The Jackson Reforms – the hidden strings

The Legal Aid, Sentencing and Punishment of Offenders Act (LASPO) and revised Civil Procedure Rules are due to implement the majority of the Jackson reforms from April 2013. We enter unchartered territory within the next few weeks.

The reforms intend to, “rebalance the system,” by providing greater financial control by reducing costs, whilst still providing access to justice. The impact may be keenly felt in one of the largest areas of occupational disease, noise induced hearing loss claims (NIHL).

Ambiguities

Although the reforms appear favourable to insurers/representatives, there are substantial ambiguities and areas which can be exploited by claimant lawyers if not checked early.

Litigants bringing their cases on a no-win, no-fee arrangement will be unable to recover success fees or costs of after-the-event (ATE) insurance premiums from the losing party (except for existing Conditional Fee Agreements (CFA’s) entered into pre April 2013).

Instead an uplift of up to 25% from the claimant's damages can be agreed with the claimant. This appears substantially less advantageous to claimant lawyers. The loss of 62.5% uplift on fees is unlikely to be matched by the 25% recoverable from the claimant's damages - even when balanced by the 10% increase in general damages. Currently, the bulk of claims for NIHL settle for fairly low sums - especially pre- proceedings.

Now that claimant solicitors have a financial interest in the damages recovered, we are likely to see a firmer approach in damages negotiations.

Example

Imagine a NIHL case which currently settles pre proceedings for £3,000 but the JSB says is worth £7,000. Clearly, 25% of £7,000 (£1,750) will be a more enticing to a claimant solicitor than 25% of £3,000 (£750). The increase in recoverable fees to the claimant solicitor seems minor.

The increased damages settlement means the potential cost to insurers could be more significant than currently anticipated - and could even negate the savings made by insurers through the non-recovery of the success fee. Insurers may wish to consider testing the value of low level hearing loss claims with formal assessment hearings. After all, there will no longer be the risk of a 100% success fee uplift after trial.

Lawtel

Recording favourable settlements achieved for publication on Lawtel would also be practical. The majority of cases currently recorded come from claimant solicitors when they have achieved favourable settlements. The alternative to this is rather less attractive, surrendering the initiative to the claimant side and allowing incremental damages inflation by inactivity.

Changes

The 10% uplift in awards for general damages is intended to compensate claimants for paying their own success fees. This will take effect in April 2013, in cases where a CFA was entered before April 2013 (established and implemented in Simmons v Castle October 2012). This aspect of the reforms will be dealt with through the judiciary. Damages in personal injury matters are not traditionally established by Parliament.

The introduction of Qualified One-way Costs Shifting (QOCS) provides that in cases brought post April 2013 insurers/defendant lawyers cannot recover costs in successfully defended claims - eliminating the need for ATE.

QOCS protection will only be lost if;

• the claim is found to be 'fundamentally dishonest' on the balance of probabilities
• orders for costs in favour of the defendant can be enforced against claimant's damages and interest
• the proceedings are struck out for:
  • no reasonable grounds for bringing a claim,
  • an abuse of process, or,
  • were the claimant's (or their solicitors) conduct is likely to obstruct the just disposal of the claim

This suggests that QOCS may cause more trivial/negligible claims to be pursued by claimant solicitors. There will be no adverse costs consequences and no pre-action scrutiny by an ATE insurer. This may lead to a rise in litigated claims and associated costs.

The reforms also include extension of the RTA portal to include employers’ liability claims along with fixed costs provided they settle within that process. This reform has now been postponed indefinitely with no alternative date yet provided. This is sensible and inevitable given the difficulties and further detail required.

As the current proposals stand, it is difficult to see how any disease claims can stay within the portal. Insurers may be able to press for implementation of an alternative costs structure for cases outside of the portal.

Improved processes

Whatever system is ultimately adopted, it is likely to reward slick claims handling. Insurers and their representatives will need to balance their speed of response with appropriate decision making. Insurers may consider improved processes of record keeping, access to documents and claims notifications procedures so as to reduce response times. If their effects and dynamics are ignored, the reforms may not be as favourable to insurers as they could be. Developing a coherent strategy will be key.