Lea Brocklebank reviews proposed changes in personal injury compensation
The ABI proposals, set out in its care and compensation paper, serve as a welcome contribution to a much needed debate. It is worth remembering that in July this year we will celebrate the tenth anniversary of Lord Woolf's final report, Access to Justice.
The report identified many failings in the civil justice system including that it was too expensive in that the costs often exceed the value of the claim. It also found it was too slow in bringing cases to a conclusion. And that the system was too uncertain: the difficulty of forecasting the cost and duration of litigation was said to induce the fear of the unknown, and the process was described as incomprehensible to many litigants.
It is well known that Lord Woolf's report recommended many far reaching reforms to the existing civil justice system to address these and many other problems, many of which were incorporated into the current Civil Procedure Rules. Yet many of the problems continue.
Furthermore, additional challenges have arisen. An unfortunate conjunction of conditional fees and the departure of many small high street legal practices has created a suitable environment for claims management companies (CMCs) to exploit. These CMCs have interposed themselves between injured claimants and their professionally qualified lawyers.
Justly criticised
Some of their advertising and practices have been justly criticised. Other problems stubbornly persist: legal costs remain disproportionately high in low and moderately valued claims, and the time it takes to progress many claims is unacceptably long. So what can the industry do about it?
The ABI's stated objectives of delivering faster, fairer and more accessible compensation are laudable. The fact that an insurer wishes to be offered an opportunity to make a decision on whether or not to pay a claim before additional costs are incurred as a matter of course, has to be right.
It would help if claimant solicitors were more open in giving clear costs predictions at the outset of their involvement - in the letter of claim.
Indeed claimant solicitors should be discouraged from cost building before a letter of claim has been sent, and they should be penalised for doing so where this has occurred unreasonably in the event that an admission is subsequently made within the three-month period.
Under paragraph 2.10 of the Personal Injury protocol, no further steps to investigate should be undertaken until the defendant has had an opportunity to respond to the claim.
The current model is front loaded. It should be reversed, as the majority of claims are relatively straightforward and simply don't need extensive investigations and evidence gathering to enable a decision on liability, or an offer on quantum to be made.
For those cases that are not straightforward the subsequent inquiry should be focused. So much unnecessary work and duplication can be taken out of the system resulting in overall costs savings. Who can argue with this?
The proposal for a new process for relatively straightforward claims worth up to £25,000, involving fixed timetables, independent arbitration and free legal advice above the small claims limit has promoted welcome debate.
There are obvious and intended similarities with the new process for resolving claims before they reach the courts and the Personal Injuries Assessment Board (PIAB) which was introduced in the Republic of Ireland in 2004.
The ABI has been quick to point out, however, that it is not advocating the same process but (perhaps to alleviate some of the concerns of commentators) it is worth noting the subtle but important differences between the two jurisdictions.
For example, in the Republic of Ireland general damages are significantly higher, and at the time the PIAB scheme was introduced there was no equivalent to our Judicial Studies Board (JSB) guidelines and no pre-litigation conduct was enshrined in the pre-action protocol.
Behavioural shift
A different approach is needed to promote a behavioural shift, and this seems to be acknowledged by the ABI in its proposals.
Those that represent claimants have been quick to point out that the JSB guidelines exist and special damages are not readily amenable to prescribed tables, and so they question the concept of a new public tariff for general damages.
The difficulty with the JSB guidelines is that they are neither very predictable nor (for the lay person) easy to understand. By offering ranges of values (as opposed to a fixed) amount they leave the way open for argument and debate. A new tariff offering greater certainty and clarity for low value claims would be welcomed. It should remove the need for Part 36 offers and have the advantage of resulting in a less adversarial and less stressful experience for the claimant.
One point that would need to be addressed is whether any tariff would have to be consistently applied to claims within and outside the scheme.
Without this, inconsistencies would arise between settlements achieved within the new process and those concluded either in legal proceedings or claims that fell outside the scheme.
A criticism that has been raised against the ABI proposal relates to the suggestion that insurers are really only in the business for making money for their shareholders.
Others maintain that those representing claimants are also in the business of making money. The ABI is quick to point out that its proposals put the claimant at the heart of the issue.
The question to be addressed appears to be one of motive and trust. An easier, faster and less expensive system is in all parties' interests. '
' The more transparent the process becomes the less reason there will be to doubt any parties' motives; questions of trust should fall away.
At present, less scrupulous claimants who deliberately exaggerate their claims face few if any personal sanction. Clearly, exaggeration and fraud does occur, despite the fact that every statement of case must now contain a clear verification statement.
This is not only of huge concern to insurance companies; fraudulent claimants also put their own legal representatives at risk of facing costs sanctions that they cannot necessarily recover.
Sanctions that have teeth and act as a deterrent against fraudulent or exaggerated claims are welcome.
Under the current system if a claimant brings an exaggerated claim and is unsuccessful the exaggerated part falls away, but he still recovers the legitimate claim with possible costs consequences to his solicitors. The concept of penalising claimants by reducing the amount of damages they receive in their pockets is a good one.
Some of the ABI's suggestions have been implemented within the recent amendments to the CPR. Litigation is now stated to be the last resort in the amended Personal Injury Protocol.
Parties are now required to consider alternative dispute resolution (ADR) and rehabilitation at an early stage. Costs sanctions apply where these steps are not taken.
It remains to be seen how those sanctions are applied by the courts.
There is likely to be widespread support for tax incentives for rehabilitation, a new code of practice that improves treatment responses to accident injuries and an extended role of the HSE and NHS in promoting rehabilitation.
In conclusion, there are a number of areas where the ABI proposals are either likely to find support or where they have already been implemented. The ABI's proposals were published in December 2005 during a frenetic period of reform including:
The sheer volume of these proposals and innovations raises a real danger that we could approach the task of reforming the delivery of justice in a confused and discordant fashion, producing yet further uncertainty.
It is important that all the various stakeholders involved in the personal injury claims process cooperate in an attempt to improve a system that is not without its flaws.
Government has a responsibility to continue to promote discussion and debate so that representative bodies and stakeholders can contribute and participate.
Going back to Lord Woolf, in his interim report he said: "If the profession is not willing or able to meet this challenge (for example, reducing legal costs), then it should not imagine that the status quo can be retained.
"More fundamental measures, possibly involving the removal of at least moderate-sized injury claims from the litigation system, would have to be envisaged" (Interim report, chapter 7, paragraphs 24 - 25). IT
' Lea Brocklebank is vice-president of the Forum of Insurance Lawyers (Foil) and a partner at Bond Pearce
