QBE Technical Claims Jackson Reforms Guide Mar2013

7/28/2019 QBE Technical Claims Jackson Reforms Guide Mar2013

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QBE European Operations

UK Casualty ClaimsPolicyholder guide | March 2013

2013 Jackson reforms and Ministryof Justice Claims Portal Extension


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UK Casualty ClaimsPolicyholder guide | March 2013

2013 Jackson reforms and Ministryof Justice Claims Portal Extension

Contents

Introduction 1

Disproportionate costs why things

had to change 2

Lord Justice Jackson reorms

eective 1 April 2013 3

Ministry o Justice (MOJ) Claims Portal

Extension eective 1 August 2013 4

Impact on claims handling orpolicyholders 4

Portal exclusions 5

Portal process 5

Cost comparisons

pre-litigation 6

Cost comparisons litigated 6

Disclaimer 10


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1QBE Casualty Claims

2013 Jackson reforms and Ministry of Justice Claims Portal Extension - March 2013

Introduction

This guide explains the background to

these changes; the likely inancial and

operational impact and how we and our

policyholders can best work together to

gain maximum beneit.

There will be opportunities to substantially

reduce legal costs where liability is

admitted, but compliance with very tight

timescales will need to be balanced againstputting saeguards in place to ensure that

a robust deence, contributory negligence

arguments or raud allegations are made

where appropriate. The prompt reporting

o accidents likely to give rise to a claim

and the early supply o all relevant accident

documentation is essential to enable timely

liability decisions to be made and or you

to beneit rom the signiicant costs savings

available.

Lord Justice Jackson Reformsof civil litigation costs and theextension of the Ministry of Justice(MOJ) Claims Portal are due to be

implemented on 1 April 2013 and 1August 2013 respectively and willresult in very signicant changesto the way Employers Liability (EL)and Public Liability (PL) claims inEngland and Wales are handled.


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Disproportionate costs why

things had to change

In 1999 the Association o British Insurers

(ABI) estimated that 38 pence was paid in

third party legal costs or every 1 in injury

damages.

By 2009 this had increased dramatically to

86 pence paid in third party legal costs orevery 1 in injury damages.

There have been numerous cases where

third party legal costs have ar exceeded

the damages paid to a claimant. One o

the most publicised cases wasSimcoe v

Jacuzzi Group (2012) where the claimant

received 12,750 in damages or repetitive

strain injury and costs o 75,000, even

though the case was settled beore trial.


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Lord Justice Jackson reforms

eective 1 April 2013

Lord Justice Jackson was tasked with

addressing the issue o disproportionate

costs in civil litigation and with making the

process more cost eective and eficient.

His report was published in 2010 and the

recommendations he made were taken

orward in the Legal Aid, Sentencing &

Punishment o Ofenders Act (LASPO)

2012. Part 2 o this Act embodies a number

o the Jackson recommendations including:

Ater the Event (ATE) insurance

premiums are no longer recoverable

rom deendants

Success ees in conditional eeagreements (CFAs) are no longer

recoverable rom deendants

10% uplit on general (injury element)

damages

Qualiied One Way Costs Shiting (QOCS)

deendants will now pay most o their

own costs even i a claim is successully

deended, although exceptions apply or

raud and where there is ailure to beat a

deendants Part 36 oer (up to the value

o damages awarded)

10% additional penalty on damages or

awards up to 500,000, reducing to

5% (or awards between 500,000 and

1,000,000) where the deendant does

not accept and ails to better a claimants

Part 36 oer

A proportionality test when costs areassessed by the court

Costs budgeting in multi-track 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 o reerral ees.

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.


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Ministry of Justice (MOJ) Claims

Portal Extension eective 1

August 2013

As part o a package o interlocking

measures designed to reduce legal costs

and speed up settlement timescales, the

Government is introducing additional

reorms or EL and PL personal injury

claims arising rom accidents occurring

on or ater 1 August 2013 in England and

Wales. These reorms will have signiicant

inancial and operational impacts including:

EL and PL personal injury claims (except

EL disease where there is more than

one deendant, and all PL disease)

valued rom 1,000 up to 25,000 will

be transacted via an online electronic

portal and will be notiied directly by

the claimants solicitor to the insurer

where identity o the insurer can be

established. Claimant solicitors must use

the Employers Liability Tracing Ofice

(ELTO) database to identiy the relevant

EL Insurer

Low, ixed, recoverable costs or claims

that remain in the portal

A new predictive costs regime or EL

and PL claims worth 1,000 to 25,000

that all out o the portal (excludes single

employer disease claims which will revert

to an hourly rate basis)

Predictive costs are cheaper than the

current costs regime, but are up to

six times more expensive than portal

costs i the case proceeds to litigation.

For example, the new base costs or

an EL claim worth 25,000 would

increase rom a maximum o 2,100

to a maximum o 13,430 i settled at a

hearing

Insurers (or policyholders where they

receive notification outside the portal)

must acknowledge receipt o a new

Claim Notiication Form electronically

within 24 hours (currently 21 days). The

deemed service date o the claim is the

next day i sent by 1st class post

For EL claims, the timescale to admit

liability and communicate a decision rom

date o claim notiication receipt, whether

served on the insurer or policyholder, is

30 working days (currently 3 months)

and or PL claims the timescale is 40

days otherwise the claim drops out o

the portal with an increase in costs

Admissions must be in ull with no

contributory negligence arguments or

raud allegations permissable otherwise

the claim drops out o the portal with an

increase in costs

Admissions on EL claims must be

ollowed up with disclosure o earnings

details within 20 working days o the

admission.

Impact on claims handling for

policyholders

The prompt reporting o claims and

the early supply o all relevant accident

documentation is essential or liability

decisions to be made promptly and to

ensure compliance with the very tight portal

timescales. I the portal timescales are not

complied with, claims will not be kept within

the portal and the opportunity or signiicant

costs savings will be lost.

Close co-operation between us and our

policyholders is critical.

Policyholders should:

Ensure all accidents/incidents

are recorded promptly; accident

documentation is entirely actual without

conjecture; all relevant documentation,

including accident reports, locus

photographs, witness statements, risk

assessments, training records etc. are

readily accessible; and a thorough

investigation is undertaken

Collate earnings details promptly

ollowing any accident that is likely to

give rise to a claim

Provide us with pre-claim accident

notiication i you believe a claim is likely

to ollow. This will allow us to complete

enquiries about liability beore any claim

is received

Prioritise compliance with the new

rules over any contrary risk handling

arrangements already in place. We will

contact any policyholders who have

such arrangements that may need to

be revised

Acknowledge new claim notiications

within 24 hours i they are received direct

and ensure we are notiied immediately

Provide points o contact and details or

investigating purposes when notiying us

o a claim Respond promptly and ully to any

requests we make or inormation or

site investigation

Be prepared to amend any existing

claims handling procedures to help us to

deal with your claims in the most eficient

and eective manner that will maximise

the beneits available under the reorms

Review any sel-insured retention

or aggregate policyholder own

claims handling arrangements so as

to best respond to the reorms, asrecommended in this guide

Trust us our claims adjusters, claims

inspectors and service providers are

expert claims handlers and decision

makers. Claims will be dealt with

proessionally and expediently.


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Portal exclusions

The ollowing are excluded rom the portal:

PL claims against an individual

Claims under 1,000 or over 25,000

in value

EL disease claims with more than

one deendant

All PL disease claims

Where the deendant or claimant is

deceased or a protected party

An accident or breach o duty outside

England and Wales

Abuse claims, mesothelioma,

clinical negligence

Where the claimant is bankrupt

Where the deendant is insolvent

and uninsured.

Portal process

The portal consists o a 3-stages process:

Notification - Valuation - Hearing

Stage 1: Notifcation

EL Claims: 30 days to admit liability; Stage

1 costs o 300

PL Claims: 40 days to admit liability;

Stage 1 costs o 300.

Stage 2: Valuation

I liability is accepted under Stage 1,

the claimants solicitor will obtain amedical report and should send it to the

deendant together with special damages

documents and a proposed settlement

igure as part o a settlement pack

The insurer will have 15 days to accept or

reject the oer. I rejected, a counter oer

must be made within a urther 20 days.

I these timescales are met, then Stage

2 costs will be 600 (or claims between

1,000 and 10,000), or 1,300 (or

claims between 10,000 and 25,000)

plus VAT and disbursements .

Stage 3: Hearing

I the quantum is not agreed, then either

party may seek a hearing. The claimants

solicitor will ile a claim orm and medical

report and both parties will submit their

best oers on heads o claim in sealed

envelopes. Stage 3 costs are 250 or

a paper hearing or 500 or an oral

hearing.




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Cost comparisons

pre-litigation

There are substantial savings on third party

costs to be achieved i the decision made

is right irst time and comply with the new

timescales.

The ollowing table sets out base costs

excluding VAT and disbursements, such as

the cost o medical reports.

Claim

Value

EL

inside

Portal

EL

outside

Portal

Outside

Difer-

ential

2,000 900 1,300 144%

7,500 900 2,168 240%

15,000 1,600 3,000 188%

25,000 1,600 4,000 250%

Claim

Value

PL

inside

Portal

PL

outside

Portal

Outside

Difer-

ential

2,000 900 1,300 144%

7,500 900 2,105 234%

15,000 1,600 2,870 180%

25,000 1,600 3,870 242%

Cost comparisons litigated

The table below illustrates the signiicantly

increased cost o running a claim to trialwhere the claim is ultimately settled. Again

the igures shown are base costs excluding

VAT and disbursements.

Claim

Value

ELinside

Portal

EL

outside

Portal

Outside

Difer-

ential

2,000 1,150-1,400 5,365 420%

7,500 1,150-1,400 7,220 566%

15,000 1,850-2,100 9,815 497%

25,000 1,850-2 ,100 13,430 680%

Claim

Value

PLinside

Portal

PL

outside

Portal

Outside

Difer-

ential

2,000 1,150-1,400 4,825 378%

7,500 1,150-1,400 6,542 513%

15,000 1,850-2 ,100 8,950 453%

25,000 1,850-2,100 12,315 624%

6


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Contributory negligence A

case study

Employee Mr Hapless sticks his hand into

an unguarded machine

Primary liability is admitted

The claim is realistically worth 15,000 to

20,000 (ingers damaged, but not lost)

Mr Hapless is an experienced employee

who admits he knew he should not have

stuck his hand into the machinery

Our solicitors advise that a judge

would award around 10% contributory

negligence

Is it economically worthwhile arguing

contributory negligence when this will

mean the claim alls out o the portal and

into the higher predictive costs regime?

Economics o arguing contributory negligence:

Damages

saving

Litiga-

tion

Stage

CostsInside

Portal

CostsOutside

Portal

Increasein

Costs

Costofarguing

Contributory

Negligence

Best

Case

Worst

Case

1,500-2,000Not

issued1,600 3,000-3,500 1,400 -1,900

600

saving

400

cost

1,500-2,000 Hearing 1,850-2,100 9,815-11,930 7,965 -9,8305,965

cost

8,330

cost

The savings achieved by successully arguing a reduction in damages or 10%

contributory negligence are likely to be more than oset by the increase in costs. Unless

there are other considerations, such as discouraging other potential claimants, this would

be a good case in which to concede liability in ull. Fraud




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Economics o alleging raud:

Settlement DamagesStage2

Pre-issue-Cost

Stage3

Listed-Cost

Stage3

Hearing-Cost

Inside Portal 5,000 900 1,150-1,400 1,150-1,400

Outside Portal 5,000 1,116 5,780 6,470

Dierential Nil 226 4,630-4,380 5,070-5,320

I raud is alleged, multi-track costs will apply which could be double or treble the portalcosts igure.

Fraud has always been expensive to ight and dificult to prove. Where raud is proven a

deendant is likely to get an order rom the court that the claimant must pay their costs,

although recovery will only be possible where the claimant has unds or assets to recover.

To not ight raudulent claims however, is to invite more raud. Our specialist raud

teams are expert in identiying raud, calculating the cost o ighting it and assessing the

prospects o success. We rely on our policyholders to help us investigate suspicious claims

and to alert us to their concerns over the authenticity o claims.

A Case Study

Employee Mr Dodgy alls over some

machine parts let in a walk way by his

colleague Mr Pal

Mr Dodgys solicitors say that he is not

badly hurt and will settle quickly or

5,000

There are no witness to Mr Dodgys all

He has a report rom his GP saying that

he suered sot tissue injuries and Mr Pal

conirms that he let an obstruction in the

walk way

A CUE PI check reveals that Mr Hapless

has six previous claims with ormer

employers over the last 10 years and that

he and Mr Pal are known to be riends

Should we make a protocol admission?

Should we challenge the claimant to

prove his allegations o how the accidenthappened and that he really was injured

(pushing the claim out o the portal) or

directly allege raud (pushing the claim

out o the predictive costs regime into

the even more expensive multi-track

regime?).


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How we have prepared

In preparation or the reorms we have:

Embedded the new timescales in our

claims handling processes to maximise

the opportunities presented by

the reorms

Made our claims processes more

proactive and eficient

Ensured panel loss adjusters are working

to the new timescales

Implemented more robust raud

identiication procedures

Ensured a disciplined approach to

liability decision making and contributory

negligence arguments in accordance

with our philosophies

Instigated more monitoring and

perormance review procedures to

ensure high levels o customer serviceand quality standards are maintained

Introduced new technology to enable

even more eficient claims handling

Initiated a review o all claims handling

arrangements with policyholders to

identiy where these might be improved

in order to best operate within the new

claims regimes

Kept policyholders updated on the

reorms and committed to doing so in

uture. For urther updates please visit:

www.qbeeurope.com/risk-management/

technicalclaims.asp

The big picture

The Jackson and MOJ Portal reorms

provide an opportunity to make some

substantial costs saving, but are not

wholly good news or insurers and their

policyholders. In an eort not to penalise

claimants or reduce access to justice, the

Jackson reorms will bring in:

A 10% increase on General Damages (in

addition to the current underlying annualinlation in awards o 8% to 9%)

Qualiied One Way Costs Shiting (QOCS)

that will greatly limit the amount o costs

that winning deendants can recover

rom claimants and will prevent any

recovery at all in many cases

A penalty o 10% additional damages (up

to 50,000 or the majority o cases)

where a deendant declines a claimants

Part 36 settlement oer and the claimant

is awarded as much or more by

the court.

The overall claims environment also

remains dificult with high levels o raud,

courts that appear to be easily persuaded

by claimants and the threat o a reduction

in the discount rate, which could see a

leap in the cost o lump sum settlements.

Our claims experts are here to help

policyholders make the most o theopportunities that the reorms oer and

overcome the challenges that they

also present.


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QBE European Operations Plantation Place 30 Fenchurch Street London EC3M 3BD

tel +44 (0)20 7105 4000 www.QBEeurope.com

4271/QBECasualtyClaims/JacksonReorms/March2013

QBE Insurance (Europe) Limited, QBE Re (Europe) Limited and QBE Underwriting Limited are part o QBE European Operations,

a division o the QBE Insurance group. All three companies are authorised and regulated by the Financial Services Authority.

Disclaimer

This publication has been produced by

QBE Insurance (Europe) Ltd (QIEL).

QIEL is a company member o the QBE

Insurance Group.

Readership o this publication does not

create an insurer-client, or other business

or legal relationship.

This publication provides inormation

about the law to help you to understand

and manage risk within your organisation.Legal inormation is not the same as legal

advice. This publication does not purport

to provide a deinitive statement o the law

and is not intended to replace, nor may it

be relied upon as a substitute or, speciic

legal or other proessional advice.

QIEL has acted in good aith to provide an

accurate publication. However, QIEL and

the QBE Group do not make any warranties

or representations o any kind about the

contents o this publication, the accuracy or

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obligation to update this report or any

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or by any other person arising out o or in

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reliance on this publication or on the

inormation contained within it and or any

omissions or inaccuracies.

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QBE Underwriting Limited are authorised

and regulated by the Financial ServicesAuthority. QBE Management Services

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Services (UK) Limited are both Appointed

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