Motor news quarterly update – spring 2009 Contents Motor news Quarterly – winter/spring 2009 News 1 track limits 1 new claims process 1 Implementation 2 qBe response 2 Health and safety (offences) act 2008 2 new charges for damaged vehicles recovered by the police 2 “rome II” – european union seeks consistency in the selection of applicable law in cross border disputes 3 Costs 4 CFas, passengers, no risk, ate premium unrecoverable 4 Credit hire 5 offers of replacement vehicles, failure to mitigate 5 uninsured claimants; ex turpi causa 5 Fraud 7 tort of deceit, exemplary damages 7 fictitious accidents, credit hire, non-party costs order 7 Liability 9 Cars travelling in convoy, apportionment of liability 9 english claimants injured in spain, applicable law 9 As reported in our autumn bulletin, the Ministry of Justice has published the response to the consultation process it carried out in 2007. Since then organisations with an interest in the new process for personal injury *claims, have met with the MOJ to clarify how the proposals would work in practice. News • The time period for response will • If an admission is made because the start the next working day after the process makes a claim uneconomic to the main points of the proposals and the notification form has been sent. defend, the defendants will again have to most recent developments are reported word the admission very carefully so as below: • A decision on liability must be made by not to be prejudiced if the claim turns out defendants within 15 working days. an to be worth more than was first realised. Track limits extension to 30 working days has been agreed for the motor Insurers Bureau • Where liability is denied or contributory • The MOJ has clarified the position with (mIB) in recognition of the extra enquiries negligence is alleged, the claim is dealt regards to the £10,000 maximum limit that the bureau has to make. the with outside of the new process. for the process. the limit will not include notification form will also have four extra claims for vehicle damage, hire etc but • Part 36 offers: there is no change questions for mIB cases. will apply exclusively to claims “arising however more emphasis is to be placed from the injury”. • The MOJ has confirmed that all of the upon judicial discretion. If an unrealistic questions on the notification form must offer is made resulting in a quantum New claims process be fully completed for it to be valid. hearing the party making the unrealistic offer should be penalised. • A “Claim Notification Form” is to be • Once liability is admitted the claimant completed and served by the claimant’s obtains medical evidence which is • There is no change to the recoverability solicitor within 5 days of gathering served within 15 days of receipt. there of after the event premiums. the “all required information” necessary is however no set time or timetable, proposal that premiums should only be to complete the notification form (as for the claimant’s solicitor to obtain the recoverable where liability is denied will opposed to 5 days from taking initial medical report. not be carried forward. instructions). • An admission of liability is to be binding, • The MOJ wishes the form to be served save in cases of fraud. electronically and service will be deemed • The wording of liability admissions will to have taken place unless the sender need to be carefully chosen in order to receives an error message. leave open arguments on causation. *applicable to motor claims only Implementation Health and Safety (Offences) New charges for damaged • The Civil Procedure Rules Committee Act 2008: Tougher sentencing vehicles recovered by the is still considering draft rules, practice for breaches of health and police directions and pre-action protocols and safety legislation the removal, storage and Disposal of the advisory Committee on Civil Costs • The Health and safety (offences) act 2008 Vehicles (Prescribed sums and Charges) is still to make recommendations on the came into force on 16 January 2009. regulations 2008 came into force on fixed recoverable costs regime. 1 october 2008. the regulations set out • The Act does not alter existing health standard charges for recovery based on • When the MOJ hosted a meeting of and safety duties but increases the vehicle size, position and damage and interested parties in november 2008, number of offences for which individuals whether carrying a load or not. they told their guests that they intended can be imprisoned. to implement the new rules by 1 october • Serious breaches of the Health and Insurer associations, such as the 2009. at the time of writing however, safety at work act (1974) or supporting lloyd’s market association and the aBI, this estimate has been put back to regulation, obstruction of inspectors or participated in the consultation process prior the first or possibly the second quarter breach of prohibition or other notices to the implementation of the regulations of 2010. may be punished with custodial and were pleased to see many of their sentences of up to two years. recommendations implemented. Concern QBE response has been raised however, about the • The maximum fine which can be there is much speculation that the reforms definition of the term “seriously damaged”. imposed by magistrate’s Courts is will not be implemented, mainly due to the this has been defined in the regulations as increased from £5,000 to £20,000. difficulties faced in creating an effective applying to a vehicle if “in the reasonable costs regime. It would however be very • Crown Courts retain the power to opinion of a police constable it cannot unwise to assume that they will fail and thus impose unlimited fines but for many be driven safely on the road”. this would be caught unprepared for implementation. offences a two year custodial sentence mean that a vehicle with only minor qBe is working to streamline the claims is the new maximum penalty. physical damage, such as a flat tyre or a process from first reporting to settlement broken brake light, could be classified as • The new penalties are not retrospective so that the deadlines in the MOJ’s new “substantially damaged” because it could and will not apply to offences committed process can be complied with. not be driven safely even though it would before 16 January 2009. not be difficult to recover. we are also reminding our policyholders Comment: the new penalties apply to that prompt reporting of accidents, everyone with a responsibility for health and the “substantially damaged” definition irrespective of the new claims process, safety in the workplace including individual would for example, mean that the recovery has proven to be an effective means of employees. The prosecution of employees charges for a laden vehicle of over 18 controlling the escalation of the cost of has however, historically been rare and it tonnes, upright on the road, would rise claims. is the directors, managers and partners of from £350 to £4,500. representations businesses who are far more likely to be have been made to the government on this at risk of a custodial sentence. It will not issue. the government has indicated that be necessary for the prosecution to show it will seriously consider concerns raised criminal intent in order to secure a conviction. by insurers during the course of the first Both the government and the HSE have operational year of the regulations. stated however that they see custodial sentences as being appropriate only where Comment: vehicle owners can avoid fatalities or serious injuries have resulted expensive police recovery charges by from the breach of health and safety law. pre-arranging private recovery facilities. QBE policyholders can make use of the to see the full act go to www.opsi.gov.uk/ services of Auto–Rescue Logistics Ltd. acts/acts2008/ukpga_20080020_en_1 Contact no: 0800 0285890. 2 motor news quarterly update – spring 2009 In england and wales the quantification of damages is deemed to be a procedural matter whereas article 15 of the new regulation states that this process is substantive law. If quantification of damages is held to fall within the regulation, this could see the end of “forum shopping” in uK courts. article 14 of the regulation allows the parties to a dispute to make an agreement on the selection of the applicable law. such an agreement would have the benefit of avoiding the uncertainties of a contested hearing on jurisdiction. Comment: the European Union has sought to bring certainty to cross border disputes but there is likely to be much satellite litigation, at least in the short term, as to the new regulation’s interpretation and application. The provisions of the regulation are similar in part to the existing Private International Law (Misc Provisions) “Rome II” – European Union however be displaced under the terms of Act 1995 but the ultimate arbiter of cross seeks consistency in the articles 4(2) or 4(3) below. border disputes will now be the European selection of applicable law Court of Justice rather than any national in cross border disputes under article 4(2), where both claimant court and it is perhaps this that is the most and defendant “habitually” reside in the significant feature of the new regime. With effect from 11 January, EU regulation same country, it is that country’s law which 864/2007(known as “Rome II”) applies will apply regardless of where the damage in all member states except Denmark. occurred. the regulation is retrospective and in motor cases will apply to accidents under article 4(3) the Courts will have which occurred on or after 20.08.07. the discretion to consider all the facts surrounding regulation seeks to clarify the basis on a case and to displace the general rule which the applicable law is determined in in favour of a more appropriate choice of (non-contractual) cross-border disputes. national law i.e. that of whichever country is most closely associated with the claim. under article 4(1), the general rule is that the applicable law will be that of the article 1(3) designates the substantive law country where the damage occurs rather that governs claims but is not concerned than the country where the event giving with evidential and procedural issues. this rise to the damage occurs. In road traffic distinction may well lead to complications accidents the country where the damage as different member states define occurs will inevitably be the same as where procedural matters in different ways. the accident took place. article 4(1) may Costs at a Detailed assessment Hearing the The District Judge agreed that the ATE claimant’s solicitors argued that the premium had not been reasonably incurred Conditional Fee Agreements, admission of liability was irrelevant and that and disallowed it. He also reduced passengers, no risk, ATE it was an accepted and reasonable practice the medical report fee to £245 in line premium unrecoverable: Aziz to take out an ate policy at the outset of with association of medical reporting v Liverpool Victoria Insurance such a case to cover any liability for costs organizations rates. Ltd – Rawtenstall County incurred by the claimant. they also referred Court (2008) to the House of lords decision in Callery Comment: an illustration that despite the claimant was travelling as a passenger and Gray (2002). Callery and Gray ATE premiums may still when he was injured in a road traffic be successfully challenged where there is accident. liability for the accident was the defendant’s solicitors countered that no genuine risk of the claimant failing to admitted immediately by the defendant’s the court had wide discretion under the recover costs. insurers. Despite this admission, an after Civil Procedure rules and supreme Court the event insurance policy was taken out. act 1981 to assess the reasonableness the claim was settled without proceedings of any ate premium and that it was for and costs were paid on a predictive basis the claimant to prove that it had been but without the £350 ate premium and a reasonably incurred. since the CPr had disputed medical report fee of £495. not been amended to remove the courts’ discretion it followed that they were still free to exercise that discretion despite the judgement in Callery and Gray. 4 motor news quarterly update – spring 2009 Credit hire Uninsured claimants; ex turpi although the credit hire claim had failed on Offers of replacement causa: Smyly Agheampong v the illegality point, the case also addressed vehicles, failure to mitigate: Allied Manufacturing (London) the issue of reasonable credit hire and Copley v Lawn and Madden v Ltd – Central London County judgement on this issue was reserved, to Haller – Leeds County Court Court (2008) give the parties an opportunity to make further submissions. (2008) the claimant’s car was parked and In both these cases the claimants had been unattended when the defendant’s lorry Comment: the judge commented that offered free replacement vehicles by the struck it, damaging it beyond economical for the ex turpi defence to succeed the third parties’ insurers KGm motor Policies, repair. liability was admitted and the defendants had to establish that (on the following road traffic accidents. Both defendants paid the claimant £1,505 in balance of probability) the claimant would claimants declined these offers. respect of the pre-accident value of the car. have remained uninsured for the period of the hire claim but for the accident. They In madden the claimant was offered a the claimant however, also sought recovery were undoubtedly assisted in this by the replacement car before he entered into a of 341 days credit hire charges in the sum claimant having been uninsured for a very credit hire agreement. at first instance, the of £34,076.68 and the defendants refused long period pre-accident and by his being whole claim for credit hire charges was to pay these on two grounds. found to have tried to mislead the court. By dismissed. implication, had the claimant been deemed Firstly, they argued that the claim was to have been only temporarily uninsured, the In Copley the claimant had been offered a tainted by illegality. the claimant had not ex turpi defence would not have succeeded. free replacement vehicle several days after insured his car pre-accident and had been she had signed the credit hire agreement. at convicted for this offence. He would have first instance only the hire charges up to the continued to use it uninsured, for the period time of KGm’s offer of a replacement car of the loss of use claim, had the accident were allowed. not occurred. the claim must fail on the basis of the public policy doctrine ex turpi At the conjoined appeal HHJ Langan QC causa non oritur actio (there can be no right was asked to consider two issues: firstly of action founded on an illegal act). whether the claimants had failed to mitigate their losses and secondly whether they secondly, the amount of credit hire charges were entitled at least to the cost to KGm of was unreasonable, being hugely in excess supplying alternative cars. the claimants lost of the value of the damaged car. on both points. the judge found that “upon a high balance Comment: this is more good news for of probability” the claimant had had no defendants and their insurers. As in the insurance for about 16 months before the case of Steadman v TNT (reported in accident and that but for the accident he the autumn 2008 bulletin) the offer of a would have continued to drive uninsured. replacement vehicle to claimants has proven the doctrine of ex turpi causa applied and to be a successful method of preventing or the claim for credit hire must fail. reducing credit hire charges. 6 motor news quarterly update – spring 2009 Fraud Tort of deceit, exemplary damages: Axa v Jensen – Birmingham County Court (2008) the defendant sold her car through a car dealer but did not receive any money from the sale due to the company becoming insolvent. she decided to fabricate a theft claim to recoup her losses which her insurers duly settled. when the police later located the car in the possession of the new owner, the defendant admitted that the claim had been fabricated. the police cautioned the defendant but took no further action. the insurers brought an action for the recovery of their losses, exemplary damages and costs. the defendant was ordered to repay the £8,100 settlement she had received with interest, plus exemplary damages of £4,000 and costs of £7,500. Fictitious accidents, credit the ate insurers declined to pay the Comment: awards of exemplary damages hire, non-party costs defendant’s costs on the basis of the are unusual in insurance fraud cases. order: Farrell and Short v claimants’ fraud. the defendant’s solicitors Fraudulent claims have a direct impact on Birmingham City Council - applied for a cost order against the credit motor premiums and any new measures to Birmingham County Court hire company Dams on the grounds that discourage fraudsters should be welcomed (2008) the largest element of the claim was the hire by both policyholders and insurers. charges and that Dams was the instigator the claimants alleged that their vehicle had and potential beneficiary of the action. after been struck by one of the defendant’s dust a contested hearing the judge ordered carts. they made use of a credit hire car Dams to pay 80% of the defendant’s costs. supplied by Direct accident management services who referred the case to solicitors Comment: even where there is no to recover the hire charges, the pre- suggestion of complicity in a fraudulent accident value of the first claimant’s car and claim, a non-party which instigates and/ damages for personal injury on behalf of or manages and stands to benefit from the both claimants. litigation may find itself held liable for the defendant’s costs. the defendant quickly settled the vehicle damage claim but declined to pay the other items of the claim after information was received suggesting fraud. the claim was eventually discontinued in the face of detailed fraud allegations and a costs order was made against the claimants. Liability English claimants injured in In deciding that english law should apply to Cars travelling in convoy, Spain, applicable law: Mrs the damages claim, the judge held that the apportionment of liability: Lauren B, Tyler B and Noah B factors linking the claim to england were Hames v Ferguson and v Mr Mark B – High Court (2008) more relevant than those linking it to spain. the accident had occurred in spain and Ors – Court of Appeal (2008) the defendant was driving a hire car in the claimants had suffered their immediate spain on holiday when he mistook the road losses there but all the parties were two cars were travelling in convoy, at he was on for a dual carriageway and had english and normally resident there and speed, along a country lane. the claimant a head on collision with a spanish motorist. the consequences of the accident would was a rear seat passenger in the lead His wife and two children who were in the be suffered, particularly by the second car driven by the first defendant. the first car with him were injured and brought claimant, in england long after any losses defendant’s car struck a tractor towing a claims against him. in spain. trailer which was turning into a field. the claimant suffered severe head injuries. the second claimant, the defendant’s Comment: in line with other recent decisions the second car struck the trailer towed by son suffered serious spinal injuries leaving on this issue, such as Harding v Wealands, the tractor but caused no further injury to him doubly incontinent and likely to be the country in which a catastrophically the claimant. at first instance liability was wheelchair dependent in later life. injured claimant will receive care appears apportioned on a 60/40 basis between the first and second defendants respectively, to have been a major factor in the minds of as a preliminary issue the court had to on the basis that the drivers of the two cars the court in deciding which country’s laws decide whether english or spanish should had distracted one another. the second should be used to calculate damages. apply to the claims for damages. defendant appealed. Further information the general rule, under the Private the Court of appeal upheld the decision If you would like to discuss how any of International law (misc Provisions) act of the first instance judge. He had properly the reported judgments or statutory 1995, is that the applicable law should explored the evidence and this supported changes could affect your business, be that of the country in which the tort his view that the drivers of the two speeding please speak to your qBe contact or occurred. In deciding whether this should cars had distracted one another. appeal specialist technical advisor. Details or be displaced (as permitted under the act) dismissed. copies of featured judgments, statutes the judge adopted the three part approach set out by the Court of appeal in roerig and regulations can be obtained from Comment: it is common to see liability for John Tutton (contact no: 01245 272756, v Valiant trawlers ltd (2002). the first an accident split between vehicles which are e-mail: firstname.lastname@example.org). part was to identify the issue on which racing but the Court of Appeal now appears the general rule should be displaced, the to have extended this approach to cars second was to identify the factors linking the travelling in convoy. case with each of the two countries and the third was to weigh the significance of the various factors. the judge also bore in mind that “forum shopping” was an increasing and unwelcome trend that should be discouraged. 8 motor news quarterly update – spring 2009 Disclaimer qIel and the qBe Group have no obligation to update this report or any this publication has been produced by information contained within it. qBe Insurance (europe) ltd (“qIel”). qIel is a company member of the qBe to the fullest extent permitted by law, Insurance Group. qIel and the qBe Group disclaim any responsibility or liability for any loss or readership of this publication does not damage suffered or cost incurred by you create an insurer-client, or other business or by any other person arising out of or in or legal relationship. connection with you or any other person’s reliance on this publication or on the this publication provides information about information contained within it and for any the law to help you to understand and omissions or inaccuracies. manage risk within your organisation. legal information is not the same as legal advice. this publication does not purport to provide a definitive statement of the law and is not intended to replace, nor may it be relied upon as a substitute for, specific legal or other professional advice. qIel has acted in good faith to provide an accurate publication. 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