Playing the claim

A lot of discussion surrounded claims process reform last year. But maybe this year will witness some tangible improvements in the way our legal system delivers justice to claimants and compensators alike.

The Association of British Insurers (ABI) set the agenda in its ‘Care and Compensation’ paper, with its stated objectives including delivering faster, fairer and more accessible compensation for injured claimants. The Law Society responded with its ‘Compensation Fast and Fair’ paper and the Association of Personal Injury Lawyers with its paper ‘Streamlining the Claims Process’. Furthermore, the Department for Constitutional Affairs (DCA) is expected to begin a review of the claims process imminently.

Problems with the system
Few can argue that the field of personal injury (PI) litigation remains a distinctly adversarial forum, where claims can still take years to conclude and at a cost that regularly exceeds the value of the claim, often by a large margin. There has been a radical overhaul of the administration of justice and reform on an unprecedented scale over the past 10 years, but even so there exists a range of problems with the current system.

Perhaps most notably the combination of conditional fees and the departure of many small high street legal practices has led to a bewildering range of claims management companies that have interposed themselves between injured claimants and professionally qualified lawyers. The Access to Justice Act 1999 has proved to be something of a Pandora’s box.

It is also tempting to question what possible public good comes from the substantial referral fees that claims management companies receive and whether the industry as a whole would be better if referral fees were once more prohibited – the ethical case against this unsavoury trade is surely as strong as it ever was.

‘After-the-event’ insurance premiums and success fees arguably engender a more belligerent approach from claimant solicitors, especially where they have invested in a referral fee and ‘chargeable’ time has been committed in investigating and formulating a claim. All this has fuelled, not calmed, the adversarial culture that Lord Woolf criticised back in 1997.

It is unfortunate that Woolf’s model is front-loaded. The majority of claims are relatively straightforward and so it makes no sense for extensive investigations and evidence-gathering to enable a decision on liability or an offer on quantum to be made in every case.

Where cases justify enquiry because they are not straightforward, they should be more focused and streamlined, hopefully with greater cooperation between the parties, then much unnecessary work and duplication could be taken out of the system, resulting in overall cost savings. This might result in a speedier resolution of claims, which is surely in all parties’ interests, claimant and compensator alike.

Paragraph 2.10 of the DCA’s ‘Pre-action Protocol for Personal Injury’ prohibits further investigative steps until the defendant has had an opportunity to respond to the letter of claim. The ABI has called for an insurer to be offered an early opportunity to make a decision on whether to admit a claim before investigative costs are incurred. Claimant solicitors should be discouraged from costs building before a letter of claim is sent and should be penalised for doing so where this has occurred unreasonably when an admission is subsequently made within the three-month protocol period.

Exaggerated claim sanctions
The ABI also called for sanctions against less scrupulous claimants who deliberately exaggerate their claims. While every statement of case now contains a clear verification statement, exaggeration and fraud still occur. This is clearly of huge concern to insurance companies. Claimants also put their own legal representatives at risk of facing cost sanctions that they cannot necessarily recover.

Under the current system, if a claimant brings an exaggerated claim and is unsuccessful, the exaggerated part falls away, but generally the claimant still recovers the legitimate part of the claim with possible costs consequences. There should be sanctions that have teeth to act as a deterrent against fraudulent or exaggerated claims. Fraudulent claimants should be penalised. The ABI’s proposal is to reduce the amount of damages such claimants receive – hitting their pockets is a sound and fair approach.

Recent years have seen spiralling clinical negligence claims and costs, as well as increased fear within the NHS over ‘defensive’ medicine practices and other less savoury implications from the US, such as the ‘compensation culture’.

In October 2005 we also saw the launch of the NHS Redress Bill and the unveiling of a new scheme applying to claims arising out of NHS hospital care. The bill was enacted in November 2006, but is not yet in force pending the formulation of subordinate regulatory provisions necessary for the operation of the scheme. In light of the forthcoming DCA claims process review, one wonders whether this will serve as a progenitor of similar schemes across a wider range of PI claims.

A call for change
It has also been proposed that Section 2(4) of the Law Reform (Personal Injury) Act 1948 be amended by exempting clinical negligence claims, thus restricting the cost of private medical treatment and care and enabling the NHS to undertake to provide or fund a specified package of care or treatment at NHS rates.

Some of the ABI’s suggestions have already been implemented within amendments to the Civil Procedure Rules. Litigation is now stated to be the last resort in the DCA’s amended PI protocol. Parties are now required to consider alternative dispute resolution and rehabilitation at an early stage and costs sanctions apply where those steps are not taken. It remains to be seen, however, how those sanctions are applied by the courts.

The unveiling of the DCA’s claims process review is awaited with great interest by all parties. While it is anticipated that they will consult on increasing the small claims limit, they are also expected to consult on the claims process and whether it should be more streamlined and consensual. A failing of the current system is that it is too cumbersome, both in time and expense, and costs remain at the top of the agenda. Clearly the system needs streamlining in terms of process, costs and economies of scale.

The current system is not sustainable and the DCA review and the Government’s response will be the principal issues facing the market in 2007.

Lea Brocklebank is a partner at Bond Pearce and president of the Forum of Insurance Lawyers