Mar 5

How to survive on reduced fixed costs

Posted in After The Event Insurance, General, Personal Injury Claims, Road Accidents, The Jackson Report

And so it came to pass. David did meet with the great unwashed (insurers) and a deal was done which the learned Judges hath said ‘there’s nothing wrong with that’: Costs for a basic RTA will now be fixed at just £500 post April.

So what now? There are letters in the Gazette saying ‘we are turning out the lights’, ‘we are all doomed, doomed I tell you’ etc etc.

But is this really true? Let’s wind back to 1998, before the Access to Justice Act. What used to happen then?

Well, solicitors used to charge their clients an hourly rate and claim costs back from the defendant if they won. If they lost, the client sometimes still had to pay – as was also the case if there was a shortfall in recovery of costs. What is more, there were After the Event Insurance policies taken out – which the client paid for.

Did the world end back then? Were solicitors firms closing and laying off hundreds of workers? Er, no.

What used to happen was that clients paid for a solicitor to run their case for them. What is wrong with that? We have all got into the mindset over the last 10 years that the client’s damages are sacrosanct. Why is that? Why should they not pay something in order to be compensated? Why shouldn’t clients agree to a deduction of say, £500 from their damages if the solicitor wins their case for them?

I know some solicitors will say that this would mean that clients would not be fully compensated for their injuries. Now I can understand that where future care is concerned or if we are talking about a serious head injury claim but whiplash? Come on. Clients won’t care. Prior to 1999 they were happy to hand over a size-able percentage of their damages to a solicitor who won their cae for them and they will get used to it again. They will have to. It is either that or solicitor firms up and down the country will have to close and then who will act for the injured clients?

I know which I would rather do.

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Dec 20

Small Claims Court Rise Consultation – Why Bother?

Posted in After The Event Insurance, Personal Injury Claims, Road Accidents, Solicitors

So here we go again. The Ministry of Insurance Companies  Justice has issued another consultation document, this time regarding their proposal to raise the Small Claims Court limit for some PI claims.

Now if the Government hadn’t already rejected a rise less than a year ago, perhaps I wouldn’t be so sceptical about this but I am afraid to me, and countless others, this just goes to show how close the Insurance industry has managed to get to the decision makers at the MoJ.

A further indication that there has been some very successful lobbying going on are the three proposals themselves. The MoJ has given respondents 3 options:

1. No change to the small claims court limit
2. Raise it to £5,000 for all Road Traffic Accidents
3. Raise it to £5,000 only for whiplash claims suffered in a Road Traffic Accident.

So why options 2 and 3? Why limit the change to RTA claims? Are those injuries less serious or the victims less worthy than say someone injured at work? What has option 3 got to do with anything? Is a whiplash claim less serious than an injured leg? Is a whiplash claim somehow easier to deal with and so victims won’t need legal representation? What happens if there are multiple injuries including whiplash?

This is just unbelievable. It is quite clear that the Government has listened to the insurance industry and has ignored everyone else.

I will stick my neck out here and predict the results of the consultation. There will be loads of replies but the summary document produced by the MoJ will refer mainly to data provided by the defendant insurance industry. The MoJ’s summary will be produced somewhat quickly following the closure of the consultation period (I am guessing we will be seeing it within 2 weeks of the March deadline) and will conclude that the public will be well looked after using the small claims court (and Insurers can be trusted to pay out the right compensation). The MoJ will therefore decide to raise the limit to £5,000 for all Road Traffic Accident claims to take effect in October 2013.

I will now also predict the results of all of this:

1. The Small Claims Court will become swamped with claimants who will be ‘represented’ by claims management companies in return for a cut of the damages. There will be an outcry from The Law Society and APIL etc but they will be ignored. No one will be paying referral fees so no law will be broken. This is will be a brilliant way for Referrers to remain in business.
2. Car Insurance premiums will drop by an average of £20. The predicted £90 reduction which has been banded round by insurance companies will turn out to be incorrect. After all, the insurance industry will have a large hole in their finances following the ban in referral fees and so the lower claim payouts will help them to maintain (or who knows increase) profit levels. Additional costs will also be found with the waters muddied by, I don’t know, flooding claims or similar. The £20 reduction won’t take effect for 2 or 3 years anyway due to the ‘backlog’ of claims.
3. The Government will sympathise with the Insurance industry who will hold further talks at Downing Street over tea and cakes. The invitations to this shindig for representatives of claimants will be lost in the post.

That’s it. I am off to punch a wall.

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Nov 21

The New Costs Regime – A Trip to the Dentist?

Posted in After The Event Insurance, General, Personal Injury Claims, Road Accidents, Solicitors, The Jackson Report

We all dread it, sometimes for weeks in advance. A trip to the dentist. The visit itself may not be that bad, but the dread of what might happen……..

Could it be that in a few month’s time we will see the government’s latest announcement as just an anticlimactic session with the oral hygienist?

As you may know, the Justice Ministry has outlined its proposed new fixed costs levels for cases settling within the Portal, and of course from April onwards the Portal procedure will be extended to include EL and PL cases. The Ministry’s proposed flat rate fixed recoverable costs are:

  • £500 for RTA claims worth up to £10,000 (Stage 1: £200; Stage 2: £300)
  • £800 costs for RTA claims worth between £10,000 to £25,000
  • £900 for EL and PL claims worth up to £10,000
  • £1,600 for EL and Pl claims worth between £10,000 to £25,000

The Justice Minister has explained that the costs have been reduced to ‘reflect the forthcoming ban on referral fees’ which presumably means that costs have been reduced by the £700 which is often paid to referrers. It appears to be a disaster for personal injury firms, but how bad is it, and will it be impossible to adjust to this new landscape?

It’s worth looking at each component of the personal injury market in turn – referrers, solicitors, clients, BTE insurers and of course ATE insurers.

Referrers
… seem likely to suffer. Claims that generate less costs are less valuable, so referral fees will naturally drop and we already know that Section 56 of LASPO 2012 bans referral fees beyond a payment which a solicitor can show is a fair price only for work actually carried out.

Solicitors
…will still need to acquire work by marketing their services. They will either form new business structures with referrers, or increase their advertising spend. Baseline costs of £500 will be insufficient to pay for this, so they will probably need to charge their clients a small additional sum, to be paid out of damages on successful cases. There is obviously a risk that the rush to compete on headline price will cause an increasingly reduced level of service, but if this is avoided, and clients must now pay £200-£300 to supplement the new low level of recoverable costs, will this really be the end of all things?

Just one other thought – with Portal costs now so low, solicitors are going to do everything they can to cause claims to exit the Portal, so procedural failings within the Portal by Defendants may be more readily seized upon by Claimants from now on – Defendants beware! (…and will dealing with these issues increase satellite litigation?)

Clients -
…may well continue to behave as before. Clients should in theory receive 10% extra damages to offset any costs they will now have to pay, but in any case historical evidence (Claims Direct?) suggests that losing a proportion of their
damages (if necessary) does not deter them from making a claim. If referrers are providing a service which clients cannot do without, and referrer activity diminishes, then there may perhaps be a few less clients making claims, but by and large the number of clients pursuing a claim is unlikely to diminish significantly.

BTE insurers -
…may have to review whether they have a viable product. BTE insurance’s only value to insurers is as a tool to capture claims and charge solicitors a referral fee. If they can no longer charge that referral fee their first reaction will be to form Alternative Business Structures and take the legal work in-house, but with recoverable costs reduced, will the profits be attractive enough to large commercial organisations who will still need to employ solicitors and senior staff at the right level?

ATE insurers -
After the Event Insurance will still be required by clients to protect them against abortive disbursements and adverse costs awarded when a Part 36 offer is not beaten. ATE premiums will fall to reflect a lower but still significant costs risk, and price competition is likely to increase since the client will be paying the premium out of their own damages – albeit now increased by 10%!

Hand me that drill and don’t bother with the pain relief – I can do the fillings myself.

Simon Pinner
Director Box Legal

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May 25

Single After The Event Premiums are fully recoverable

Posted in After The Event Insurance, General, Personal Injury Claims, Road Accidents, Solicitors

As many of you may know, since the introduction of the MOJ portal for low value RTA claims some motor insurers and their costs draftsmen have been saying that a fixed ATE premium is too expensive if the case has settled in stages 1 or 2 of the new RTA claims process.  Why, well they argued that that there are some staged ATE policies available with premiums that are apparently very reasonable if the case settles before stage 3 of the new motor claims process.

This argument came as a slight surprise for those trying to recover the same staged premiums on cases that had not settled in stages 1 or 2 of the MOJ portal, because these were often challenged by motor insurers for being too expensive.

The problem is that although some staged policies do offer very low premiums if the case concludes in the very early stages of a low value motor claim, the premiums tend to increase quite quickly if the case goes to stage 3 or drops out of the MOJ portal.  Therefore if the case settles early then it can be cheaper for the claimant to arrange a staged ATE policy, but if it doesn’t then it is probably cheaper to have used a fixed premium policy.

This is great if you can predict the future, as you simply pick the right type policy for where you know the case will end.  And it seems motor insurers were becoming quite annoyed by claimants lack of psychic abilities.  But with some figures suggesting that anything up to 40% of cases are dropping out of the new motor claims process with presumably a proportion of those that stay in going on to stage 3, it is in fact impossible to know for certain at the beginning of a claim how long it will take or where it will finish.

The problem however, as with most challenges we have seen over the years, did not go away and because of the amount of cases being issued on this issue in the Liverpool County Court, District Judge Smedley (acting as a Regional Costs Judge) decided to pick a number of them to treat as test cases.  The cases have been heard and DJ Smedley handed down his decision on 24th May.

Unsurprisingly, and very sensibly, DJ Smedley has recognised that defendants are trying to have their cake and to eat it by very often making contradicting arguments in different cases depending on what type of premium was being claimed and where the case has settled.  He said:

“So, the claimant and his solicitor dealing with funding at the outset know that their particular claim may or may not resolve within the Protocol. If they choose a single premium policy and the case settles within the Protocol, it will be said on assessment that they should have chosen a staged, reduced-premium policy.  If they choose such a policy and the case exits the Protocol and goes to trial, it will be said they should have chosen a single premium policy – in each case because the choice made was unreasonable.  I accept Mr. Finn’s evidence on this point.  There is no “right” or “wrong” decision to be made.  Both single premium and staged premium policies are legitimate.”

It was held that:

  1. It is reasonable to arrange an ATE policy at the very beginning of a claim, on the claimant first giving instructions
  2. It is reasonable for the claimant to choose either a single premium or a staged premium policy

Will this see the end of these challenges?  If I could see into the future I’d tell you, but if I could do that…….

Jon Gouldsmith
Head of Legal Support

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May 17

Government to Consult on Raising the Small Claims Court Limit

Posted in After The Event Insurance, Personal Injury Claims, Road Accidents, Solicitors, The Jackson Report

Hot off the press, Mr Jingly Jangly has confirmed the that the Ministry of Justice is going to ‘consult’ on their er, decision to raise the small claims court limit for Personal Injury claims from £1,000 to £5,000.

Here it is in black and white  (blue and red with my highlighting) – an official question asked:

Oliver Colvile: To ask the Secretary of State for Justice what plans he has to reform civil justice following his Department’s 2011 consultation. [106874]

Mr Djanogly: The Government’s plans for the reform of civil justice are set out in its response to the Solving Disputes consultation which was announced in a written ministerial statement on 9 February 2012, Official Report, column 31WS.

Since then, this Department has launched an evidence gathering exercise in relation to the extension of the Road Traffic Accident Personal Injury scheme; and has published provisions to establish a single county court in the Crime and Courts Bill which was introduced in another place on 10 May 2012. In addition, the Government intends to consult on raising the small claims threshold for personal injury claims to reduce the costs of challenging fraudulent cases in court, and
on tackling questionable medical evidence by considering the use of independent medical panels.

Now we all know how well the previous consultation went: lots of effort going into the submissions which were subsequently speed read by a thousand civil servants in 24 hours to give the Government their balanced view.

Soooo we shall see.

Here is a quick poser – how does raising the small claims court limit prevent fraud? Does it stop people making bogus claims? Is there some magical force-field at the doors of the small claims courts which prevents criminals getting in? Er no. What about costs then – at least the defendants can get their costs back if someone is found to be a fraudster? Well they can get personal costs orders now but not in the small claims court.

Mmmmm. Strange. So not sure how this is going to help except to give the insurers a lot more money to fight them. That must be it.

Trebbles all round!

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May 10

Unbelievable

Posted in After The Event Insurance, Personal Injury Claims, Road Accidents, Solicitors, The Jackson Report

I have had to wait a few days in order to calm down. I want to avoid potential defamation claims.

So the Government have suddenly decided to increase the small claims limit to £5,000 for personal injury claims.

Now I am a glass is half full sort of person but even I am somewhat sceptical about the timing of this sudden u-turn. The Legal Aid  Sentencing and Punishment of Offenders Bill was given Royal Assent after a rough ride through the Lords recently. Deals were struck during the passage of the bill to exclude mesothelioma cases. Many Lords were also assured by the announcement in February that, following a review, the Government would be keeping the small claims court limit at £1,000 for PI claims due to their inherent complexity and so voted with the Government.

Then what happens? The day the bill hits the statute book, the Ministry of Justice has a cosy conference about whiplash with the defendant insurers and suddenly announces that the small claims court limit will rise 5-fold to £5k.

Do you think they were considering this change whilst the LASPO bill was being debated? Do you think their announcement in February was genuine? I am sure you can guess my view.

So let’s see shall we. The reason for this about turn are the apparent large number of fraudulent claims for whiplash. Now presumably the Government accept that there are at least some genuine claims out there – surely there can’t be over half a million crooks making bogus claims each year. So the way to deal with let’s say 10% of bogus claims is to punish the 90% genuine claimants is it? The genuine claimants will now have to go it alone against the big insurers and all of their legal clout or they will have to forgo a fair chunk of their damages by paying a solicitor. Will this stop the bogus claimant? Will the thought of them having to pay perhaps 25% of their damages to a solicitor put them off? I doubt it.

In effect therefore, the defendants have managed to persuade the Government to remove payment of legal costs on 60% to 70% of road accident claims. Nice saving this.

This has been decided by insurers (who have a lot of money) and Government Ministers who, let’s face it, aren’t short of a bob or two. For most people, being in an accident where they have lost their car (let’s say £2000), been injured and off work for 2 weeks (let’s say £1000) could mean they are out of pocket by £3000 before you think about compensation. This sort of claim would probably have to proceed in the small claims court which is daunting to most people. So this man on the street is going to be injured and out of pocket with no easy way to get compensation. For the insurers and Government Ministers, £3000 is chicken feed. For voters, it isn’t.

The Labour Party have already said they will reverse many of theses changes if they come back to power. The local elections indicate that the man in the street may have had about enough of these underhand tactics by the Government.

With the massive costs savings that the insurers will experience however, at least we will have some benefits:

  1. Fewer defendant solicitors
  2. Fewer defendant costs muppets
  3. Much lower car insurance premiums

So every cloud does have a silver lining.

UPDATE: Made a mistake with point 3 – meant to say Higher Dividends for Insurance companies

 

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Oct 31

Scary Referral Fee Ban

Posted in General, Guest bloggers, Personal Injury Claims, Road Accidents, Solicitors

It’s Halloween.

Last year my teenage daughter forgot it was the 31st of October and answered the front door in the dark to be confronted by some pretty scary masks – she let out an ear piercing scream and slammed our front door in some poor kids faces – oh dear, we seemed to get dirty looks from our neighbours for months afterwards!

Yes – as we all know, a lot of things can look a much scarier than they really are at this time of year……and I am beginning to think that the Government’s ban on referral fees may be one of them.

It’s obvious of course, that the Government never really believed it could ban referral fees. It would loved to have done so, but could see it was impractical. Then Jack Straw embarrassed the Government by proposing it himself. He had just discovered that this sort of thing was going on, despite himself having been Justice Minister for more years than anyone could remember. The Government couldn’t afford to have the Opposition out do it on this issue, and promised it would introduce a ban (although even then, it acknowledged the difficulties by refusing to give any time limit for doing so).

The latest Government amendment may in fact bring us some warm cheer as the nights get colder. Ken Clarke’s latest amendment proposes that the ban on referral fees will not apply if the payment is made “as consideration for the provision of services”. After a moment of extreme puzzlement, things are beginning to become clearer.

The Government is not really planning to prevent Claims Management Companies charging for their services. This of course would have effectively put CMC’s out of business (or just forced them to form ABSs!) which would have been odd since it was the Government which was regulated them. The proposal is now that they can legally charge as long as they can show they are charging for a service which they have carried out. They will not normally struggle to show this, particularly since they often complete the Claim Notification Form for motor claims, or at least provide all of the information necessary to do so. They also tend to meet clients, explain documentation, get CFAs signed etc. etc. etc.

What will be banned is a payment to anyone who simply supplies a name and address in return for a fee – what might be termed a “pure referral”. This would cover motor insurers, the police and perhaps some body shops and vehicle recovery companies. They don’t perform any work for solicitors – they just receive payment for knowing who has had an accident.

The larger the organisation (motor insurers and the police) the harder it will be for them to sidestep such a ban but clearly the net effect of the Government’s current proposal is that if you carry out the normal work of a Claims Management Company then you are unlikely to be affected. Some people may think that legislation which prevented the large motor insurers from receiving a fee for “3rd Party Capture” might be the best Christmas present they could hope to receive.

We will have to wait and see. But as I said, at this time of year, things can look much scarier than they really are.

Simon Pinner

Director of Box Legal Limited

Box Legal Limited: After the Event Insurance Providers
www.boxlegal.co.uk  | daniel@boxlegal.co.uk | 0870 766 9997

 

 

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Oct 21

Referral Fee Ban ‘Could be tricky’

Posted in General, Personal Injury Claims, Road Accidents, Solicitors

Says the Government.

Well I won’t tell you I told them so but….

You see the problem they have is, money changes hands in all sorts of transactions in return for business and so although they are called ‘referral fees’ and have been made to look dirty by certain members of the press and parliament, in reality they are payments for business.

Let’s look at some other so called ‘referral fees’ shall we?

  • When your mortgage adviser finds you a mortgage – the bank pays them some money – is that a referral fee?
  • When a price comparison site passes through a customer wanting car insurance, they take a share of the policy – is that a referral fee?
  • When an estate agent puts you in touch with a surveyor, they get a payment – is that a referral fee?
  • When you recommend your bank to a new business customer, some of them pay you for the introduction – is that a referral fee?
  • When you sell something on eBay, they take a percentage – is that a referral fee?

I could go on. And on. And on.

For some reason, because the ‘thing’ being sold is not an insurance policy or a customer buying a widget but a person who has been injured, the Government et al are in uproar but why should someone needing to find a legal service just because they have been injured be any different from someone needing to find a mortgage or car insurance? Well the simple answer is there shouldn’t be a difference.

And there lies the problem. You see there are European laws against restraint of trade and lots of other regulations which mean the Government is going to find it difficult to ban fees for just one area of business. And that is before they try to actually define what a referral fee is (see my earlier blog on this one).

They have backed down following all the shouting by Jack Straw that it should be made a criminal offence and I think they will back down on a ban. It will be too difficult to define and enforce and will open the door to challenges, judicial review etc.

You er, heard it here first.

P.S. I am now off for week (it’s half term don’t you know). Will endeavour to post something from Toys R Us or wherever I end up.

Box Legal Limited: After the Event Insurance Providers
www.boxlegal.co.uk  | daniel@boxlegal.co.uk | 0870 766 9997

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Sep 27

Part 36 offers – Carver v BAA does not apply to offers made after 1st October 2011

Posted in After The Event Insurance, General, Personal Injury Claims, Road Accidents, Solicitors

An important change is being made to the Civil Procedural Rules which is going to require you to review all of your existing Part 36 offers.

The CPR (Amendment No.2) Rules 2011, which come into effect on 1 October 2011, will overrule the decision of Carver v BAA plc [2008], which ruled that because the Claimant had only just beaten a Part 36 offer, he had failed to obtain a judgment which was “more advantageous” within the meaning of CPR 36.14, and the Defendant was awarded its costs from the date the offer expired.

The rule change inserts a new paragraph 36.14(1A) into Part 36 of the CPR, which states:

 ’For the purposes of paragraph (1), in relation to any money claim or money element of a claim, “more advantageous” means better in money terms by any amount, however small, and “at least as advantageous” shall be construed accordingly’

Section 1 (4) of these (Amendment No.2) Rules clearly states: “Rule (4) applies to offers to settle made in accordance with Rule 36.2 on or after 1st October 2011” so this will apply to Part 36 offers made on or after 1st October 2011, irrespective of when proceedings were commenced, or when trial takes place, but it will not apply to offers you have previously made. This being so, Carver will apply to any previous offers and it may therefore be extremely wise to repeat any Part 36 offers you have previously made in order to avoid a possible award of adverse costs based on Carver, provided such an offer still makes sense in the context of the particular claim.

So there you have it. A sensible rule change for a er, change.

Box Legal Limited: After the Event Insurance Providers
www.boxlegal.co.uk  | daniel@boxlegal.co.uk | 0870 766 9997

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Sep 20

Referral Fees – The Case for the Defence

Posted in After The Event Insurance, General, Personal Injury Claims, Road Accidents, Solicitors, The Jackson Report

So the Government wants to ban referral fees. We have all heard about this and Jack Straw’s campaign (don’t worry, I shall get to him later), but how exactly are they going to do this – and when?

Well the answer is, I am not sure that they can. You see, the Government has a large number of hurdles to jump and proberbial holes to plug before they can get anywhere near to legislation to ban them:

  1. First there is Europe. Referral fees are permitted in Europe so banning them here is going to be difficult – there may be anti-competitive claims arising.
  2. The Legal Services Board carried out a study of them and concluded that a ban wouldn’t work so it was better to legislate and control them. There was a call for greater transparency rather than sweeping them under the carpet. Better to have the referrers inside the tent er, you know - urinating out rather than outside the tent …. (you get my drift).
  3. Alternative Business Structures are soon to be permitted – which means a large claims management company and a solicitor could join forces. Business as usual.
  4. Referrers could be taken on as employees of solicitor firms on a low basic wage with a bonus for the number of leads generated. Would this be allowed?
  5. Solicitors are allowed to sell cases to other solicitors (and always have been allowed to do this). Would this practice be banned? What about file transfers with WIP being paid? Is that ok?
  6. The proposal is to ban referrals for personal injury claims only – not conveyancing or any other legal matter. Surely this is inconsistent and would be challenged.
  7. A lot of solicitors receive work for ‘free’ in return for doing other things. For example, some firms get PI claims from insurers but then have to handle their uninsured loss recovery work for nothing. This is a referral fee isn’t it? Is this going to be outlawed?
  8. What about a free referral but on condition you give a medical agency 10 medical instructions? Is that a referral fee? Is the Government going to ban freedom of choice and legitimate business arrangements?
  9. Here’s another one: 10 firms get together and form a company which advertises for PI claims. It is run by 5 non-lawyers. They all fund this marketing company based on the number of leads they take on. Is this arrangement a referral fee? Is the Government going to ban this? What if the company isn’t a company but a partnership – or a non-profit making organisation. Does the membership of that organisation or slots bought make the arrangement against the rules?

You see, I have only been writing this for about 10 minutes and already I have thought of several serious problems. Give me a few days (and the PI industry a month or two) and there will 100 different options on the list. The problem the Government has is that no one can say for sure what a referral fee is – and if you can’t properly and fully define it then you can’t ban it.

And so to Jack Straw. Has he really though this through? He is up in arms about referrals and claims management companies. He is incensed that insurers have sold injured people’s data to a claims company. The thing is, this goes on in all industries. Loads of companies sell personal details to other companies - which is why you no doubt have had several calls about double glazing, kitchens etc. Are they allowed to do this? Well yes because we have consented to it. Somewhere we have bought something where there is a clause saying the seller can share the data. Can this be banned? I suppose so but it has to be industry wide – it isn’t just Personal Injury’s dirty little secret – it is the western worlds.

Mr Straw is also saying the practice of selling PI claims should be criminalised. Well why didn’t he criminalise it or ban it when he was the Minister of Justice? Well the answer is, he looked at banning referrers but then decided against it.  Instead, he oversaw the cleaning up of the claims management companies by requiring their registration. Why the change of heart? I have no idea.

And you see, he might just be shooting the Labour Party in the foot. Would you believe that in 2009, over 60% of Labour Party funding came from Trade Unions? Where do the Unions get their money from – well membership fees but a large part of their income comes from notional After the Event Insurance policies (soon to be banned under Jackson) and referral fees. Supporting a ban of both is going to cut the amount of money Trade Unions have available and so cut the Labour Party’s funding. It is also going to annoy the Trade Union leaders somewhat.

Maybe, the Labour party has decided they don’t need the unions any more. Mr Straw is playing a dangerous game me thinks.

Box Legal Limited: After the Event Insurance Providers
www.boxlegal.co.uk  | daniel@boxlegal.co.uk | 0870 766 9997

 

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Sep 8

Work work work

Posted in After The Event Insurance, General, Personal Injury Claims, Road Accidents, Solicitors, The Jackson Report

Oh my days. What a week.

To say we have been busy is an understatement. Just a few days into our new financial year and we are 25% up on new policies written compared with September last year.

And that’s not to mention our new website which we have been working on feverishly in the background (thanks Roger!). Or our link to a leading rehab provider  – press release to follow!

So you see, I have an excuse – of sorts. Anyway, let’s have a quick round up of developments outside of Box Legal shall we?

Well, on the Jackson front, Labour MPs seem to be proposing all sorts of amendments to the Legal Aid and Sentencing Bill - with some saying they are attempting to goad the Lib Dems to vote against the Bill’s passage. Anyway, no delays yet but who knows…

Defendant insurers (poor things) are meanwhile blaming claimant solicitors for just about everything. The masters of spin are saying it is the solicitors’ fault that they, the insurers, are having to receive referral fees for cases – running into many millions of pounds. Good eh? If you shout something from the rooftops for long enough, some people might believe you but come on Mr Admiral? Are we really to believe that it is Mr Blogs the high street solicitor who has caused you to turn over £1 billion including tens of millions in referral fees? Mr Blogs has a lot to answer for – it is his fault that car insurance premiums are rising don’t you know.

Well, the Office of Fair Trading may be investigating the rises – we shall see what they come up with but don’t expect the answer to be that it is the insurers fault. Watch out Grandma Smith – it will no doubt be you who will be taking the blame.

What else? Ah yes, premium challenges. Those pesky insurers keep on claiming that clients can’t take out a fixed premium After the Event insurance policy but guess what? Those nice Judges keep telling them they are wrong. It is 3 – 0 to us so far and no sign of any weaknesses. You would think they would give up – would save a fortune in legal fees but then, insurers were never short of a bob or two.

So that’s all folks. Except to say, I hope to become a bit more, er, regular in future.

P.S. My niece (fresh out of university) is looking for some work experience in a law firm (there is only so much insurance a young girl can take). Any one able to help her out?

STOP PRESS: The Ministry of Justice has announced it will be banning referral fees. No timetable has been announced nor any proposals. Watch this space.

Box Legal Limited: After the Event Insurance Providers
www.boxlegal.co.uk  | daniel@boxlegal.co.uk | 0870 766 9997

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Aug 18

Allianz Announce Revamp of Business Model Post Jackson

Posted in General, Personal Injury Claims, Road Accidents, Solicitors, The Jackson Report

They will also be announcing that bears prefer the woods for defecating and, contrary to popular belief, The Pope appears to be Catholic.

Big headline this in The Insurance Times. I mean come on – so they are going to remove recoverability of After the Event Insurance, introduce Qualified One Way Costs shifting and what – ATE insurers are going to keep on selling the same products? Just an excuse to get their name in the paper I suspect. I mean who would write about something like this then publish it? Er…..

Anyway.

That’s it.

Box Legal Limited: After the Event Insurance Providers
www.boxlegal.co.uk  | daniel@boxlegal.co.uk | 0870 766 9997

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Aug 15

Recovering Single Premium Policies

Posted in After The Event Insurance, General, Personal Injury Claims, Road Accidents, Solicitors

Still no call from the Ministry of Justice…..  I shall therefore continue with my day job.

A solicitor has asked me to write something about recovering After the Event Insurance premiums from defendant insurers. Apparantly, some insurers are mixing things up a little when it comes to the RTA Portal. I shall explain.

It used to be the norm (following Callery v Gray) that a single ATE Premium was recoverable from the losing party. That premium did not need to be the cheapest but had to be reasonable taking into account the risk, level of indemnity etc. Now Callery v Gray remains the key case with regard to ATE policies yet, with the advent of the RTA Portal, some insurers are arguing that claimants should be taking out staged and not fixed premiums. A staged policy is one where the premium starts off low but then gets increasingly more expensive as the case progresses to trial. The stages often involve being in the portal (which is the cheapest), dropping out, proceedings issued and trial. The premiums for the latter stages are very high with some insurers quoting over £3,000 when it gets to trial. Now that is a lot of money for an RTA claim you could have insured with a fixed premium of £371.00 at the start.

And so you see this is the problem. Defendant insurers are trying to have their cake and eat it. They are arguing cases in the portal should have low staged premiums (normally around £100) but they then argue against the higher premiums charged for those cases they settle or lose later on – saying in those cases the claimant should have bought a £371 fixed policy.

So how do you tackle this? Well, we have some bullet points for you to use in your replies:

  1. At the time the case commenced, the claimant did not know if the case would settle within the RTA portal process or not. The defendant is assessing the premium with the benefit of hindsight but at the time the policy was purchased, it was reasonable.
  2. Out of 31 brokers who offer ATE policies, only 8 offer staged policies. The vast majority therefore use fixed premiums. Claimants are entitled to recover ‘reasonable’ premiums and so it follows that ‘reasonable’ must include those offered by the majority of After the Event insurance brokers.
  3. The lower premiums for cases within the portal are not finite products. The policies are staged and you have to buy the whole product not just cover for the portal part of the claim. This means that the premium is not the £80 or £100 quoted but an amalgum average for all stages of a case. For example, a DAS 80e policy has 4 stages:  £79.80 if settled within the RTA portal; £397.50 if it drops out but proceedings are not issued; £848.00 when proceedings are issued; An additional open ended premium due 14 days before trial (individually assessed). Claimants cannot pick and choose different stages of the policy as they wish but must purchase the policy in its entirety before it is know at what stage the case will reach. This means they may be committing themselves to paying a premium of £848 or even several thousand pounds if the case gets close to trial. To work out an average, you need to apply some percentages to the various stages. Naturally, the portal won’t help with this - we wrote to them and they replied that they don’t keep this information – so we rely on our own experiences below.
  4. Assuming the best scenario is 70% of cases settle within the portal, 10% after, 15% after proceedings and 5% at trial, the DAS 80e average would be: 70% x £79.80 + 10% x £397.50 + 15% x £848 + 5% x £3500 (this is estimated for the final DAS premium) = £397.81. So basically more expensive than our single fixed premium of £371.00. If the settlement profile is worse (and we are hearing numbers of about 50% settling within the portal, not 70%) then the ‘average’ gets a lot worse for these staged policies – more like £450.
  5. There are of course many court decisions approving fixed policies, indeed in a 2005 case of J Tyndall v Battersea Dogs Home, the claimant took out a staged premium and the defendants then argused it should have been fixed! The court confirmed it was ok to have a staged policy but that the norm was for fixed premiums.
  6. Nothing in the rules which set up the RTA portal process said that only staged policies would be recoverable. Indeed, the Government specifically preserved the ATE market as it existed before the rule change.
  7. This argument has already been before a court. The defendant insurer argued that the claimant should be using a staged policy in the Wrexham County Court case of Watson v Johnson. They lost. The Judge ruled that it had not been established that staged premiums were cheaper and indeed were likely to be more expensive.
  8. Finally of course, nothing has really changed with the RTA portal process. The cases settling within the process would have been the ones settling before the rules came in anyway. The creation of the portal has not suddenly made wise old insurers throw up their hands and cave in on liability on cases which they could have won.  The chances of those cases being lost were always very low but the principle set out in Callery v Gray – that the ‘many pay for the few’ remains.  

So there you go. 8 paragraphs of wisdom should do it (thank you to Simon and Jon at this end who helped me with this).

As usual, the defendant insurers are using smoke and mirrors to try to save money. Don’t be fooled.

Box Legal Limited: After the Event Insurance Providers
www.boxlegal.co.uk  | daniel@boxlegal.co.uk | 0870 766 9997

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Aug 8

Jackson Working Party to be Formed

Posted in After The Event Insurance, General, Personal Injury Claims, Road Accidents, Solicitors, The Jackson Report

And so back to business.

You may have spotted that the Ministry of Justice has announced that they are to form a working party to help to develop the court rules and regulations to enable the Jackson reforms to be implemented. Basically, they are going to ‘invite’ relevant interested parties to help put some meat on the bones. And about time too.

Their remit will be to look at (and I quote):

  • Qualified one way costs shifting – atypical cases and behavioural aspects
  • Introduction of an additional sanction/reward under Part 36
  • The detail of the proportionality test – content of a Practice Direction – examples of when the test should not be applied.

No mean feat. I have already pointed out the great flaws in the Jackson reforms so we shall see how they cope with getting around the problems. Key here of course is (a) who is going to be invited to join the group and (b) how exactly will the group operate.

Let’s look at (a).

Well, you would hope that interested parties would include the Law Society, APIL, MASS, the ABI and Trade Unions at the very least.  I think however there will be another agenda going on with a little bias in the sides. I doubt very much they will be even with most money going on more representatives from the defendant brigade. Also depends on (b) of course…

(b) How exactly is the group going to operate.

I doubt MoJ is going to allow it to be a democracy with each interested party getting an equal a vote on proposals. I suspect the MoJ will simply listen and then ignore anything it doesn’t like when it comes to the drafting. If I am right with this then expect some fireworks and a few walk outs. I can’t see this process going smoothly and with this will be a danger that we will end up with unworkable rules.

Satellite litigation here we come me thinks.

Or maybe I am just a born sceptic.

Anyway, the MoJ have said that they will be picking the attendees from those who submitted responses to the Jackson reforms (remember them – the ones they didn’t read). Now we put a reply in drafted by our very own legal expert, Simon Pinner. So, who knows, it could be us shaping the future of civil litigation. Could also equally be Claims R Us Ltd.

Timetable is tight. The working party is to report by the end of September 2011 with a ‘workshop’ to be convened towards the end of October 2011 to be attended by experienced practitioners (both claimant and defendant) in all civil litigation practice areas.

Now we work fast here but this is a joke. There is no way a properly formed working party is going to be able come up with properly drafted rules in 7 weeks, not forgetting or course that most people are away during August.

More slight of hand going on here?

I am sitting by the telephone waiting for that call.

Box Legal Limited: After the Event Insurance Providers
www.boxlegal.co.uk  | daniel@boxlegal.co.uk | 0870 766 9997

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Jun 30

Referral Fees: AXA Jump Off the Band Wagon

Posted in General, Personal Injury Claims, Road Accidents, Solicitors, The Jackson Report

It is great to see these masters of spin at work isn’t it?

First the ABI denied it – then they had to come clean and admit that insurance companies were selling car accident insurance leads. The  justification: If we didn’t do it then Claims Management Companies would do it so we may as well make the money.

Well rubbish. AXA have been found out and have tried to head off a PR disaster for themselves by suddenly becoming the good guys – ‘We will no longer charge lawyers referral fees’.

Now what does this mean? Will they no longer encourage their insured to claim personal injury? Will they still encourage them but pass the leads through for free? Will they ask for something in return from the firms receiving the cases – I don’t know but maybe they will have to do some uninsured loss recovery for free? You see there is more than one way to skin a cat so AXA may suddenly have seen the error of their ways but I am sceptical that there won’t be some sort of balancing of the books going on.

I know – why don’t AXA (and all other insurers come to that) publish their referral arrangements for us all to scrutinise?

They won’t of course. Is it all a conspiracy? Have the insurers deliberately driven up claim numbers so they can cry fowl to the Government who, let’s face it, have fallen for it hook, line and sinker.

I think an investigation is called for.

Less of the Shane Warne and more Bob Willis please AXA.

Box Legal Limited: After the Event Insurance Providers
www.boxlegal.co.uk  | daniel@boxlegal.co.uk | 0870 766 9997

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Jun 27

The Pot Calling the Kettle Black

Posted in General, Personal Injury Claims, Road Accidents, Solicitors, The Jackson Report

Did you hear Jack Straw and a chap from the Association of British Insurers (ABI) on the Today programme this morning? No? Well, it went something like this:

Jack Straw’s friend had an accident about 6 months ago – no injuries and everything paid for by the other driver. He then started to get calls from Claims Management Companies asking him it he wanted to claim for Personal Injury. This went on for some time. The friend asked Jack Straw to find out how the Claims Companies got hold of the information about his accident. Well, after some digging, what do you know? The friend’s own insurance company admitted that they had sold the information to the claims management companies.

So there you have it – proof that the so called compensation culture is the fault of the defendant insurance industry and not due to adverts on TV. This is what we and many other companies in the know have been saying for some time – backed up by the data of course which shows all types of accident numbers reducing save for motor claims.

On the Today programme, the ABI representative got a real grilling from John Humphries (for it is he). The ABI’s justification for the practice is - wait for it – ‘if the insurers didn’t do it then everyone else would so the insurers at least make money out of it’. Well this isn’t bourne out by the figures – as stated above. Clearly this practice is driving motor claims higher. It should be banned.

When is the Government going to wake up and realise that they are being bamboozled by some very clever lobbying by the defendant insurance industry.

Unbelievable.

4.50pm Update: I have found the discussion on the BBC Website. Click here to listen: http://news.bbc.co.uk/today/hi/today/newsid_9523000/9523272.stm

Box Legal Limited: After the Event Insurance Providers
www.boxlegal.co.uk  | daniel@boxlegal.co.uk | 0870 766 9997

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May 23

Fraudulant Claims

Posted in After The Event Insurance, General, Personal Injury Claims, Road Accidents

We know they are out there. We have all heard about the fake accidents and extra passengers.

If a claimant is found to be fraudulent then he/she is in big trouble. First of course, there are the legal costs. If you make up a claim and are found out, any After the Event Insurance policy you have won’t be valid so you will be facing many thousands of pounds in defendant’s costs and disbursements. In addition, most Conditional Fee Agreements state that, in the event of a finding of fraud, you will also have to pay your own solicitor’s charges.

Ok – so what? Are fraudulent claimants likely to pay up? Well no. They often disappear – after all it is common for them to use a fake address.

Worse for the fraudster however is the fact that they have committed a criminal offence. If they are caught, the police (if they can be bothered that is) could arrest them for fraud and deception.

So how are the defendant insurers reacting? Well they are being their usual crafty selves. First, they are (quite rightly) setting up fraud teams to investigate these criminals. Often the fraudsters aren’t just doing this once but are serial offenders and so, if the defendants can stop them, they are going to save many thousands of pounds.

The problem is, the defendant insurers are now going too far. We have evidence which suggests that it is now common place for fraud to alleged in defences pleaded by defendant insurer solicitors. Virtually standard phrases are being used and defendant solicitors are telling claimant solicitors that they must (a) tell their clients of the consequences of being found to be fraudulent and (b) tell the client’s After the Event Insurer.

What is the effect of this? Well, some claimants get scared. They don’t want to be left facing a massive bill and so, even if they are innocent, they cease claiming. The problem is, we understand some After the Event Insurers are then taking this action to be evidence of a fraud and so won’t pay out for any costs. We also believe that ATE Insurers are checking defences very carefully and, if a claimant loses, they point to any allegation of fraud and tell the claimant that, in view of the allegation and the fact that they lost their claim, they won’t pay out. Now this is not where there has been a finding of fraud, just where a case has been lost on the facts.

So you see, the defendant insurer tactics are backfiring somewhat. By alleging fraud across most defences, they are giving ATE insurers ammunition to refuse claims. If a claim is refused of course, the defendant insurer doesn’t get paid costs. So they are shooting themselves in the foot here.

What do our underwriters do? Well they ignore these shenanigans. Any allegation of fraud is seen as bravado. The underwriters we use wait to see what the Judge decides. If the Judge makes a finding of fraud on the facts then they don’t pay out. If there is no finding of fraud then they do pay. Life is so much simpler when you don’t play games.

Box Legal Limited: After the Event Insurance Providers
www.boxlegal.co.uk  | daniel@boxlegal.co.uk | 0870 766 9997

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May 10

Referral Fees and Before the Event Insurance

Posted in After The Event Insurance, Personal Injury Claims, Road Accidents, Solicitors, The Jackson Report

Old Ken Clarke was all for Before the Event (BTE) Insurance. No wonder the Government has decided to leave referral fees alone.

Let me explain.

BTE Insurance, as you no doubt are aware, is an annual policy attached to motor or household insurance policies which covers the policy holder (and often their family) in the event of a legal dispute. If for example someone has a policy with their motor insurance, it would have cost them about £25 to £40. For the next 12 months they then have legal assistance and all of their legal fees paid for if they need to make or defend a legal claim.

So, let’s say they have an accident which wasn’t their fault. They contact their BTE insurance provider who places them with a solicitor. The policy holder will be protected against legal costs if they lose and if they win, the solicitor recovers their charges from the defendant. Sound familiar? Well it is exactly what happens with After the Event Insurance save for one significant fact: The BTE insurer will charge the solicitor a referral fee for getting the case.

In other words, the BTE provider sells the case to the solicitor, for up to £750! So instead of the BTE policy actually being a liabilty for the BTE Insurer, it is in fact an asset – they want clients to claim on them as it makes them money. What is more, the BTE provider insists (often with a nod and a wink) that the solicitor doesn’t claim on the policy. You know the sort of thing – if they did claim, it would be the last case they received or similar strong arm tactics.

So the BTE provider is receiving up to £40 for each policy they sell plus £750 for each personal injury claim. Nice.

Let’s compare this to After the Event Insurance bought er, after an accident has happened. Motor ATE Policies typically cost around £350 although the cost to clients post Jackson is likely to be much less, around £150. How many car accidents have you had in the last 10 years? Me – none. The average person – one. So, in 10 years, if you were buying a BTE policy just in case, you would have shelled out around £400.  Instead, if you simply bought an ATE Insurance policy when the accident happened, it would most likely cost just £150 for you to have exactly the same cover.

So BTE isn’t the answer. Not only are BTE Insurers flogging cases to the highest bidder, they are charging clients far too much. After the Event Insurance is much more efficient and cost effective. You only buy it when you need it, not each and every year just in case.

Ken Clarke is wrong. BTE Insurance is not the holy grail but a licence to print money. Tick the ‘No’ to legal insurance box on your motor quote and save a packet.

Box Legal Limited: After the Event Insurance Providers
www.boxlegal.co.uk  | daniel@boxlegal.co.uk | 0870 766 9997

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May 3

Not about After the Event Insurance but a Word of Warning

Posted in General, Road Accidents, Solicitors

Another good short week? Enjoy the wedding?

I didn’t. Had a bit of an incident which soured things a little.

Now if you read my blog regularly, you might begin to think that I am a used car salesman on the side but it’s just coincidence. We bought a 7 seater to accommodate all of the children plus their assorted friends recently so last week, I put our Mercedes M class up for sale in Autotrader.

I got a couple of calls, and one person wanted to come and see it on Tuesday night. Problem was, I was out playing football but we finally managed to shift the times and ‘Akesh’ and his friend were there when I got home. I proceeded to show them around the car but refused to let them drive it as they obviously weren’t insured. They checked all of the paperwork  – chassis number against the V5 etc, even that the chassis wasn’t bent at all.

They said they had seen one other car that night but the owner only had one key so they were suspicious. Did I have two keys? Of course – so I locked the car and got the other one. They then wanted to check that the central locking was working with the metal part of the fob (there is a small emergency key which is hidden in the Mercedes electrical fob) but it didn’t seem to work.

They then wanted to check the spare tyre was in the boot so I opened it and lent in. Next thing I know, the boot lid has come down on my head and I am somewhat stunned. ‘Akesh’ said he was looking for the lock in the boot and hadn’t realised I was going to lean in. I wasn’t feeling all that great – but ‘Akesh’ said he was interested in the car and just wanted to do an HPI credit check on it and would call me in the morning. With that, he locked the car, handed me back the key and I went back in side to look at my head in the mirror (cut and massive raised bruise).

So that was that. Except, in the morning I woke up and the car had gone. I then looked at the keys and realised they had swapped one of them after cracking me on the head. It was pretty much identical to our keys and not obvious in the dark.

So there you have it. I am now dealing with my insurers and the police who incidentally, despite an assault and theft of an expensive car, couldn’t be less interested.

I have since been told that this same theft modus operandi was featured on the BBC’s ‘The Real Hustle’.

Shame I hadn’t seen it. I suspect ’Akesh’ and his mate have.

Box Legal Limited: After the Event Insurance Providers
www.boxlegal.co.uk  | daniel@boxlegal.co.uk | 0870 766 9997

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Apr 1

Government Based Their Decision on Jaggards Data

Posted in General, Personal Injury Claims, Road Accidents, Solicitors, The Jackson Report

I have just read the Government’s Impact Assessment. I thought for a minute it was an April Fool joke but then looked at the date – it was written 10th March.

In the assessment, Annex A reveals that the Ministry of Justice have based their assessment purely on data received from Jaggards. Now anyone in the personal injury industry will have heard of them. Jaggards act for defendant insurers and their role is to knock down the claimant’s costs. They take any and all possible stances to do this (trust me, I was in practice for 7 years and had to deal with them).

So do you think their dataset will be skewed towards the defendants? Well the Government doesn’t think so. I do.

Let’s look at one item in particular. The Impact Assessment states that the Jaggards data shows average GENERAL damages in Road Traffic Accidents are £4,348. Now when I was in practice not so long ago, average damages were £2,000. Claimants need to get some data together (come on APIL!) but I suspect what has happened here is that Jaggards have accidentally given the total damages figure to the Ministry and not the General Damages figure.

Now this is quite important as the Ministry is now assuming the clients will be getting an additional £434 on average which should be more than enough to pay for success fees and After the Event insurance. If the true figure is half this sum then that is a very different kettle of fish.

If you are a member of APIL and are reading this, contact them now. This is an outrage. Something must be done.

Box Legal Limited: After the Event Insurance Providers
www.boxlegal.co.uk  | daniel@boxlegal.co.uk | 0870 766 9997

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Mar 29

Ken Clarke to Announce Government’s Decision on Jackson at 3.30pm Today

Posted in General, Personal Injury Claims, Road Accidents, Solicitors, The Jackson Report

And so it came to pass. After just 43 days in the wilderness, Ken Clarke will today put everyone out of their misery and tell Parliament what the Government intends to do about litigation.

Leaked sources indicate that the success fee recoverability from defendants is going, but it will instead be recoverable from the claimant (capped at 25% of damages). To compensate, the claimant will be given a 10% increase in damages. No win, no fee will stay and the RTA portal will be expanded to include all low value PI claims and Clinical Negligence.

Nothing about After the Event Insurance or one way costs shifting as yet – so the smart money is on this staying the same. But who knows? Am I chancing fate here by saying anything?

Not long to wait now. The only thing I would add is, this is incredibly quick. The Ministry of Justice received over 600 submissions on the Jackson reforms and over 5,000 on the Legal Aid proposals.

Mr Clarke must have been up all night for the last month reading that lot…..

Box Legal Limited: After the Event Insurance Providers
www.boxlegal.co.uk  | daniel@boxlegal.co.uk | 0870 766 9997

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Mar 28

Has Djanogly Let the Cat out of the Bag?

Posted in Personal Injury Claims, Road Accidents, The Jackson Report

One of our sharp eyed readers (it’s Malcolm Roberts again!) has spotted something very interesting. Mr Djanogly (remember him? Junior minister at the MoJ and former city slicker solicitor) spoke recently at an event organised by the National Pro Bono Centre.

Towards the end he mentioned something which, upon analysis, may indicate which way the Government is going to jump on the Jackson conundrum.

He said that plans to extend the year old road traffic accident claims process to other areas of personal injury, including low value clinical negligence, would leave only big cases affected by the Jackson reforms. Ah ha! So it appears the MoJ may be recommending that all low value PI claims go through the portal and that it is then given time to work rather than suggest big changes following the Jackson review.

OR it could be another clanger from Mr Djanogly who has slipped up quite a lot of late.

So we will have to wait but it is mildly encouraging. Let’s keep our fingers crossed.

Box Legal Limited: After the Event Insurance Providers
www.boxlegal.co.uk  | daniel@boxlegal.co.uk | 0870 766 9997

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Mar 25

Caselaw Review: Philips v Rafiq & MIB : Deceased client can claim against MIB even though he knew driver was uninsured

Posted in Personal Injury Claims, Practice & Procedure, Road Accidents

The Issues: Mr Rafiq was driving the Claimant’s uninsured car, in which the Claimant was travelling as a front seat passenger. Mr Rafiq lost control of the vehicle and crashed into the central reservation of the M25, overturning the vehicle. The Claimant suffered such serious injuries that he died in hospital later that day, and the claim was brought by his dependants. The question before the Court, was whether the MIB were exempt from paying the claim on the basis that had the Claimant survived the accident he would not have been able to recover damages from the MIB, on the basis that he allowed himself to be carried in a car which he knew, or ought to have known, was being used without proper insurance being in force (6.1(e) of the Uninsured Drivers’ Agreement).Held: Although Mr Rafiq had a policy of motor insurance which covered his own vehicle, this did not cover his use of the Claimant’s car. There was a finding of fact at first instance that the Claimant knew or ought to have known that he was being carried in a car which was uninsured. There was no appeal against this finding of fact.Clause 6.1(e) of the Uninsured Drivers’ Agreement provides the following exception to the MIB’s obligation to satisfy a compensation claim:

“Clause 5 [obliging the M.I.B to satisfy any judgment against the driver] does not apply in the case of an application made in respect of a claim of any of the following descriptions …

(e) a claim which is made in respect of a relevant liability described in paragraph (2) [it being common ground that this is such a relevant liability] by a claimant who, at the time of the use giving rise to the relevant liability was voluntarily allowing himself to be carried in the vehicle and, either before the commencement of his journey in the vehicle or after such commencement if he could reasonably be expected to have alighted from it, knew or ought to have known that –

(i) …

(ii) the vehicle was being used without there being in force in relation to its use such a contract of insurance as would comply with Part VI of the 1988 Act, …”

On considering the previous 1988 Agreement compared to the 1999 Agreement, the Court concluded that because the earlier Agreement had clearly excluded a claim of this type, but the 1999 Agreement had not, a reasonable man could only conclude that the 1999 Agreement meant to allow a dependent’s claim in such circumstances (para 25). The Agreement was between the Secretary of State and the MIB and the teams who drafted the Agreement must have had a high level of knowledge and expertise of the working of the scheme in the past and therefore must have intended to remove the exclusion to compensate dependents in this way.

The Court of Appeal upheld the first instance Court’s decision that the Claimant dependents should be compensated by the MIB.

Comment: This decision resulted in the MIB making a petition to the Government to change the law and amend the Uninsured Driver’s Agreement wording. Lawyers for Ms Philips said that the ruling would cost the MIB millions of pounds but the MIB played down the significance saying that there was only going to be a handful of cases where the “loophole” would apply. But the MIB was clearly concerned, evidenced by its contact with the Ministry of Transport.

Box Legal Limited: After the Event Insurance Providers
www.boxlegal.co.uk  | daniel@boxlegal.co.uk | 0870 766 9997

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Mar 1

European Court of Justice Outlaws Insurance Sex Discrimination

Posted in General, Personal Injury Claims, Road Accidents

Well I am a bloke so this is good news for me – lower insurance premiums! Unfortunately (don’t tell her I said this), I am married to a woman so my lower premiums will be balanced by her higher ones.

The European Court of Justice has today ruled that insurance companies cannot take into account the gender of the insured when setting insurance premiums as this amounts to sexual discrimination. We all know that ‘boy racers’ are more risky than young female drivers but now they are going to have to be treated the same if they are the same age. Makes sense when you think about it – why should the actions of some male drivers push up the premiums for the rest of the male population? Hardly fair.

The rules will come in at the end of next year to allow the insurance industry to ‘adjust’. Now I am always blowing their trumpets for them but even I can see that this is an opportunity for insurance hikes across the industry. The only winners here will be the insurance companies. They will subtract x from male drivers and add 2x to female drivers making them a nice profit of, er x.

I just need to stop the Mrs from driving the car so we can gain. Maybe I could get a spider to take up residence in the glove box….

Box Legal Limited: After the Event Insurance Providers
www.boxlegal.co.uk  | daniel@boxlegal.co.uk | 0870 766 9997

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Jan 17

Credit Hire Tutorial

Posted in General, Personal Injury Claims, Road Accidents

Is it reasonable for a claimant to enter into a credit hire agreement if he has been offered an equivalent vehicle free of charge, when will spot hire rates apply (i.e. hire costs without any additional charges for providing the vehicle on credit) and how are ‘spot hire’ rates assessed?

Case Law:

  • Copley v Lawn & Others (2009) – refusing defendant’s offer of a ‘free’ car will not destroy claim for credit hire
  • Dimond v Lovell (2000) – a claimant cannot recover additional charges for the hirer providing the vehicle on credit
  • Lagden v O’Connor (2003) – where a claimant is unable to pay hire charges, i.e. they are impecunious, they can recover additional charges for the hirer providing the vehicle on credit.

Solution:

The answer will depend on who makes the offer.

If the offer is made by the claimant’s own insurer then the claimant can normally recover the cost of hire as the Courts have tended more recently to favour the argument that benefits acquired under an insurance policy should not be taken into account in assessing loss or mitigation.

The position is similar if the offer is made by the defendant’s insurer, although there are some differences. In the recent case of Copley v Lawn & Others (2009) the Court of Appeal recognised that defendant insurers were not in fact offering a “free” car, but instead they were paying for a hire vehicle with the cost being hidden from the claimant. In reality the offer is to find and then pay for a hire vehicle and unless the claimant, or their advisor, is aware of what hire charges the defendant’s insurer is able to secure, then they are unable to compare the vehicle being offered against one the claimant can arrange.

It was therefore concluded that:

  1. It is not unreasonable for a claimant to reject or ignore an offer of a replacement vehicle from a defendant (or their insurer) which does not make clear the cost of hire to the defendant for the purpose of enabling the claimant to make a realistic comparison with the cost they have, or will incur, when arranging a replacement vehicle through a credit hire provider.
  2. Following Strutt v Whitnell (1975) , if a claimant does unreasonably reject or ignore a defendant’s offer of a replacement car, the claimant is entitled to recover at least the cost which the defendant can show he would reasonably have incurred, i.e. he does not forfeit his damages claim altogether.

To that extent, the general rule that the claimant can recover the ‘spot’ or market rate of hire for his loss of use claim was upheld, unless and to the extent that a defendant can show that a car could have been provided by them at a cheaper rate.

Credit hire companies include within their credit hire charges, additional charges for the credit and the litigation services they provide. However following Dimond v Lovell (2000) a claimant is only entitled to recover the ‘spot’ hire rate, i.e. the rate it would have cost the claimant to hire a vehicle in their locality under an ordinary hire agreement.

The exception to this is where the claimant does not have the personal means to make immediate payment for a hire car ( Lagden v O’Connor (2003) ). But how is the claimant’s impecuniosity decided? In Lagden, Lord Nichols said that it was where “there was an inability to pay hire charges without making sacrifices [a claimant] could not be expected to make”. Lord Hope however suggested that impecuniosity was where payment up front would be an unreasonable burden; and in his view the possession of a credit or debit card would suggest that someone was not impecunious as this would give them the ability to pay without a credit hire agreement.

And how are ‘spot hire’ rates assessed?

In practice, it seems that judges tend to favour the ‘reasonable sacrifices’ test, although the possession of a credit card will often be explored by a defendant.

Defendant’s often rely on reports from Autofocus which attempt to establish spot hire rates local to the claimant. The burden of showing whether or not a rate is reasonable is on the defendant but in practice the claimant will have to rebut Autofocus by showing local rates that are higher than those quoted.

The length of hire may also be challenged, as the claimant can obviously only recover the cost of hiring a vehicle for as long as is reasonably necessary. In most cases 2 to 4 weeks is considered reasonable, dependent on how long the claimant’s vehicle is off the road, and if the hire lasts longer then this will have to be justified.

Another challenge might be to question whether there was a need for a hire vehicle at all, e.g. if the claimant is on holiday or if his injuries prevented him from driving (watch what the medical report says on this) then it may be difficult to justify hiring a replacement vehicle. In addition, if the claimant owns a second car that could have been used, it is likely the claimant will need show that an additional hire car was required.

Box Legal Limited: After the Event Insurance Providers
www.boxlegal.co.uk  | daniel@boxlegal.co.uk | 0870 766 9997

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Dec 13

Caselaw Review: Dimond v Lovell – Credit Hire Agreements

Posted in Practice & Procedure, Road Accidents

The Issues:

The Claimant arranged a replacement car from a credit hire company whilst her vehicle was being repaired. However, the Defendant’s insurers refused to pay the hire charges on the basis that:

  1. the hire agreement had not been prepared in accordance with the Consumer Credit Act 1974 (‘the Act’) and was therefore unenforceable; and
  2. the charges of £364.63 for an 8 day period of hire were unreasonable.

Held:

  1. The Claimant was provided with credit in that the payment of the hire charges was deferred until the conclusion of her case and therefore, as a personal credit agreement, it was a ‘regulated agreement’ within the meaning of ‘the Act’. The Claimant’s and hirer’s agreement did not contain all of the ‘prescribed terms’, and therefore it was unenforceable. As the agreement was unenforceable the Claimant had no liability to the credit hirer and therefore the hire charges could not be recovered from the Defendant’s insurer. Once this point was conceded, it was then argued, on behalf of the Claimant/credit hirer, that the Claimant had been unjustly enriched because she had had the use of the car for nothing and consequently she should be required to pay the hire charges. If the Court had agreed then as this was a liability caused as a result of the accident and the hire charges could be recovered from the Defendant’s insurers. However, this was dismissed on the basis that to accept this argument would be inconsistent with the purposes of ‘the Act’. Parliament intended that if a consumer credit agreement was not executed correctly then the debtor should not have to pay, and this meant that Parliament had contemplated the debtor might be enriched.
  2. On the basis of the above findings, no specific judgment was required on the amount of the hire charges however comment was made, in obiter, as the point was of general importance to credit hire companies and insurance companies. By a majority, it was stated that a Claimant could not recover any additional fee applied by the credit hire company, on the basis of any additional services provided, e.g. providing credit. Therefore, the damages recoverable for loss of use are limited to the ‘spot rates’ quoted by ordinary car hire companies.

Box Legal Limited: After the Event Insurance Providers
www.boxlegal.co.uk | daniel@boxlegal.co.uk | 0870 766 9997

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Dec 6

Jackson – The Main Problem with Qualified One Way Costs Shifting

Posted in General, Personal Injury Claims, Road Accidents, The Jackson Report

So there I was watching Dr Dolittle with my children (not my cup of tea but better than sitting though 5 Peppa Pig episodes again) when on came the two headed lama thingeymajig called – pushme-pullyu. I was watching Rex Harrison trying to establish which end was the front and suddenly realised what the problem was with one way costs shifting (I know I am sad but it is a terrible film after all).

Slipping and tripping accidents are not affected and nor are accidents at work. Which party is the claimant and which one is the defendant is obvious to everyone.

The problem is, over 50% of claims are road traffic accidents and in road accidents, identifying the claimant and defendant is not so easy (can you see where I am going yet?).

Let’s take an accident at a junction where one car pulls out in front of another. The one that pulls out is at fault, right? Well, not always – what if the approaching vehicle is indicating (and there are witnesses). Who is at fault then? A court would most likely award a split of liability – perhaps 60/40 in favour of the approaching vehicle. So….. if both parties are partly to blame for the accident, who is the defendant? Well, the simple answer – and one the courts use – is that the claimant is the one to sue first, meaning the one who fails to sue as quickly and has to counterclaim is the defendant.

Why does this matter? Well, Jackson suggests the answer to all of our problems is Qualified One Way Costs Shfiting – where the claimant can receive costs when they win but will not be subject to any costs if they lose (and so there is no need for After the Event Insurance). If either party could be a claimant as both are partly responsible for the accident, surely there is going to be a race to be the claimant to ensure they face no risk of costs and can recover their costs? What about the one that sues second – they are considered to be the defendant and so they will have to pay costs but not receive any if they win. Madness.

It simply doesn’t work. Nor does a Lama with a head at each end – which is why you don’t see them in the zoo. 

Box Legal Limited: After the Event Insurance Providers
www.boxlegal.co.uk  | daniel@boxlegal.co.uk | 0870 766 9997

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Nov 2

Clocks going back leads to more fatalities

Posted in Road Accidents

So the clocks went back and we all had an extra hour in bed (except those with young children like me!) and we now have to get used to going home in the dark for the next 6 months. But did you know that lighter evenings means fewer accidents and darker means more?

The Royal Society for the Prevention of Accidents (RoSPA) estimates that the change back to Greenwich Mean Time increases the number of road accident fatalities by over 80 people each year, not to mention a huge increase in injuries. Strangely, darker mornings don’t seem to have the same effect – something to do with being fresh from a night’s sleep and all that coffee I suppose.

There has been a call for the UK to stick to British Summer Time to avoid this but the Government remains unconvinced. Once again the true statistics are going to be ignored so be very careful on your way home – watch out for all those tired drivers and make sure your lights are working properly.

Box Legal Limited: After the Event Insurance Providers
www.boxlegal.co.uk  | daniel@boxlegal.co.uk | 0870 766 9997

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