Beware accepting a claimant's part 36 or making one yourself in a small claim.
Part 36 offers – widely acknowledged as one of the major plus points of the civil procedure rules – are being used and abused by claimant solicitors.
While the costs consequences of Part 36 offers apply before allocation or following re-allocation to the fast or multi-track, they do not automatically apply to claims allocated to the small claims track. This is not preventing claimant firms from 'trying it on'.
It is becoming common practice for claimant solicitors to make a pre-proceedings offer under the guise of a Part 36 and on acceptance seeking full costs. What's more, if unwary claims handlers make offers in line with Part 36, claimant firms are arguing this implies they accept the claim should be dealt with on the fast track – entitling them to full costs.
Insurers should take the following steps with every new claim:
- Will it be allocated to the small claims track if proceedings are issued? If so, do not describe your offer as a Part 36 offer. Call it a calderbank offer – one made without prejudice as to costs – and at most offer fixed costs and disbursements.
- Do not accept a claimant's offer to settle without clarifying the costs position.
- Make acceptance conditional on payment of fixed costs and disbursements.
- If proceedings are threatened unless costs are paid in full, tell your opponent the claim will be allocated to the small claims track and costs will be fixed anyway.
- A reminder that courts have the power to award costs personally against a solicitor who acts unreasonably should have a sobering effect.
Let's stop this CRU scandal – insurers money tied up in appeals for too long.
The Social Security (Recovery of Benefits) Act 1977 came into force on 6 October 1997. The result is that insurers are liable to pay the DSS through the Compensation Recovery Unit (CRU), an amount equivalent to the recoverable benefits paid during a relevant period to a claimant.
Broadly speaking, when a compensation payment is made to a claimant, the insurer must reimburse to the CRU those payments which are recoverable and have been paid as a result of the accident, injury or disease in respect of which compensation was paid.
An insurer is bound by a CRU certificate, which is in force at the date of any compensation payment. So what does an insurer do if it has grounds to believe that either the amount, rate or period specified in the Certificate is incorrect or more commonly, the benefits have been paid other than because of the action giving rise to the compensation payment?
The legislation provides a mechanism where an insurer can appeal provided it is made three months after the claim has been finally disposed of and after the recoverable benefits have been repaid. The problem is the delay involved.
The CRU acknowledges that there are currently over 2000 outstanding appeals – 94% of which are from insurers. The result is that insurers' money is tied up, often for years, at the CRU with no provision for payment of interest of the cost of bringing the appeal. The benefits can run into many £1,000s, and even if the appeal is ultimately successful, the loss of interest on the money alone makes the delay hard to swallow.
The DSS recently appointed a Task Force to oversee a recovery plan. While there may have been some improvement, there is still too much insurers' money tied up in CRU appeals for far too long.
So what can insurers do?
- Keep the pressure on. Although there is no provision for payment of interest the CRU has confirmed that there is scope to consider ex gratia interest payments on application.
- Apply now. You should also insist on payments of your costs incurred in lodging the appeal and subsequently chasing up the CRU – it is your money.
Dimond v Lovell: the impact could extend to damages generally, not just car hire claims.
One of the issues the House of Lords is now considering is whether the claimant can claim a loss even if the credit hire agreement is unenforcable.
Generally, a claimant can only claim compensation for losses he / she has actually suffered or will suffer in the future. An exception in relation to past losses is where there is a claim for care. Often this care is given by friends or family and no payment is made by the claimant to the carer. Nevertheless, the claimant is entitled to claim damages for the care given, usually calculated by reference to an hourly rate.
The Courts have allowed these claims on the basis that the claimant's loss is not the care given, but the fact that the care is needed at all. The value of the loss is then worked out by considering how much it would have cost the claimant to seek professional care – although the rate awarded is usually discounted from the market rate.
If the claimant recovers in respect of credit hire, even though the agreement is found to be unenforcable on the basis that the claimant needed a car, we could then see hospitals offering credit treatment to innocent victims of accidents.
The treatment cost would be charged at a premium to the wrongdoers to make up the credit facility. The House of Lords needs to wrestle with this point.
Success fees – what can insurers do to avoid increased claims payments?
Legal Aid has now disappeared. Conditional fees are nearly with us. What can insurers do to avoid increased claims payments?
- Follow established principles. Make sure your insureds' accident reporting and investigations systems will enable you to make an early decision on liability
- Be prepared to fight more claims and fight hard. Success fees will be highest in cases where claimants' prospects are perceived to be lowest
- Invest in experienced claims handlers and solicitors to help you identify the claims to fight
- Consider fighting claims where there are prospects of success, even if in the past economics dictated settlement, the stakes are now higher. If the claimant is union backed or insured you may not be out of pocket if you win
- Be prepared to admit liability if you are going to lose. Once you have done so there will be no risk to the claimant and no justification for a success fee
- Be pragmatic and identify cases to settle. The earlier you do so the less impact a success fee will have
- Consider more radical action. Can you eliminate conditional fee agreements by increasing availability of 'before-the-event' legal expense insurance?
Rules of conduct now require solicitors to discuss all funding options with clients. This should make it more difficult to force a claimant into a conditional fee agreement if a cheaper funding option is available. If you insure, you hold the purse strings. You can insist on proper risk assessment by claimants' legal advisers before funding litigation, and so reduce speculative and misconceived claims and control the cost of valid claims.
The Human Rights Act – who is really effected?
Those in for the biggest shock are people who believe that it will only affect public bodies rather than private individuals and companies.
Under Section 6 of the Act, a public authority includes courts and tribunals and extends to any person certain of whose functions are functions of a public nature. So, if a private person, company or other organisation also has some public functions, they will be caught by the Act.
A passage from the White Paper says: "Examples of persons or organisations whose acts or omissions it is intended should be able to be challenged include: central government (including executive agencies); local government; the police; immigration officers; prisons; courts and tribunals; and, to the extent they are exercising public functions, companies responsible for areas of activity which were previously within the public sector such as the privatised utilities".
The Lord Chancellor added in the House of Lords: "We also believe that it is right as a matter principle for the courts to have the duty of acting compatibly with the Convention, not only in cases involving other public authorities but also in developing the common law in deciding cases between individuals".
Insurance companies must take a fresh look at the business of their insured, particularly those which are not pure public sector bodies and where some element of public function might be involved. Lawyers need to look more closely at their client's business and to anticipate the points that might be fired at them by the Court, as well as by the other side.