Caught up in a tug of war

When the Department for Constitutional Affairs – now the Ministry of Justice (MoJ) – waded into the complex issue of personal injury reform, it inadvertently became stuck in the middle of a heated tug of war.

Some in the industry say the government initially may not have realised what a hotbed issue personal injury is – which could explain why, almost four months past the due date, there is still no sign of the MoJ’s reform proposals and why there is now an expectation that the government might water down or scrap its plans altogether.

When the MoJ released its consultation paper, the proposals were met with mixed reaction. Claims solicitors applauded the decision to leave small claims at £1,000, while insurers were disappointed it wasn’t raised to the £5,000 they’d suggested. The intention to introduce fixed costs to all forms of PI claims confused both sides as to what the fees would be. And insurers railed against plans to shorten the timeframe for admitting liability from three months to 30 days for public and employer’s liability cases, and 15 days for motor cases – a move backed by solicitors.

Many within both the insurance and legal sectors are now questioning whether the proposals will ever materialise or whether they will simply be a watered-down version to placate opponents.

So what will happen to the personal injury claims system – which many see as archaic and costly – if the government

doesn’t get on board and legislate change?

Nick Gunter, head of technical claims at Fortis, says that he is optimistic the proposals will eventually be released, but in the meantime he thinks that insurers may have to take matters into their own hands.

Fortis has already been in talks with claimant solicitors to come to compromised decisions on fixed fees and early admission of liability.

“For the vast number of claims you could have a simple set of solutions. Some of the larger solicitors’ firms run on a more business-like basis and may want to streamline that business by reducing the amount of letter writing and debate by pre-agreeing to a set of actions,” says Gunter.

Dave Williams, AXA claims director, agrees and says that pilot schemes between insurers and solicitors have achieved some success. Timetables and codes of practice on admission of liability have been established.

Williams says: “Even if we don’t get legislation, there will be a natural evolution of the situation that will improve things. The old model was based on huge inefficiency.”

Simon Allen, a managing partner at Russell Jones and Walker Solicitors, says that the situation could be vastly improved simply by working within the Personal Injury Pre-action Protocol, formed in 1999.

The protocol, part of the Civil Procedure Rules, was designed to increase the benefits of early but well-informed settlements which satisfy both parties.

“The protocol seems sensible,” says Allen. “The issue is why it isn’t perceived to work.”

Allen says that he’s optimistic the protocol could work if discussion between both sides irons out certain kinks.

That said, the shortfalls of the protocol have traditionally surrounded a lack of compliance enforcement.

Solicitors argue that insurers are notorious for failing to conclude liability investigations within the existing three-month timescale. A lack of cost sanctions means there is less incentive to do so.

On the other side, the existing personal injury protocol has no measures in place to protect against solicitors who do not respect the conditional fee arrangements.

The protocol also doesn’t address the issue of referral fees which some insurers say is responsible for keeping legal costs so high.

Playing referee on such a contentious issue cannot be easy. Fortis’s Gunter says he believes that is why it is taking so long for the government to release its proposals.

The government has given no indication when its response will be released – a spokesman for the MoJ says that the department is still wading through the 300 replies it received to its consultation paper – but insurers have vowed they will not allow the issue to be swept under the carpet.

Gunter says that the MoJ can expect some heavy lobbying, while Allen says that he is confident a mutually beneficial solution can be found. “These are reasonable people,” he says.