NIHL Fixed Recoverable Cost Consultation

Background

The Government commissioned the Civil Justice Council (CJC) to make proposals:

1.  to improve the handling of these claims, and
2.  for a regime of Fixed Recoverable Costs (FRC).

The CJC working group published a report on 6 September 2017 which recommended a much-improved exchange of information in the early stages of a claim in order to narrow the issues, through a new letter of claim process.

The Ministry of Justice is now seeking views on these proposals including on the content and clarity of the draft letters of claim (and accompaniments) and response. Views are also sought on the content of the proposed standard directions and the listing of preliminary trials.

Claims Handling

The proposed pre-litigation process involves greater transparency between the parties for straightforward NIHL claims. This includes:

1. A new letter of claim and response.
2. Only audiology (from an approved audiologist) to be obtained in the first instance. Full ENT reports are to be obtained only on denial of the claim.

The two recommendations for the post-litigation phase are:

1. Standard case management directions to control the number and use of experts; and
2. Tighter controls on the criteria applied when listing trial of preliminary issues.

Fixed Recoverable Costs

The CJC recommend the introduction of FRC for pre- and post-litigation costs at rates set out in the table below, along with a proposed increase in the fixed fast track trial advocacy. The FRC proposed by the CJC were agreed by claimant and defendant representatives following a mediation.

FRC for NIHL claims

The pre-issue costs are split into three stages:

• Stage 1 - up to and including the letter of claim; these costs are subsumed into the agreed costs that settle at Stage 2 or Stage 3.
• Stage 2 - cases where liability is admitted: cases will proceed to Stage 2A or 2B (or to litigation on quantum, but this is rare); the FRC are lower where liability is admitted.
• Stage 3 - liability not admitted: cases will proceed to Stage 3A, 3B or to litigation
• Stage 2A/3A - represent cases where papers have not been prepared to issue proceedings
• Stage 2B/3B - contain an additional allowance for the cost of preparing papers to

issue where incurred.

What will this mean?

In theory more claims will be resolved at low cost pre-litigation and with greater cooperation between parties. However Defendants and their insurers need to consider the strategies likely to be adopted by Claimant firms to maximise revenue from the FRC and the inevitable changes to the NIHL market and behaviours that will follow. So what could the FRC mean for the NIHL market and what behaviour might we see from Claimant firms?

Fewer Claimant firms in the noise market?

The FRC will require streamlined, process-driven handling to be profitable. Only those Claimant firms able to resource and implement such processes are likely to be able to take advantage of the NIHL market. This may mean a reduction in the number of Claimant firms to only those able to operate at volume.

Claim Volumes

The need for audiology to be disclosed with a letter of claim could lead to a reduction in claims being initiated. Claimant firms cannot simply rely on non-BSA compliant screening audiograms. Those that are pursued will necessarily need to meet the Coles criteria.

Alignment between claims farmers and approved audiologists?

To counter the above, will there be increased alignment between claims farmers and “approved audiologists” to improve screening audiograms and use them to pursue the claim.

Rise in PAD applications?

PAD applications are not included in the fixed fee. Claimant firms could well pounce on any delay by Defendants and take advantage of additional revenue from PAD applications.

More multi Defendant/spurious claims?

If there are more than 3 Defendants pursued the matter drops out of the FRC and standard costs apply. There is clear motivation for Claimant firms to look to proceed against as many employers as possible regardless of whether there is any real prospect against them all. This could lead to claims being brought in industries not typically associated with NIHL claims.

For the same reasons there could be a rise in claims being pursued against multiple companies/subsidiaries of the same group where there have been transfers of business. It suits Claimant firms not to waste their fixed fee on investigating corporate history properly and/or to have more Defendants and avoid the FRC entirely.

The death of the repeat audiogram?

If any Defendant requests a repeat audiogram the claim falls out of the FRC. The quality of the approved audiologists is a significant concern for Defendants. Insurers will have to decide whether to save money on individual cases at the risk of encouraging more dubious claims.

Increase in “de minimis” claims?

Likewise, if any Defendant alleges de minimis the claim drops out of the FRC. This could lead to a greater number of claims that would not normally make the cut being advanced to test insurers resolve.

Defendant cooperation required

Co-Defendants will need to work closely together from the outset of claims as one Defendant’s actions in making allegations that lead to a claim falling out of the FRC will impact all.

The end of preliminary limitation trials

A successful Claimant would be entitled to fixed costs for the preliminary trial and fixed costs for the consequent main action. Accordingly there remains little economic benefit in seeking a preliminary limitation trial.

Consultation

The Government consultation ends on 6^th June 2019. An online survey is available for interested parties to express their views.

Links

Online Survey

https://consult.justice.gov.uk/digital-communications/fixed-recoverable-costs-consultation/

CJC Paper

https://consult.justice.gov.uk/digital-communications/fixed-recoverable-costs-consultation/supporting_documents/fixedrecoverablecostsconsultationpaper.pdf

For more information, please contact Oliver Bingle