Will plans to extend fixed recoverable costs keep the insurers up at night?

Plans to apply fixed recoverable costs (FRC) to virtually all claims in civil cases will undoubtedly take unnecessary costs out of the system and give greater cost certainty to compensators. Good news for the insurance sector.

But, within the detail of how these changes could be applied, which the Ministry of Justice (MoJ) consulted on earlier this year, are proposals that would diminish these gains.

There are myriad concerns, but three stand out as things that would keep the insurance sector awake at night.

Too little disclosure

First is the proposal to limit the disclosure of evidence in non-personal injury claims.

This would mean that many complex cases would be subject to the same standard of evidence as small claim track matters; the documents a party intends to rely on or those ordered by the courts only. To take credit hire cases as an example, where there is a degree of intricacy that necessitates full and frank disclosure, instinctively this proposal doesn’t feel right.

Applying a hypothetical but probable scenario to stress test the proposal reveals its critical flaw: a claimant could simply produce an invoice as evidence of suffering loss. The implications of this would, frankly, be alarming.

Our hope, as outlined in our own submission to the consultation, is that all intermediate cases are subject to standard levels of disclosure.

Bands open to abuse

The proposals include a significantly stepped increase in the banding for FRC claims valued at less than £25,000 to those between £25,001 and £100,000. This makes the size of the prize for claimant solicitors much greater and will surely act as a huge incentive to value claims above £25,000.

Without detailed guidance on the nature and complexity of cases that belong under each band, this will surely lead to cases being pursued in vain, wasting court time and inflating costs.

As well as providing clarity, we would welcome a penalty fee being introduced for claimant solicitors that challenge banding allocations, only to see it dismissed for the inclusion of irrelevant factors in a hollow bid to prove complexity. This would be an effective counter to any perverse incentives.

The highest benchmark, Band 4, should be reserved for only the most serious and complex matters. For example, housing associations and their insurers facing disrepair claims, under current proposals, would see them allocated to Band 3 or 4 as standard. But a large volume of cases would be applicable under Band 2, in our view, because the costs paid frequently dwarf the damages as a result of an inflated banding.

It is also worth highlighting that the proposals do not address the problem of courts fixing trial dates of intermediate band cases on allocation, thereby pushing fixed costs in to the next band. By listing the matter for trial at such an early stage, there’s less incentive for claimants to consider early resolution post issue of proceedings.

Hearing evidence from audiologists

The proposals will extend FRC to hearing loss claims.

Audiology, in the words of the British Academy of Audiology, is a ‘challenging and expanding field’, and the use of audiograms in support of claims is sometimes critical evidence when contesting Noise Induced Hearing Loss (NIHL) claims.

Some work has been done around the accreditation of audiologists, by the Claimant Working Group for the Civil Justice Counsel on NIHL claims. But it remains provisional and, in the meantime, the reliability and repeatability of audiograms is poor.

Fundamentally, audiologists must be independent of the claims process and a robust accreditation scheme needs to be finalised. This would help eliminate so-called ‘over diagnosis’ of NIHL.

We put forward a comprehensive list of what the accreditation scheme should include in our response to the Ministry of Justice, covering basic tenets you would expect of expert testimony, like a random and independent testing of work undertaken by accredited providers.

The verdict

The MoJ is expected to announce its findings and make its recommendations in Sptember 2019, after the consultation formally closed in June 2019. I’ve touched on just three aspects here that give rise to concerns but there are others: the risk of the system being gamed through multiple claims, the 35% uplift in FRC if a defendant’s Part 36 offer is defeated and the use of specialist counsel. Our submission to the consultation ran to over 10 pages.

No legislation is perfect, alas, but if the three key areas outlined here are taken into consideration than the FRC reforms will deliver swifter and more equitable justice for claimants and defendant insurers alike.

Rob Williams is head of insurance at Weightmans LLP, a defendant insurance solicitors