sum of £500 for an oral hearing is split between £250 for the papers and £250 for the advocacy. Of course, the solicitor may also be the advocate and if so, the additional £250 may prove an attractive stream of additional revenue. Insurers and their representatives should have arguments ready to uphold the presumption of a paper only hearing.

§ It is to the stage 3 costs only that the RTA protocol offer will apply. The idea is to provide certainty for the claimant’s solicitor advising their client on the merits of an offer and the risks of proceeding to stage 3.

§ Where offers are made and settlement is reached between the issue of a claim and before the stage 3 hearing commences then fixed recoverable costs of £250 will apply plus fixed success fee at 12.5% (CFA only).

§ Stage 3 costs are to be paid within the general timescale set by CPR or as ordered by the court.

Credit hire - Flowchart

Credit hire - Commentary

Value of the claim

§ The value of the claim for the purpose of deciding if it should fall into the new process is based on the level of general damages (which includes PSLA) and injury-related special damages.

§ Although vehicle damage and/or hire costs (‘vehicle related damages’)are excluded for the purposes of valuing the claim, they can be recovered as an element of special damages within the process. This provides scope for very large credit hire claims to be tagged onto straightforward injury claims within the process.

§ The concern is the extent to which insurers will have the opportunity to assess the credit hire claims within the timescales set out in the new process. There will be limited time to chase up information and potentially limited scope to rely upon evidence to dispute the hire charges.

Hire charges handled separately

§ Hire charges are typically handled separately from a claim for personal injuries.§ Where there is a claim for credit hire the claimant must state in the CNF that the claim

is being dealt with by a third party or within the MoJ process.§ If handled outside the process and the credit hire is not settled the hire claim will need

to be brought back into the process following the stage 2 ‘consideration period’ by amending the Stage 2 Settlement Pack Form to include these ‘vehicle related damages’ defined as ‘additional damages’.

§ If handled by a third party there could potentially be a situation where proceedings are issued for a contested credit hire claim and concluded, whilst the claimant’s injury claim runs through the process. If so, a claimant may lose their right of action to make a claim for personal injury.

Early notification of claims at stage 1

§ Early notification should allow insurers to facilitate repairs if necessary and/or monitor the period of the repair and hire. Every field on the CNF is mandatory (save for referral source). The claimant is required to confirm:– whether he requires the use of an alternative vehicle and/or has been provided with the use of an alternative vehicle– if the hire is still ongoing– the name of the credit hire organisation.

§ There is no time limit from the date of the accident for the claimant to start the process. Claimants may be looking to push claims through the process, possibly so they may exit if insurers fail to respond on liability.

§ It remains to be seen whether early notification may provide defendant insurers with an opportunity to intervene in the credit hire. Although where insurers subscribe to the ABI GTA it is not possible to intervene. There is also the distinct possibility that a claimant may not appreciate that they are actually in a hire vehicle because they are under the misapprehension that it was a courtesy car/car provided by insurers.

Stage 1 and ABI GTA

§ If instructed to deal with credit hire the claimant’s solicitor should send invoices and receipts for the credit hire with the CNF or explain when they are likely to be sent to the defendant.

§ The new process suggests that only invoices and receipts are sent at stage 1, not the payment pack that would ordinarily by required under the ABI GTA. The question is will the claimant send all the required information at this early stage?

§ The hire may still be continuing. Defendant insurers should, upon notification, consider serving a mitigation questionnaire and seeking details of any alleged impecuniosity. However, if an insurer is a subscriber to the ABI GTA, it will be premature to make the enquiries at this stage.

§ The daily rate is not challengeable (unless the claimant hires a better car) until 90 days after receipt of the payment pack. Until the 90 days have passed the only queries are proof of need, what car is hired and whether it is 'like for like'. Impecuniosity questions are contrary to the terms of the ABI GTA and it is unlikely that period can be investigated as the claimant will still be in hire.

Between stages 1 and 2

§ It may be some time before the medical evidence to commence stage 2 is obtained and approved by the claimant. Insurers should be looking to narrow the credit hire issues during this period. Otherwise, following the end of the consideration period at stage 2 there will be only a very limited 15 day period for insurers to consider and respond.

§ Under the GTA insurers have 30 days before penalty charges start accruing. It will be fundamental that insurers investigate the hire as soon as the claimant off hires in relation to period and once the matter is outside the 90 day period as to rate. Insurers should be requesting the Mitigation Questionnaire and Hire Period Validation Form as provided under the ABI GTA. They should be checking loss of use dates with the insurers/garage/CHO and clarifying if the claimant is impecunious/requesting documents.

Stage 2 ‘additional damages’ claim

§ If at the end of the Stage 2 consideration period the claim has not settled, but there are outstanding ‘additional damages’ being dealt with outside of the process the claimant must at this point bring them into the new process.

§ The claimant must notify the defendant that there is a separate claim, obtain all relevant information and make a separate offer by amending the Stage 2 Settlement pack Form.

§ This amended settlement pack should therefore include evidence in support of the credit hire claim. This will be the only evidence that a claimant will be allowed to rely upon in support of the credit hire claim unless the court otherwise directs.

§ Within 15 days of the claimant sending the amended settlement pack the defendant must either agree the offer or make a counter-offer.

§ This counter offer will be the only opportunity for the defendant to put forward their evidence and arguments to dispute the extent of the credit hire claim.

§ Insurers will need to have their systems set up so that if there is a continuing dispute, they can anticipate and be in a position to properly put their case in response, or risk losing the opportunity to argue the points. Defendants must be primed to set out their arguments disputing the hire within this 15 day response period.

§ If the credit hire is agreed during this 15 day response period then insurers must pay the agreed amount of the ‘additional damages’ within 10 days.

§ If during this period the ‘original damages’ are agreed but the ‘additional damages’ are not the claim will exit the process and claimant may issue Part 7 proceedings to attempt to recover the disputed hire charges.

§ If neither are agreed then the matter proceeds within the process.

Stage 3

§ The Court Proceedings Pack must not raise anything that has not been raised in the Stage 2 Settlement Pack Form.

§ If an insurer is to use evidence to counter the ‘additional damages’ such as an engineer’s report/vehicle report, a rate surveyor report, and valuation evidence such as Glass’s Guide, this evidence will need to be included within the response to the Stage 2 Settlement Pack.

§ There remains concerns as to the extent that courts will look at the evidence presented by either party within credit hire disputes within the new truncated process.

§ At Stage 3 parties may not rely upon evidence not served within the Settlement Pack and counter-offer unless the court orders otherwise and gives directions. Where further evidence must be provided by any party and the claim is not suitable to continue under Stage 3 then the court will order that the claim will continue under Part 7 and allocate the claim to track and give directions.

§ The expectation is that if further evidence is required to resolve an ‘additional damages’ claim that the court is likely to direct that the claim leaves the process. Any degree of complexity to the credit hire dispute, such as an enforceability argument, is likely to force the court’s hand in allowing a claim to exit.

§ What weight will the judge attach to the evidence at a paper hearing? There may be some benefits of a paper hearing in the right case in that insurers will have the opportunity to put in spot rate evidence and the court will not have counsel for the claimant raising the usual high expectations as to the quality of the evidence. This may make the court more inclined to accept the rate evidence subject to the claimant being allowed and the judge weighing in the balance rebuttal evidence.

Stage 3 oral evidence?

§ There appears to be no provision for oral evidence within the process. Would the parties be able to apply, the rules are not wholly clear?

§ If oral evidence is required is it likely that the claim will be deemed to be too complex to remain within the process?

§ For oral hearings, it seems the opportunity to cross examine will be lost. The claimant’s solicitor will be able to present the claimant’s evidence as they wish. We are therefore likely to see statements saying ‘I required a like-for-like vehicle because I needed a sturdy, safe and reliable car’ when now on cross-examination a claimant may accept on the stand that a lesser vehicle would have sufficed.

Stage 3 further offers

§ Where directions are provided, or the evidence provided on the part of the claimant is not sufficient for the defendant to make a proper assessment, there remains no guidance as to what if any further offers can be made.

§ There must be arguments with regard to any Part 36 cost consequences if there is insufficient evidence to assess the reasonableness of the credit hire claim. Yet the rules allow for the Part 36 costs consequences to only follow the RTA Protocol offer, and further that any other offer must not be communicated to the court at all.

§ This further supports the expectation that where a court considers that further evidence is required that the claim will leave the process.

§ There must be consequential costs arguments limiting the costs to the appropriate fixed costs, if a claim including credit hire ends up as a Part 7 claim, when the claim could and should have remained as a Part 8 claim had the claimant provided sufficient evidence to properly assess and evaluate the credit hire.

Stage 3 tactical balance

§ There will remain a balance to be found between certain hire disputes that insurers would want to be dealt with under this system (given question marks over the evidence that will be able to be put forward, and the fact that the hearing will be dealt with by way of paper evidence only with no oral evidence)and other extensive hire disputes that insurers would want to be taken out of this process.

§ If a defendant objects to the use of the Stage 3 procedure then the defendant must file those objections with their Stage 3 Acknowledgment of Service and reasons must be given why there is such an objection. The defendant must cogently argue to exit the process if there is need to put the claimant to proof of the claim, there is inadequate evidence in support of ‘additional damages’, and/or on the disputed issues there is a need for oral evidence or a realistic reason to cross examine the claimant.

Fraud - Flowchart

Fraud - Commentary

Allegations of Fraud

§ Prior to publication of the Pre Action Protocol and amendments to CPR it was thought that an allegation of fraud would be a general exit trigger at any stage. The rules now finalised in statutory instrument, though, make no explicit reference to a claim exiting the process once an allegation of fraud is raised.

§ Defendants and their insurers will need to have their systems set up for fraud screening and be ready to use ‘exit points’ to remove claims from the process where they want to investigate fraud suspicions and issues more thoroughly, for example, not responding or contesting liability at Stage 1.

§ Alternatively admissions made in a case handled under the RTA Protocol will be binding unless an application is made under CPR 14.1B to withdraw an Admission made under the RTA Protocol.

§ The onus is on the party alleging fraud to prove it and the standard of proof, whilst on the balance of probabilities, is generally for fraud cases a high burden. No pleading of fraud can be made and maintained without clear and cogent evidence for which, ultimately, one is reliant upon witnesses and experts.

§ Whilst there may be circumstances where the parties are known fraudsters, or there is clear evidence of fraud, or the claim is part of a wider fraud ring, it would be a rare circumstance indeed where there would be sufficiently cogent evidence to found an allegation of fraud within the notification timescales proposed under the reforms.

§ The timetable is such that it is very much in the fraudster’s interests to enter the process at an early stage. With automatic costs provisions and payments of offers and interims in full, the incentives are there for fraudsters to run low-value sham litigation through the new streamlined process before the fraud is spotted.

Notification of referral source

§ This is an optional field on the CNF. It is thought that this information may enable the insurer to know more about the validity of the claim at an early stage. Whilst it may help with management information capture, it is more than likely that the claimant solicitors will omit this field, raising concerns as to the benefit that may be derived from a non-mandatory field.

Stage 1

§ Insurers (and defendants) will need to have their processes set up to screen cases for fraud indicators within the initial 15 day period to remove suspicious claims from the process. The timescales highlight the need for slick processes to cross reference the claim details against a fraud indicator checklist and fraud databases such as MIAFTR and CUE.

§ Insurers should be wary of raising allegations of fraud without cogent evidence. The insurer does not have to put forward a substantive case of fraud and can put the claimant to strict proof – Kearsley v Klarfield (2005).

§ If there are concerns or suspicions, insurers will want to remove the claim from the process. Where the insurer does not respond or a denies (with reasons) liability, the claim will exit the process without stage 1 costs becoming due. Hence both are options for insurers where there are some fraud indicators but the evidence is relatively weak at that stage.

§ Insurer’s preference may be simply to not respond so the claim exits the process without insurers having to provide any detailed reasons for a denial and putting a claimant on notice of the extent of insurer’s investigations.

§ Remember, however, that once a claim has left the process it may not re-enter it, which highlights the acute nature of the decision to be made as to whether there are enough indicators or reasonable suspicions. If the claim leaves the process, the insurer will have lost the benefit of the new fixed costs regime. The claim will be handled – and costs will arise – in accordance with the relevant pre-action protocol and/or the CPR at large.

§ Equally, insurers should be aware that if they admit too soon they may end up paying £400 in Stage 1 costs for a fraudulent claim.

§ An ‘admission of liability’ is defined as meaning, firstly, the accident occurred, secondly, that the accident was caused by the defendant’s breach of duty and, thirdly, the defendant caused some loss to the claimant, the nature and extent of which are not admitted

Stage 2

§ CPR Part 14.1B ‘Admissions made under the RTA Protocol’ provides an opportunity for a defendant, by giving notice, to withdraw an admission of causation during the Stage 2 ‘consideration period (or any extension to that period). Any other withdrawal of anyadmission, otherwise, must be by way of application after the commencement of proceedings and requires permission of the court unless agreed by all parties consenting.

§ There is no opportunity to exit the process at Stage 2 because of fraud concerns unlessby default, such as not responding to a Settlement Pack, disputing a request for an interim and/or not paying interim or costs at Stage 2, albeit insurers may still be bound by any admission of liability at Stage 1 and will need to adopt the appropriate strategy to look to withdraw that admission at the appropriate time.

§ Any admission of liability made at Stage 1 is binding until an application is made pursuant to Part 14 once proceedings have been issued. Dependent upon when insurers have cogent enough evidence to support a withdrawal of an admission, an application to withdraw will need to be made either at Stage 3 or on issue of Part 7 proceedings if the claim has exited the process by default.

§ For an application to withdraw an admission to succeed the usual Part 14 rules apply and the defendant will need to show that there are good prospects of success of any defence, that there is no prejudice if the admission is withdrawn, alternatively insurers position will be prejudiced if not withdrawn, new evidence may have come to light and it is in the interests of justice that the admission is withdrawn.

§ If the insurer wishes to question or deny causation (giving reasons) the claim can exit the process on notice without the need for an application at Stage 2 and this, for example, enables an insurer to preserve their denial on causation grounds in a low velocity impact claim.

§ However, the cost of obtaining medical records will be allowed as a disbursement only where the medical expert has identified the need for them. The insurer will need to be in an informed position via monitoring their systems and processes of fraud screening to pick up on those cases where there may be such causation issues.

Recovery of sums paid during the process

§ The MoJ envisages that insurers will be able to take whatever steps they consider appropriate to recover money paid to the claimant such as Stage 1 costs or any interim/non settlement payment of damages and costs at the end of Stage 2.

§ Therefore enforcement proceedings may need to be pursued. At this point, though, there may well be complications with regard to the validity of the allegation of fraud. It may not have been tested or proven and what if a claimant has already spent the money paid (eg by way of an interim payment)?

§ It must also be noted that there are potentially serious regulatory issues in paying over money where there are suspicions of fraud and caution should be exercised over making payments where there are suspicions raised.

Exit points commentary

Claims outside scope

Criterion Test Procedure/law Costs regimeClaim type

Anything other than a road traffic accident claim is excluded

– –

Location Accident outside England & Wales1

Relevant local law Relevant local law

Value Injury PSLA under £1,000 Small claims track CPR 27.14Value Injury and associated

specials over £10,000CPR and pre-action protocol

Fast-track if total claim under £25,000

General costs rules –'predictable' costs do not apply

Accident date

Before implementation (30April 2010)2,3

CPR and pre-action protocol

Frast-track if total claim under £25,000

General costs rules –‘predictable’ costs may apply if under £10,000 and if not litigated

At fault driver

Untraced MIB untraced drivers agreement

MIB untraced drivers agreement

1. The Rome II regulation means that claims arising from accidents outside England & Wales but involving parties with a common habitual residence in England & Wales are subject to English law. Hence such claims could be within the scope of the new process.

2. Parties may agree to apply the new process to claims arising from accidents occurring before implementation. If so, the new staged costs will apply.

3. Therefore – combining notes 1 and 2 – the new process may potentially apply to claims arising from accidents which happen before 30 April 2010 either elsewhere in the UK or abroad.

Fraud – a general exit point

Party(ies) defaulting

§ trigger event(s)

Procedure / law

Costs regime and comments/consequences

Insurer

§ alleging fraud at any time


General costs rules – ‘predictable’ costs may apply if under £10,000 and if not litigated

The claim will leave the process and the staged costs will not be payable

Insurers may take 'appropriate' steps to recover any money paid (eg an interim payment or stage 1 or stage 2 costs)

Exiting on notice?As a general principle, the MoJ envisages that when an exit point is triggered, the party not in default must give notice, within 10 days, that the claim is exiting the process. If no such notice is given, then the claim stays in the process despite the default.

Stage 1 exit points


§ trigger event(s)

Procedure / law Costs regime and comments/consequences

Claimant solicitorInsurer

§ mandatory CNF field omitted, rendering insurer unable to decide liability



However, new three stage costs may apply if the court subsequently considers solicitor could have obtained omitted information

Insurer

§ denying liability§ failing to respond§ responding later than

15 business days (30 for MIB claims)



Stage 1 costs not due

The claim enters the pre-action protocol at the start of the 3 month investigation period

Insurer

§ alleging contrib. (other than seat belt)

Stage 1 new process then CPR and pre-action protocol


Stage 1 costs of £400 will be payable

The claim enters the pre-action protocol at the start of the 3 month investigation period

Insurer

§ failing to pay stage 1 costs, due within 10 business days after the 15 day admission period

Stage 1 new process then CPR and pre-action protocol


Stage 1 costs not due

The claim enters the Pre-action Protocol at the start of the 3 month investigation period

Insurer

§ late payment of stage 1 costs

CPR A claimant must give notice of intention to exit the process, otherwise the claim remains in the process

If the claim exits at stage 1 the fixed success fee of 12.5% is not due because the claim has not settled.

Stage 2 exit points


§ trigger event(s)


Insurer

§ refusing claimant’s offer, within 15 days of receiving settlement pack

§ failing to make a counter offer within 15 days of receiving

§ making a late counter offer (without having agreed an extension)

Stage 1 and stage 2 new process then CPR


Stage 1 costs of £400 have already become payableStage 2 costs of £800 are not payableAll Pre-action Protocol steps have been completed. The claimant decides the next action

The claimant may issue proceedings immediately

Insurer

§ denies or takes a causation point having seen medical report


General costs rules – ‘predictable’ costs may apply if under £10,000 and if not litigated.

Stage 1 costs of £400 have already become payable.

All Pre-action Protocol steps have been completed. The claimant decides the next action.

The claimant may issue proceedings immediately.

ClaimantInsurer

§ seatbelt case§ dispute of fact

requiring evidence from lay defendant and/or medical expert


General costs rules – ‘predictable’ costs may apply if under £10,000 and if not litigated.

Stage 1 costs of £400 have already become payable.

The Pre-action Protocol steps which may have been completed are not specified (probably all).

Claimant

§ pursuing, after the insurer’s refusal, an interim payment greater than £1,000


Claimant solicitor will issue Part 7 proceedings

Stage 1 costs of £400 have already become payable

Stage 2 costs of £800 are not payableClaimant

§ child applying for any interim payment




The new process does not provide for interim payments for children. The claimant must issue proceedings in the usual way

If the claim exits at stage 2 the fixed success fee of 12.5% is not due because the claim has not settled.

Stage 3 exit points


§ trigger event(s)


ClaimantInsurer

§ non-quantum dispute about credit hire or vehicle damage


Not specified

General costs rules apply – any sanction will be through the court where the claim could have remained in the processStage 1 costs of £400 have already become payable

Unlikely that stage 2 costs will be payable, likely the claim will exit the process

Claimant

§ child case in which judge requests further evidence




Stage 3 oral hearing costs of £500 and approval costs of £500 are not payable

If the claim exits at stage 3 the fixed success fee of 100% – which applies to this stage only –is not due because the claim has not concluded.

Late payment procedures (not strictly exit points)


§ trigger event(s)

Procedure/law Costs regime and comments/consequences

Insurer

§ late payment of agreed damages

Stage 1 and stage 2 Claimant applies (detail not specified) to the court for an order to pay

The court will determine via a paper hearing unless the judge directs otherwise

Any outstanding costs and disbursements will be dealt with at the same time

Insurer

§ late payment of stage 2 costs

Stage 1 and stage 2new process

Claimant applies for payment to be enforced under CPR 44.12A

Claims at the financial margins

Margins Test Costs regime and comments/consequencesLower

§ PSLA concluded at under £1,000

Reasonable prospects at outset of exceeding £1,000 PSLA

MoJ intends that:

§ stage 1 costs of £400 and stage 2 costs of £800 should be paid on all such claims

§ the claim will exit the process with the insurer notifying the claimant that it is valued at less than £1,000 PSLA

Note that these provisions could amount in practice to an effective lowering of the Small Claims Track limit, because all cases valued in a bracket of, say, from £800 – £1200 would be argued to be costs bearing

Upper

§ Claim within the process exceeds £10,000 PSLA

Later becomes that claim exceeds £10,000 PSLA

MoJ intends that:

§ the claim exits the process with the claimant notifying the insurer that it exceeds £10,000

§ if the court later finds that it unreasonably exited the process, costs may (not ’must’ or ‘will’) be limited to the maximum of the staged costs in the new process.

Note that the value used by the MoJ – ie exceeds £10,000 PSLA – is different to that used to define the scope of the process. There, the test is that the general damages and associated specials (excluding hire and repair/damage) should be under £10,000. It is not clear if this difference is a mistake or deliberate

If you have any further questions on the content, please contact one of the editors.

Berrymans Lace Mawer is regulated by the Solicitors Regulation Authority and accredited to quality standards ISO 9001 and Lexcel. This e-bulletin Is designed to keep readers abreast of current developments, but is not intended to be a comprehensive statement of law and no liability for errors of fact or opinions contained herein is accepted. Please take professional advice before you apply this e-bulletin content to your particular circumstances.

introduction april 2010 - blm reforms_apr10.pdf · § if there is no element of personal injury the...

Documents