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Client Alert: ‘Fundamental Dishonesty’ Section 57 - Criminal Justice & Courts Act live from 13th April 2015

Client Alerts08/04/2015

Having received Royal Assent last month, the MOJ has confirmed that the Act will be implemented with effect from 13th April 2015.

As detailed in our previous client alerts, this piece of legislation introduces the next key stages of the Government’s programme of reforms to the personal injury arena, and in particular empowers the courts to effectively deal with claims that are fundamentally dishonest.

Crucially, the new powers available to the courts under s57 will only apply to:

  • Claims involving personal injury
  • Proceedings which are started by the issue of a claim form on or after 13th April 2015

The s57 provisions cannot be applied to non-injury claims, or to any proceedings already live as at the implementation date.

S57 introduces a fundamental dishonesty regime which is quite distinct from the existing fundamental dishonesty provisions under Part 44.16 CPR, which enable QOCS protection to be set aside on claims that are fundamentally dishonest.

Whilst both of these provisions will rely on the nebulous concept of fundamental dishonesty, they have entirely different outcomes and costs consequences. However, the combined fundamental dishonesty provisions provide insurers with powerful weapons with which to fight fraudulent/fundamentally dishonest claims.

That said, we caution against insurers simply referring to s57 in all cases where there are concerns as to the fundamental dishonesty of the claimant. Instead, it will be necessary for insurers and their legal partners to proactively consider the correct application of the fundamental dishonesty provisions having regard to the facts of each particular claim.

At this point, and with the implementation of s57 less than a week away, we expect to see some reaction from claimant practitioners, with some claimant market commentators suggesting that claimant lawyers issue proceedings on all claims in advance of the 13 April commencement date in order to avoid claims being caught by the s57 provisions.

Whilst we would not expect a rush to litigation to the same extent as the pre-LASPO litigation spike, we would not be surprised if there was an uplift in litigation volumes; not least upon those claims already subject to scrutiny by insurer fraud teams, where repudiations have already been submitted or where third party solicitors are on notice that claims are under investigation and the protocol periods have expired. Similarly, in higher value claims where there is a suspicion of malingering or gross exaggeration, we would not be surprised to see protective proceedings issued purely to avoid the s57 provisions biting on those claims.

With the enabling of s57, it will be vital that insurers correctly utilise the full range of fundamental dishonesty provisions to their strategic and tactical advantage. Keoghs will be providing a guidance note regarding the new provisions to our clients and look forward to engaging with them on this issue over forthcoming weeks.