LASPO and Credit Hire: the story so far

April 1 2013 heralded a massive change in the world of litigation. Not surprisingly, credit hire will be affected significantly. Indeed, even at this early stage, we have already seen some changes in behaviour. This article will discuss what impact the Legal Aid Punishing and Sentencing of Offenders Act 2012 may have in the field over the next few months.

Referral fee ban

The payment of referral fees in cases of personal injury or death is prohibited as from April 2013. For many organisations the receipt of these fees represented a significant referral stream which is now going to have to be replaced by other means, perhaps increased credit hire claims, for which referral fees will still be payable.

With the increase in the use of telematics (equipment in vehicles which can transmit information to any nominated party), it is possible that CHOs will be notified at the very moment the accident occurs. The impact this will have on insurers who attempt to intervene and therefore be the ‘first to the customer’ will be discussed in a future issue. However, what it certainly means is that CHOs will become more efficient in capturing hires than ever before; and they are pretty sophisticated now.

Alternative Business Structures (ABS)

With the advent of ABS, new players are coming into the market with significant funding available. What this means for the credit hire arena is difficult to say at this stage but it could lead to more credit repair than we have seen in recent years. As John Gibson, has mentioned, the success of our strategy on the utilisation (or not) of the comprehensive policy has meant that CHOs who have the funding are perhaps more keen to control the repair.

Many however, have simply not previously had the cash flow to do so. Historically, most credit hire was provided where there was a clear liability on the third party. Those CHOs who carry their own fleet are now more likely to take on cases where liability is not so clear cut.

Insurers who are inefficient in making a quick decision on liability will also fall foul of the increased penalties within the GTA thereby increasing significantly their overall indemnity spend.

Another question which arises is whether, when the ‘independence’ of CHOs’ representatives and their linked suppliers is no longer there, we are likely to see a more aggressive litigation stance both in terms of numbers and tactics. Evidence seen so far suggests that we are.

Tie all this in with the costs building tactics we are seeing from a number of CHO’s representatives and we are potentially left with a fairly sorry picture.

Increase in the small claims track limit

Prior to the implementation of the new limits, I predicted that we would be likely to see other heads of claim not usually pursued introduced into the claim. Clearly my crystal ball was working well that day as we have seen just that!

For heads such as diminution, the fact they have not been pursued as routine in recent times means that we are perhaps a little rusty (pardon the pun) on how to deal with these claims and how the evidential burden is discharged.

Recovery and storage is also on the increase, not only perhaps due to the change in the Court limits but because repairing garages themselves are in financial distress. As there is no precedent to set what is reasonable for such a claim, part of our focus over the coming year is to explore the issues and look to get Judicial guidance.

Will we see more injury claims?

Maybe. What we have seen are increased numbers of claims being pulled out of the MOJ portal and proceedings issued for both the hire and the injury. Previously, we had seen them pursued separately. Although there is provision in the rules to combat this, it is merely a costs penalty. If the hire is genuinely disputed, and with recent cases on abuse of process, unless the strategy is right, an argument that the injury should not be included could be a difficult one to win.

Qualified one-way costs shifting (QOCS)

This only applies to cases where there is personal injury and it remains to be seen whether we will see a rise in such claims. If QOCS applies, there is no automatic recovery of costs if a claim is struck out for defaulting a court order or where a defendant’s Part 36 offer is not beaten. There is however, provision for costs to be recovered from a party other than the claimant if that party is likely to benefit from the claim. It would seem that a CHO would fall squarely into this category and I am sure we will see some interesting events in the coming months.

So what do we do?

• Ensure that there is a clear pre- and post-litigation strategy which is owned by all members in the claim chain.
• Insurers need to make quick and reasonable liability decisions and decide to either;
  • make a without prejudice general interim payment or;
  • lay down the appropriate costs markers to ensure that the groundwork on an argument of a failure to mitigate if a claimant fails to use their comprehensive policy is already done.
• A slick intervention process is also needed.
• Have a ‘know your opponent’ strategy and ensure it is properly monitored and consistently adhered to. This is crucial in order to limit indemnity spend.
• Where a point is to be taken ensure it is made in open correspondence and that appropriate “markers” are laid at all crucial stages.

There are interesting times ahead, however, by working together, I am confident we and our clients will succeed.