Jackson reformsFirst impressions - Hill Dickinson by wuzhenguang


									22 | Post Magazine | 6 June 2013

                                                                     in association with
 Roundtable Legal Reforms

 Jackson reforms:
 First impressions
 Implemented as part of the Legal Aid, Sentencing
 and Punishment of Offenders Act 2012, how have
 the Jackson reforms affected the industry so far
 – and what will their impact be in the future?

 By Mairi MacDonald

 The highly anticipated civil justice reforms          The general consensus around the table towards
 have the potential to overhaul the way claims         the recent reforms – including a ban on referral
 are managed by the legal and insurance                fees and the recovery of after-the-event insurance
 industries. Seven weeks after the introduction        premiums from defendants, as well as the
 of the Legal Aid, Sentencing and Punishment           introduction of damage-based agreements and
 of Offenders Act 2012 – the primary legislation       qualified one-way cost shifting under the Civil
 encompassing key proposals from Lord Justice          Procedure Rules – was one of cautious optimism.
 Jackson’s review of civil litigation costs – Post,    However, participants said much depends on how
 in association with Hill Dickinson, brought           fully the changes are enforced over time and
 together specialists from the corporate,              how successfully they are complemented by the
 insurance and legal sectors to discuss whether,       reforms still to be implemented. These include
 in these early days, the reforms are working          the extension of the personal injury claims            strategy director at RSA, said: “Obviously
 as they were intended. In a far-reaching              portal to encompass higher-value motor claims          the focus on speeding-up claims settlement
 roundtable debate, the group considered               and employers’ and public liability, extension of      and providing access to justice to claimants
 what will determine, and how to quantify,             the small claims limit to £5000 and the Ministry       at a more proportionate cost is good for the
 the reforms’ success, the approach of the             of Justice’s whiplash consultation.                    premium-paying consumer.”
 judiciary, the unintended consequences and any            Considering the benefits to stakeholders,              But she expressed concern around a “loss in
 outstanding issues.                                   Carolyn Mackenzie, complex claims and                  momentum” in the progress in outstanding areas,

 Doug Askin,              Angela Doran,               Paul Edwards,             Nathan Fuller, UK           Ruth Lawrence,          Carolyn Mackenzie,       David Powe
 technical claims         insurable risk              head of costs, Hill       casualty claims             partner and head        complex claims and       underwriting
 manager, AIG             department claims           Dickinson                 service delivery            of insurance, Hill      strategy director, RSA   manager, Llo
                          manager, Tesco                                        manager, QBE                Dickinson                                        Market Asso
                                                                                                                                                  Post Magazine | 6 June 2013 | 23

                                                                        How will the recent civil justice reforms impact the insurance industry?

                                                                                                                                     Reducing the number of claims rather than

                                                                                                                  Iain Winfield
                                                                                                                                 simply cutting cost would have the greatest impact
                                                                                                                                 to the industry, agreed Ruth Lawrence, partner
                                                                                                                                 and head of insurance at Hill Dickinson. However,
                                                                                                                                 she added: “Achieving this would be really hard,
                                                                                                                                 because there is such a culture within the country,
                                                                                                                                 and such an industry behind those claims.”
                                                                                                                                     Lawrence suggested the reforms should
                                                                                                                                 shift the focus from costs to damages, noting:
                                                                                                                                 “We’ve all had cases where you pay a relatively
                                                                                                                                 small amount in damages and a lot in costs,
                                                                                                                                 and one would hope [the reforms] should bring
                                                                                                                                 back proportionality.”
                                                                                                                                     John Windsor, Marks & Spencer head of
                                                                                                                                 insurance, emphasised the need to protect
                                                                                                                                 claimants’ access to justice, noting he hopes the
                                                                                                                                 reforms will reduce “some of the more ridiculous
                                                                                                                                 claims all of us see from time to time” rather
                                                                                                                                 than the genuine ones.

                                                                                                                                 Proportionality problem
                                                                                                                                 But considering how the test of proportionality
                                                                                                                                 regarding claims costs will work in practice,
                                                                                                                                 Paul Edwards suggested the answer is far from
                                                                                                                                 clear. “We will have to wait and see because
                                                                                                                                 judges haven’t been given much training on
                                                                                                                                 it,” he said. “I believe full-time judges have
                                                                                                                                 only had about four-and-a-half hours’ worth
                                                                                                                                 of training on the reforms, and no definition
                                                                                                                                 of proportionality is being provided. So we’ll
                                                                                                                                 see quite varied results depending on the mood
                                                                                                                                 of each judge.”
                                                                                                                                     He added: “The court can’t do anything about
                                                                                                                                 costs that have already been incurred, although
                                                                                                                                 it can comment if it thinks they’re too high.
           which was echoed by Doug Askin, AIG technical      a reduction of 5% to 10% in motor premiums                         But the court is supposed to take ‘push out’
           claims manager, who added that “on paper” the      over the last 12 months to anticipation in the                     into account when making projections. Judges
           reforms will drive certain benefits for insurers,   market of “savings in the pipeline”, he suggested                  are supposed to challenge parties’ decisions to
           government and insurers but there is “still lots   policymakers might be disappointed the reforms                     ask for 10 witnesses if it’s more proportionate
           to do to reduce the cost of civil litigation”.     have not had a “massive effect on premiums”.                       to have three.”
              While David Powell, Lloyd’s Market              He asserted the underlying reason for this is                          Edwards conceded the reforms have the
           Association underwriting manager, attributed       that there are still too many claims and motor                     potential to end “justice at any cost”. “The days
                                                              insurance remains unprofitable.                                     are gone when you could throw the kitchen
                                                                                                                                 sink at a case, win and expect to recover your
                                                                                                                                 costs,” he said. He questioned whether more
                                                                                                                                 cases will be fought now that the “maximum
                                                                                                                                 extent of the liability is clear” and if the reforms
                                                                 The reforms will                                                empower clients who would previously have
                                                                                                                                 settled out of fear of the costs, regardless of the
                                                              hopefully bring a lot                                              merits of the case.
                                                                                                                                     Angela Doran, insurable risk department
 ll,        Frances Stapleford,      John Windsor,            more common sense                                                  claims manager at Tesco, raised the potential
g           assistant                head of insurance,
oyds        vice-president of        Marks & Spencer
                                                              and put the focus back                                             for satellite litigation and urged insurers not to
                                                                                                                                 forget genuinely injured claimants. She added:
 ciation    claims, Generali                                  on the claimant                                                    “The system will be good for claimants who will
                                                                                                                                 get their money earlier because claimant          24
24 | Post Magazine | 6 June 2013

                                                                   in association with
 Roundtable Legal Reforms

                                                      the desired effect in the motor sector by reducing
                                                      claims life cycles and premiums “by a smidge”,
                                                      Powell added: “As we extend the value bracket            Edwards pondered whether this would lead to
   23 solicitors now have a unit cost per case.”      for motor and move into casualty, we will see        more consolidation in the claimant legal sector,
 Doran noted there will be a “sweet spot” in the      more effort to get reasonably simple cases out       asking: “Are we going to see some firms saying
 fixed-cost regime on cases under £25 000 for          of the portal and that’s obviously a big deal.       they can make this work on a scale basis and
 solicitors to maximise their unit profit cost.            “Now that costs have been significantly          actually expand?” According to Askin, firms that
 She added claimants should get their damages         slashed, claimant lawyers have a direct financial     do not take any of the claimants’ damages and
 quicker given their legal representatives “no        incentive to get their cases out of the portal       “just work the models to maximise the profit
 longer have the Dickensian way of charging on        wherever possible.”                                  under the fixed fee” are already emerging.
 an hourly rate when they have complex case-              Doran suggested there is still a role for the        “As long as lawyers have the right model,
 management systems that make an enhanced             ATE market to play in protecting against QOCS/       they can maximise the £500 now in motor and
 profit ratio because of automation”.                  Part 36. “For lower-value claims, by the time the    there’s no need to take the client’s damages,”
                                                      claimant has to pay 25% of their damages and         he said. “It’s a good way of incentivising
 Claimant focus                                       then ATE, they might decide they would prefer        claimants to come to them on the back end
 Agreeing with Doran, Windsor added: “The             to go direct to the insurers, or clients if they     of the referral fee ban. Based on that, we will
 reforms will hopefully bring a lot more              have large deductibles,” she said. “This could       see a lot of consolidation among claimant law
 common sense and put the focus back on the           result in more unrepresented claims arising in       firms in the next 12 months. Smaller practices
 claimant rather than on the games we play on         the lower-value band, as claimants don’t want        will potentially struggle as they may need to
 costs and trying to score points with different      to give away their damages to lawyers.”              reach into claimants’ damages to help top-up
 teams of lawyers. There’s going to be a lot of                                                            some costs.” Powell added that creating market
 fun and games in the first couple of years until                                                           forces for legal fees was “exactly the intention
 it settles down.”                                                                                         of the reforms”.
     Frances Stapleford, Generali assistant                                                                    Mentioning that claimant law firms are
 vice-president for claims, agreed speed of               Now that costs                                   offering cash up front or iPads as an incentive
 settlement is a critical benefit for claimants,
 while Windsor said claimants will be “more
                                                      have been significantly                               to potential customers, Mackenzie said: “An
                                                                                                           unintended consequence of the reforms is that
 involved” in their claim.                            slashed, claimant                                    the relationship between claimant and lawyer
     Askin complained that, historically, claimants                                                        has to be very carefully managed when it comes
 have been too removed from the decision-making       lawyers have a direct                                to funding. I’m hearing that market forces are
 process, adding: “With QOCS and the funding                                                               at play and claimants are approaching different
 arrangements, Jackson has made it important
                                                      financial incentive to                                law firms and asking if they make deductions
 for the claimant to be involved. So, by default,
 you should see quicker life cycles and better
                                                      get their cases out of the                           from damages. For that to be happening so soon
                                                                                                           into the reforms is incredible.”
 trends and behaviours emerging.”                     portal wherever possible                                 Askin agreed that for claimant lawyers to start
     Emphasising that the claims portal is having                                                          taking a percentage of damages from claimants
                                                                                                                             Post Magazine | 6 June 2013 | 25

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that have lived through the post-Woolf world of
no-win, no-fee “is potentially quite a hard sell”.
    Returning to where the responsibility lies
for driving the reforms’ success, Doran agreed           There is a danger                                  motor claims in the portal never materialised,
it “sits in the hands of the judiciary and how it
interprets the rules”. Lawrence added: “Certainly
                                                      that everyone gets                                    “the onus has been on those working within the
                                                                                                            portal to track that data themselves”, he said. “At
in the first decisions we’re seeing the judges are     excited about the                                     some point in the next couple of years it is going
being quite harsh.” However, she cautioned that                                                             to have to ask for our experience and our stats.”
while judges may be taking a hard line initially,     feedback from the first                                    On whether firms will have to defend more
there is a danger that might dwindle over time.                                                             claims as a result of the reforms, Fuller said:
    Edwards offered a handful of examples of cases
                                                      few months. But it may                                “There is a school of thought that suggests you
that have been struck out, including one where
the trial bundle was filed a day late and another
                                                      take two or three years                               can run more cases because of the certainty
                                                                                                            around costs but, likewise, because of QOCS,
where the claimant side had not complied with         before the larger cases                               claimants might also have the appetite to go
a few minor technicalities and was refused an                                                               down that route. If we go to trial and lose, there’s
adjournment and charged costs. He compared            come to conclusion                                    no recovery of our costs, which could potentially
the scenario to the “Singapore experience” in                                                               be expensive depending on what arrangements
which he explained thousands of cases were                                                                  insurers have with their lawyers.”
struck out for the “tiniest of default” for about     “Is it sufficient to wait five to 10 years to see           As the discussion drew to a close, Edwards
12 months. “But the courts softened once both         whether it works and then try something else,         suggested stakeholders remember “claims that
sides learned to comply with the rules,” he added.    or should the government take a more proactive        settle under the new regime for the first year
“It will be interesting to see if that happens here   approach in managing the reform?” he asked.           are, by definition, the straightforward ones”.
or whether the judges will continue to enjoy              Turning to some of the potential pitfalls of      With this in mind, he added: “There is a danger
their new power. This is almost the last roll of      the process, Doran said she has advised corporate     that everyone gets excited about the feedback
the dice from the government. If these reforms        colleagues to ask insurers for “a monthly report      from the first few months. But it may take two
don’t work over five to 10 years, we may well          of what claims have fallen out of the portal and      or three years before the larger cases come to
find a sort of US model, where costs don’t exist       why”, adding: “If insurers have failed to meet        conclusion, before we actually find the appeal
as we know it, it is just imposed on us.”             deadlines in terms of payments and admissions,        courts getting involved and analysing the way
                                                      and it affects the overall claims experience,         cases are being dealt with.”
Measuring success                                     they might find themselves in an errors and                With the early implementation of the reforms
Nathan Fuller, QBE UK casualty claims                 omissions position.”                                  being positively received by these stakeholders,
service delivery manager, questioned how the              Edwards agreed management information and         the discussions will undoubtedly continue as the
government will measure and monitor whether           control of monitoring is crucial for the reforms to   industry gauges the longer-term effectiveness
the reforms are having the intended impact.           succeed. As the MoJ’s pledge to provide MI from       of the reforms. n
your claims
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Please contact Ruth Lawrence on 020 7283 9033 or ruth.lawrence@hilldickinson.com.
For further information, visit hilldickinson.com.

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