On the 6 April 2010, the Ministry of Justice reforms came into play for low value personal injury claims arising from road traffic accidents that occur within England or Wales.
The aim of the reforms
To provide a simplified new process for low value personal injury claims that delivers fair compensation to the claimant on a more timely fashion and at a more reasonable cost.
The reforms only apply to claims where the injury element of the claim falls within the range of £1,000 to £10,000.
The stages
The process will now be split into three stages. The level of fixed costs at each stage of the process, have been formally agreed by representatives of claimants and insurers –
Stage 1 (agreed fixed claimant cost - £400) – Agreeing Liability
The claimants’ solicitor completes the Claim Notification Form and sends it to the insurer. The defendant then has 15 days to either, admit liability, admit liability but allege contributory negligence or deny liability. If the defendant does not respond within the 15 day deadline the claim will fall out of the process and instead goes into the current pre-action protocol.
Should liability be admitted but the Defendant alleges contributory negligence, then the claim will leave the new process and no longer be covered by it. The claim will also leave the process if there are any issues of causation.
Stage 2 (agreed fixed claimant cost - £800) – Evidence Disclosure
The claim enters stage 2 where liability is admitted. The claimants’ solicitor obtains a medical report and the process continues with offers and negotiation of a settlement within a strict timetable. Defendants have 15 days to consider the offer, but if it is rejected there is a further 20 days allowed for the parties to negotiate. If the offer is accepted the damages must be paid to the claimant within 10 days.
Stage 3 (agreed fixed claimant cost - £250 paper hearing or £500 for an oral hearing) – Contested Claims
This is where the parties cannot agree on a settlement and the case goes to court. The costs are paid by the losing party.
As well as speeding up claims, the new process will reduce unnecessary legal costs through setting a fixed legal cost for each stage of the process.
The main effect of the reforms
The changes will have far reaching implications for both Clients and Insurers and nominated claims handlers. The challenge will be to ensure that claims are reported as soon as possible after an accident. This will allow adequate time for claims handlers to make any necessary investigations before receiving the third party claim, at which point the 15 day deadline will start. Particular attention will need to be applied to Road Traffic Accidents that involve personal injury, and these claims should be notified immediately. To be clear, the time limit starts once the claimant has notified a claim through the approved reporting process. In practice this could be some time (within three years in most cases) after the accident
Failure to report motor claims involving injury at the first possible opportunity, may well lead to claims falling outside the new protocols, which will lead to increased claims costs and inevitably to increased premiums at future renewals.
The intention is to speed up the claim process and to reduce costs. Failure to meet the deadlines will inevitably increase costs. It is therefore imperative that the appropriate systems and controls are put in place within your organisation to ensure a prompt accident reporting procedure.
Conclusion
Time will tell as to how effective the introduction of the reforms will be, but it seems imperative that proactive action is required to ensure the deadlines are met to maximise the opportunity of reducing costs.
However, there could be a downside, in that there may be pressure on claims handlers to admit liability within such a tight deadline, by paying a third party claim, which possibly should have been repudiated if the appropriate information had been available. For Insurers and those clients with excesses on third party motor claims, these reforms are likely to impact on cash flow by speeding up the settlement process.
What you need to do
-
Ensure all claims are reported immediately
- Make available sufficient information/evidence to able Insurers to determine liability within the 15 days.
- Ensure, if responsible, that the Motor Insurance Database (MID) is kept up to date. Solicitors will use the MID to identify Insurers and failure to do so may result in the claim being submitted to the wrong Insurer.