Katy Dowell takes a closer look at the Civil Justice Council's proposals to reform claims
After three years of research, the Civil Justice Council (CJC) has completed its report, Improved Access to Justice and Proportionate Costs. If, as is widely anticipated, the government accepts the CJC's proposals, all those involved in the claims process will feel the effects.
Experts agree that a reduction in insurers' hefty legal costs will be one major change.
But the report also makes important recommendations about the after-the-event (ATE) insurance market, medical reports and the use of contingency fees.
The report stopped short of recommending a radical overhaul of the ATE market, instead proposing the "further expansion" and wider "promotion" of the before-the-event (BTE) insurance sector.
According to AXA technical claims manager Graham Plumb, such a recommendation suggests "an implied criticism" of insurers' failure to support the BTE market.
"It is clear that the ATE industry is here to stay," he says. "[But] the CJC is saying that something now needs to be done about the BTE market."
A source close to the CJC says too much investment has been put into ATE cover for the body to recommend its complete withdrawal, saying: "We have gone too far down that road for the CJC to pull the carpet from under it."
But not all lawyers are likely to support this move. One legal source comments: "I suspect solicitors may well receive operating fees from the unions for which they act.
"Solicitors paid on the number of cases they refer may not want to see promotion of the BTE industry."
Under the proposal lawyers will be responsible for obtaining medical reports at fixed fees. In May Insurance Times reported that the CJC was in talks with the Association of Medical Reporting Associations (AMRO) about introducing a predictable costs regime.
It is now understood that the CJC and AMRO, which represents 60% of the medical reporting industry, may have reached a deal.
Hugh Price, a partner at lawyer Hugh James, says: "AMRO has agreed with the CJC that it will pay a fixed fee in certain cases. In these cases the insurer will pay the fee directly to the medical agency."
But he says this could compromise the independence of agencies. "How independent is a document if it is being paid for by an insurer attempting to reduce its costs?" he asks.
But Christine Harragan, development director of Allianz Cornhill Legal Protection, says: "Predictability will benefit everybody. We all need to know what the reserves for these cases should be - it impacts directly on business plans."
Past president of the Forum of Insurance Lawyers (Foil) Claire McKinney agrees, saying fixed fees would "contain costs". But she adds that medical experts may rebel against the proposal. "The medics don't want to see fixed fees - it won't go down too well."
She says the CJC may force a costs structure onto all sectors of the market. "The report is saying if you want to work in the market you have to work at a price we can afford."
Medical reports are currently sold at a rate of around £200 by AMRO, sources claim. The CJC recommends that in future fees will be negotiated by a new Costs Council body.
It will also negotiate fees for police reports and oversee the use of the contingency fees system, where lawyers' fees are calculated as a proportion of awarded damages.
The report says: "The CJC recognises the importance of clear procedural and effective cost proportionality controls in group actions with potentially high costs."
This has the support of McKinney, who believes contingency fees will become a permanent fixture in the UK: "They keep the claimant alive as to what this is costing them."
But the Association of Personal Injury Lawyers (Apil) says their introduction would undermine the conditional fee system. In a statement Apil says it has "always been against the introduction of contingency fees for personal injury cases, as we feel the claimant's damages should be sacrosanct.
"We now have a workable system. Introducing contingency fees now would render the last five years' work pointless."
Harragan argues that there are some cases where contingency fees are necessary to make way for access to justice.
"Underwriters might refuse to take some clinical negligence cases on - then where do people go to get justice?"
The CJC's 149-page report is now in the hands of the Department for Constitutional Affairs, which is expected to give its formal response later this year.
Industry-wide consultation by the CJC in the run-up to its publication has mellowed reactions to the report.
All agree it has completed its aim - to streamline costs. Now it's over to the government. IT