The introduction of the Civil Justice Reforms was heralded as revolutionising the way claims are managed. But 18 months after Lord Woolf's proposals were introduced, there is still much debate about how effective the new system actually is.
Perhaps the biggest stumbling block to attaining the streamlined system envisioned by Lord Woolf is one of attitude, and there is no doubt that those companies who embrace the reforms in a proactive way are reaping significant benefits.
But before examining the effect of the new system, it is worth reminding ourselves of the objectives proposed by Lord Woolf as set out in the Pre Action Protocols. These are:
Parties are encouraged to co-operate with each other in the conduct of proceedings and identify and crystallize the issues at an early stage. Prompt decisions should be made where full investigation is required or where cases might be disposed of summarily. The courts should fix a tight timescale for dealing with matters and control the progress of a case through case management. The use of ADR procedures are encouraged.
That's what Lord Woolf wanted to achieve, but are his procedures actually working? From my perspective as an adjuster dealing primarily with liability matters, the answer has to be both yes and no.
We are receiving instructions from insurers to investigate and deal with claims, but often the cases are received very late in the day when the letter of claim has been sent to the insured months previously.
This gives us very little time to tie up the evidence and come to a firm conclusion on liability and disclose the relevant documents, and so on as required under the Pre Action Protocol Rule – i.e. within three months of the letter of claim being acknowledged.
Unfortunately, too often we find that an insured has ignored the letter of claim, or certainly not acted on it quickly, and the insurer has been given no opportunity to acknowledge the letter of claim within the 21-day time limit.
Potentially these delays are prejudicial to the defendant, although the courts seem to be taking a relatively relaxed view at present, providing that the spirit of the protocol is adhered to.
In an attempt to overcome this problem one insurer (The Underwriter) is now nominating adjusters at inception of the policy, giving the adjusters delegated authority to deal with claims.
We make contact with the insured at that time, explaining the new procedures, offering to discuss matters with them and ensuring that we are advised of potential claims in good time – even before the letter of claim is received. The earlier and more thorough the investigation the better.
It is essential that there is a strong relationship and trust between insurer and adjuster if a delegated scheme is to work, and that the adjuster has adequate resources.
Even when a decision has been reached on the question of liability we find insurers reluctant to then admit liability, either in full or part, if that is appropriate.
If an admission is given at that stage then there can be very considerable savings on costs. The other side is not put to the expense of a full investigation. Liability can be admitted, save as to causation/contributory negligence. The old adage of “if in doubt chuck it out” no longer holds good.
This is perhaps even more important now that many cases are subject to conditional fee arrangement (CFA). The solicitors will not only charge a success fee on the costs proportionate to the risk involved in litigating the matter, but will also include in the claim an after the event (ATE) insurance premium.
Even in minor cases we have noticed that solicitors are suggesting the ATE insurance premium will be as much as £1,200. Obviously, if an admission of liability has been made at an early stage then there is little or no risk and the proportionality argument should prevail.
We are making part 36 offers before proceedings are issued both on liability and quantum. The claimant is bound to take notice of such offers and they will be aware that unless they beat the offer in court then costs will not be recoverable after the date the part 36 offer was made. This is having the effect of concentrating both parties' minds and moving the settlement procedure onto a conclusion without needing to involve the court.
Some insurers seem to be completely ignoring part 36 offers made against them. In one case recently where we made a part 36 offer, giving them 21 days to consider it, we heard nothing.
When we telephoned a few days later to see if they were taking the offer seriously or not, we were told that the letter had not even been scanned on to their system.
Some insurers will need to wake up very quickly or pay the penalty of punitive interest on the award – up to 10% above base rate – and indemnity costs.
The latter can be painful as indemnity costs equate to whatever the claimant's solicitors can get away with, and not necessarily proportionate to the value of the claim.
Claimant's solicitors are not always adhering to the spirit of the protocol and often attempt to catch insurers out. They will front load the investigation and then will spring the letter of claim on the insured, possibly toward the end of the three-year limitation period, giving the defendant little opportunity to respond within the time limits.
This will be a particular problem when dealing with stress claims or industrial disease claims. It is all the more important, therefore, that these potential claims are recognised at an early stage and documents, statements and so on are gathered.
A close working relationship with larger employers is essential. Indeed, there is an opportunity here for the insurer to be proactive in the management of potential claims by liaising with those involved in rehabilitation, re-employment and stress counselling.
The claimant's solicitor can no longer ignore the request from the defendants that their client consider rehabilitation or training. Active management of the claim should show a reduction in the cost of future loss of earnings claims.
The reforms are working for the defendant insurer who is prepared to invest time and effort into managing the insured risks properly. That is where we as liability adjusters can assist.
A firm realistic proactive response to notification of claims can achieve considerable savings. That service, if it is to be carried out properly, comes at cost – some insurers seem to still wish to pare those costs down – but the savings can be considerable. We have always taken a pro-active stance on the investigation and handling of claims, encouraging dialogue with the other side and the pre-action protocols under the Civil Justice Reforms now make that mandatory.
Overall this has to be good for the industry and, all considered, the reforms are working – it is up to insurers to take advantage of the system rather than let others take advantage of them.