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Law for Business

Knowhow - guidance - precedents

23 AUG 2013

Jackson Reforms

In 1999 the Association of British Insurers (ABI) estimated that

38 pence was paid in third party legal costs for every £1 in injury damages. By 2009 this had increased dramatically to 86 pence paid in third party legal costs for every £1 in injury damages.

There have been numerous cases where third party legal costs have far exceeded the damages paid to a claimant. One of the most publicised cases was Simcoe v Jacuzzi Group (2012) where the claimant received £12,750 in damages for repetitive strain injury and costs of £75,000, even though the case was settled before trial.

Lord Justice Jackson was tasked with addressing the issue of disproportionate costs in civil litigation and with making the process more cost effective and efficient. His report , published in 2010, made recommendations that were taken forward into legislation in 2012. These include:

Success fees in conditional fee agreements (no win-no fee)

are no longer recoverable from defendants

  • 10% uplift on Personal Injury Damages
  • Defendants will now pay most of their own costs even if a claim is successfully defended
  • A proportionality test when costs are assessed by the court
  • Costs budgeting in cases whereby the court will seek to control legal costs at an early stage
  • Case management by judges who will be stricter about delays and imposing court sanctions
  • Banning of referral fees.

The reforms aim to reduce the overall legal costs burden and to rebalance cost liabilities between claimants and defendants, but without reducing access to justice.

Further reforms are planned to go live in August 2013 with measures designed to reduce costs and speed up settlement timescales. Most Personal Injury claims arising from incidents occurring on and after 1st August 2013 will be transacted via an online portal and will be notified directly by the claimant solicitors to insurers. Any claims that remain within this portal will be subject to lower, fixed, recoverable costs.

The impact for policyholders is that the prompt reporting of claims and supply of all relevant information is now vital for liability decisions to be made within short timescales and claims to remain within the portal and take advantage of potential cost savings.

There are practical steps that can be taken to ensure your business is ready for these reforms, such as capturing detailed information whenever an accident occurs, ensuring training records and accident books are properly archived and readily available, ensuring managers know what to do when a claim is notified and to update handbooks and intranet sites to reflect new processes in dealing with incidents.

If a claim notification form is received then you should acknowledge receipt immediately and advise your insurance broker or insurer straight away with as much information as possible about the alleged incident.

Insurers have also had to change their processes and make claims departments more pro-active and efficient. Many have implemented robust fraud identification systems and instigated higher levels of monitoring and performance reviews of claims handling staff.

The Jackson Reforms and the development of the claims portal provide the opportunity to make substantial savings and arrest the spiralling cost of personal injury claims. However, in an effort to balance the scales the reforms also recommend a 10% increase in damages (in addition to any annual inflationary increases) and also limits the amount of costs successful defendants can recover from claimants.

Overall, the reforms should help to speed up the process of dealing with liability claims for the majority of cases and put an end to the some of the ‘sharp practice' and over-inflated legal costs that have blighted the insurance landscape for many years. If you are in any doubt or indeed if you have any queries please do not hesitate to speak with your insurance advisor.

Scott Brown Assistant Vice President Bristol

+44 (0)117 906 5005 scott.brown@uk.lockton.com

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