Introduction 8 December 2009 reforms(6).pdfA major change is imminent in the handling of road...

Introduction 8 December 2009

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.

The Civil Procedure Rules (CPR) which will govern the new process have yet to be published. We expect this to happen in the next few weeks and we will update you again on publication, and should any changes emerge in the run up to implementation next April.

Pending publication of the CPR update there are, inevitably, areas of uncertainty, notably: the detail of the application of Part 36, finding insurers’ best response to an inadequately drafted notification, and dealing with the rapid transition from stage 2 to stage 3.

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

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Stage 1 - Flowchart

Do general damages and special damages (excluding damage to the

vehicle and hire costs) fall in the bracket £1,000 to £10,000? Claim falls outside the scheme and

CPR will apply

The claimant submits a Claim Notification Form (CNF) for the new

claims process

Is the CNF complete? Is claimant insurer known? What if certain

information is not provided?

The insurer should (probably) request the missing information

The insurer should consider fraud screening of the claim

Does the claimant provide sufficient information so as to enable the insurer to make liability decision within 15 days

Are there any fraud indicators?

Claim will exit the process

Is there a claim for credit hire? Insurer does not admit liability in 15 days and claim exits the process

Insurer should consider mitigation questionnaire and seek details of

any alleged impecuniosity of claimant

Does the insurer admit liability within 15 business days?

Does the insurer pay the fixed recoverable costs of £400 within 10 days

from the end of the 15 day period allowed for responding to the CNF?

End of stage 1

The claim exits the process

The claim reverts to start of CPR Pre-action Protocol 90 day

admission period

No

Yes

Yes

Yes

No

YesNo

No

Yes

No

Yes No

Yes

No

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

§ All parts of the Claims Notification Form (CNF) are mandatory – save that the claimant need not provide details of the referral source.

§ Some claimants may not provide complete information (eg TBA). Insurers should then immediately seek any further information which is needed.

§ 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.

§ Other than concerning liability (immediately above) there is no specific provision about defective CNFs. It would appear that an insurer could, by admitting, waive any non-liability related defects so that the claim would stay in the process. Doing so might, however, in certain circumstances, create subsequent complications (for example if the claimant turned out to be a minor and therefore entitled to higher costs, due to the additional quantum advice and approval hearing fees).

§ 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 MoJ’s stated aim is that the admission will reflect the policy intention that the ‘Insurer admits that their policyholder was negligent and caused the accident. Some damage was caused, but the insurer does not admit the nature or extent of the damage.’ (The precise wording is still under consideration).

§ The admission is standardised, and made by ticking boxes in the CNF response form. Hence there appears to be no option to qualify the admission. The options used in the CNF response form (more than one may/should be ticked) are:

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 denied. Reasons need to be given with a denial.

§ 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 the insurer must pay the stage 1 fixed recoverable costs of £400 within 10 days from the end of 15 day period allowed for responding to the CNF.

§ 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 within the 10 days the claim exits 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 Pay £400 stage 1 costs4. Contrib – seat belt case Stays in Pay £400 stage 1 costs5. Deny – must give reasons Exits Nothing to pay6. Allege fraud – will need evidence Exits Nothing to pay

Stage 2 - Flowchart

Negotiations fail

Late offer

Yes

Has the insurer admitted liability at stage 1?

The claimant obtains a medical report, checks for factual accuracy and forwards

to the insurer

The insurer takes a view that the medical report supports the value of the claim

within the scope of the new process, iePSLA £1,000 - £10,000

Do the contents of the medical report cause the insurer to withdraw the

admission of liability or take a causation point?

Does the stage 2 settlement pack forwarded by the claimant contain a gross offer together with documentary evidence

in support of special damages? The insurer should request missing

information/documentation

Without an agreed extension,this will cause the claim to exit

the process

Are there any fraud indicators?

Does the insurer accept the claimant’s offer within 15 business days? If so, the

claimant solicitor is entitled to a 12.5% success fee where a CFA applies

The insurer does not make acounter offer or does nothing

The claim exits the process - see exit points section

End of stage 2 Within 10 days of the end of the negotiation period the insurer must pay the full amount of its offer by way of an interim payment.

The claim then proceeds to stage 3

Yes

Yes

No

No

Yes No

The claim exits the process -see exit points section

There are different costs consequences if <£1,000 or if

>£10,000

The claim exits the process -see exit points section

The claimant may issue immediately

No

Yes

No

The insurer must make a counter-offer within 15 days. Parties have a further 20 daysfor negotiations beginning when the 15 day period ends

The insurer makes a payment of the claim and stage 2 costs within 10 days commencing the

end of the 15 day period


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.

§ 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, plus the claimant’s offer to settle are sent with the medical report.

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.

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

§ It has been proposed that the 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 repair costs and hire costs, insurers could be met with a substantial claim for credit hire/repair costs with only 15 days to respond.

15 days to respond to settlement pack

§ 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. The 15 day period starts the day after the settlement pack was sent by the claimant’s solicitor.

§ 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.

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 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.

§ 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 20 period will extend the period by five days.

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 seeing 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 will also be paid at this point.

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.

§ 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).

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.

§ The claimant’s solicitor may request an interim payment of more than £1,000 and should provide reasons. An insurer may refuse this and 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.

§ If the claimant’s solicitor elects to pursue the full amount of the interim payment the claim will exit the process. 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 (ie stage 1 and stage 2 costs).

Stage 3 - Flowchart

Still part of stage 2At the end of the 20 day period for negotiation, the claimant solicitor will prepare the stage 3 version of the Settlement Pack Form (A) and (B) which includes final stage 2

offers.NB There is no further opportunity at stage 3 to provide new documents/evidence

except where ordered by a judge

The claimant solicitor may make application to court in accordance with CPR after 10 business days from date he sent the stage 3 settlement pack to

the insurer

Claimant solicitor sends stage 3 settlement pack electronically to the insurer who has 5 business days to check accuracy of

the forms and return them electronically

The claimant solicitor files at court§ A claim form (not the CNF)

§ Medical report§ Stage 3 settlement pack

§ Receipts supporting special damages and disbursements

The claimant solicitor lodges both parties’ final offers in the stage 3 Settlement Pack Form (A) and lodges it in sealed envelope to be seen by the judge only after a decision

has been made§ The offers are exclusive interest

§ Part 36 applies to the stage 3 offers only

There is a paper hearing unless the judge directs or either party requests an oral hearing

The hearing concludesThe judge’s valuation is checked against sealed envelope

The interest is calculated by the court

Claimant solicitors fixed recoverable costs for stage 3§ £250 paper hearing§ £500 oral hearing

§ fixed success fee of 100% for stage 3 costs only, if claimant wins (success fee is 12.5% for stages 1 &

2)§ Time for payment of stage 3 costs is in accordance

with CPR/or as ordered by the court

Credit hire disputes about issues other than quantum (eg a

challenge to validity of the hire agreement) will cause the claim

to exit the process

Defendant solicitors fixed recoverable costs for stage 3

§ £250 paper hearing§ £500 oral hearing

§ There may also be a success fee


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.

§ A simple application process is proposed that will require the lodging of standard forms but which has sufficient flexibility for the court to order additional evidence if it considers necessary.

§ 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.

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 Part 36 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

Stage 1

Stage 2

Stage 3

Technical arguments areraised or oral evidence is

required

The insurer fails to make an offer within 15 days

The insurer fails to respond on liability

The CNF identifies credit hire. Is it being handled separately

from the personal injury?

Insurer should consider a mitigation questionnaire and seek details of any alleged

impecuniosity of the claimant

The claimant sends invoices. There is an opportunity to settle

or narrow the issues

A stage 2 settlement pack is sent with evidence to support

credit hire

A stage 3 settlement pack brings all credit hire into

process and sets out issues in dispute

Insurers have 5 days to respond or may lose

opportunity to argue hire

The court will direct additional evidence

There is an opportunity to intervene in credit hire

Credit hire elements fall outside the process but will need to be brought back in

if unresolved by stage 3


Yes

Yes

No



Stage 3 hearing

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 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.§ If handled outside the process and the credit hire is not settled the hire claim will need

to be brought back into the process at stage 3.§ 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 would 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 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 for the credit hire with the CNF or alternatively as soon as possible and on the defendant’s admission of liability.

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

§ The hire may 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. At stage 1 under the ABI GTA 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 point 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 at stage 2 there will be only a very limited 15 day period for insurers to consider and respond.

§ Outside of the ABI GTA insurers should as soon as possible be requesting from the hirer the Mitigation Questionnaire and Hire Validation Form as suggested 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.

§ Under the ABI GTA once the hire has concluded insurers have 30 days from receipt of the payment pack before penalty charges start accruing. Early enquiries remain a priority. As soon as the hirer off hires enquiries can start into the period of hire. Once the matter is outside the 90 day period after the receipt of the payment pack then enquiries should commence as to the rate.

Stage 3 settlement pack

§ The insurer has 5 business days, from receipt of the stage 3 settlement pack form, to provide brief comments, check the accuracy and return it. So if the credit hire is brought into the process at stage 3, the insurer has only 5 days in which to comment and if this is missed or is late, it will be assumed that they have nothing to add.

§ 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. The draft rules will provide further guidance, but defendants must be primed to set out their arguments disputing the hire within their response.

Stage 3 evidence for paper hearing

§ It is suggested there will be a simple application process that will require the lodging of standard forms which have sufficient flexibility for the court to order additional evidence if it considers that necessary.

§ There is reference to evidence required such as invoices, engineer’s report/vehicle report, rate and period of credit hire, and valuation evidence such as Glass’s Guide. All will be subject to the judge’s directions.

§ The indication is that the insurer will have the opportunity to provide in response evidence from an engineer or a rate surveyor, for example. However, there may well be no opportunity to call evidence.

§ What weight will the judge attach to such 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.

§ For paper hearings, obviously 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 oral evidence?

§ There appears to be no provision for oral evidence within the process. Would the

parties be able to apply?§ If oral evidence is required is it likely that the claim will be deemed to be too complex

to remain within the process? There is no guarantee of an oral hearing, and the claimant may be likely to oppose any request.

Stage 3 further offers

§ It may be that the stage 3 settlement pack is prepared before there is sufficient evidence to fully assess the hire claim for the defendant to make a final offer. In stage 3 the judge may direct, or the parties may request further directions for further evidence to be obtained/exchanged. At this stage there is no guidance regarding what further offers may be made after stage 3 commences and particularly once you have received and/or exchanged further evidence following directions.

§ 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.

Stage 3 hearing and exiting

§ Where there is a quantum dispute over vehicle damage/hire charges it will be resolved at a stage 3 hearing. This would include disputes over the rate and period of credit hire, subject to the judge’s directions.

§ Disputes about issues other than the amount of damages to be paid will cause the claim to exit the process. For example, a challenge to the validity of the hire agreement, or a technical argument not relating to quantum.

§ There is no definition of an 'argument not relating to quantum'. It is assumed this will include technical enforceability arguments. It is assumed that arguments with regard to the need to hire, period of hire and rate disputes are not complex enough to be removed from the process. There is a risk of satellite litigation regarding the definition of what would be a complex enough dispute to remove the claim from the process.

Stage 3 tactical balance

§ Once at stage 3 and the hire claim has been brought within the process, insurers can proceed to settle the personal injury element and may tie the credit hire claim into the fixed costs process.

§ 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 representation) and other extensive hire disputes that insurers would want to be taken out of this process.

Fraud - Flowchart

Stage 1

Stage 2/3

Details are completed in a claim notification form

(referral source optional)

Fraud screening

Suspicions raised

Liability admitted within the 15 day period

Fraud identified

Fraud alleged Claim exits process

No response or a denial of liability

Claim exits process

Fraud alleged Claim exits process§ Seek recovery of any stage 1

costs or interim payment

Suspicions raised Causation issues Claim exits process§ Claimant may issue

immediately

Liability issues, but not enough

evidence to allege fraud

Claim proceeds in process

Application to withdraw admission

Claim exits process

No

Or

Unsuccessful Successful

Yes

Fraud - Commentary

On notification

§ An allegation of fraud is a general exit trigger at any stage. The claim will leave the process and fixed recoverable costs will not be payable.

§ 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.

During the 15 period for admission

§ 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.

§ 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 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 this stage.

§ 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.

§ There is the question of how binding the admission at stage 1 will be. The MoJ envisages a form of words by which the insurer admits that their policyholder was negligent and caused the accident and that some damage was caused, but that the insurer does not admit the nature or extent of the damage. What effect will a withdrawal have? It is likely that withdrawals remain governed by CPR part 14 generally. This area could potentially cause a procedural headache and is likely to lead to satellite litigation.

Notification of referral source

§ This is an optional field on the CNF. 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.

Medical records

§ The cost of obtaining medical records will be allowed as a disbursement only where the medical expert has identified the need for them.

§ If there is an issue as to the accident circumstances and the nature of injury sustained, the insurer should be looking to exit the process.

§ If the insurer wishes to question or deny causation (giving reasons) the claim will also exit the process. 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.

Stage 2

§ There is a potential problem when suspicions arise after stage 1 and the matter has progressed within the process. There may not be sufficiently cogent evidence to found an allegation of fraud, but insurers have enough suspicions to want to investigate further.

§ If there are liability concerns such as a staged accident, insurers may want to leave the process and investigate further. There is no guidance within the process as to the standard of evidence and basis of the allegation to be raised to exit the process. Taking a general point on causation may not be enough.

§ It may be preferable simply not to respond at stage 2, to cause the claim to exit the process. Once again, this highlights the acute nature of the decision to be made as to whether there are enough indicators or reasonable suspicions. If the claim exits the process, the insurer will have lost the benefit of the new fixed costs regime.

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.

§ 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 would have been tested or proven by this stage and what if a claimant has already spent the money paid (eg by way of an interim payment)?

§ Note that there are potentially serious regulatory issues in paying over money where there are suspicions of fraud.

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. It appears that 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

Not specified Not specified

Assume late payment will be treated as non-payment (above)?

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)

Procedure / law

Costs regime and comments/consequences

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



Stage 1 costs of £400 have already become payable (however, the MoJ states that 'fixed recoverable costs will not apply' – which presumably means the stage 2 costs of £800 are not 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



Stage 1 costs of £400 have already become payableStage 2 costs of £800 are probably not payable (this is not specified)

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



Stage 1 costs of £400 have already become payableStage 2 costs of £800 are probably not payable (this is not specified)

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)

Procedure / law Costs regime and comments/consequences

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

Not specified if stage 2 costs of £800 are payable

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

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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.

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