Disease Claims Handling in 2013: A period of significant change
The changes as at 1 April 2013
As with other types of injury claim, there are of course no longer any success fees, nor any ATE premiums, which can be recovered from insurers by claimants where those arrangements were entered into after 1 April. The change regarding the loss of recoverable success fees is the more significant, because the level of success fees which claimants could recover from insurers in disease cases were higher than in other types of claim. You will recall that in claims for deafness and for hand arm vibration syndrome, the level of recoverable success fee was as high as 62.5%, or even 70% if it was a case supported by a trade union undertaking to pay adverse costs. In stress cases or in work-related upper limb disorder claims, the recoverable success fee was of course 100%. It was this level of recoverable success fee which made these types of claims particularly attractive to claimant lawyers.
In recompense for the loss of the right to seek recovery of these additional liabilities, claimants are entitled to a 10% increase on settlements or awards for PSLA. Where damages quantum levels are low, such as in the case of deafness, this does not add a great deal to the cost of the claim and is more than offset by the gain to the insurer from the fact that the claimant can no longer seek the recovery of success fees and ATE premiums.
As a result of the intervention of the House of Lords when LASPO was passing through its final stages, mesothelioma claims were exempted from these changes for the time being. Mesothelioma claimants are still able to seek the recovery of success fees, even when the retainer post dates 1 April. These claimants are additionally entitled to the 10% increase on PSLA as well.
The further changes as at 31 July 2013
The portal has of course come into play for EL disease claims where the letter of claim is sent after 30 July, though there are certain excluded categories including disease claims where there is more than one defendant, as well as claims for mesothelioma. Unless falling into an excluded category, every EL disease claim where the initial notification is sent after 30 July must be lodged to the portal, rather than using the old process of submission of a letter of claim.
If the disease claim is concluded in the portal, and that may be a big if, then the same fixed recoverable costs (FRCs) apply as are used for EL accident claims, that is for a settlement at stage 2, £900 for claims with a value of £1-10K, and £1,600 for claims with a value of £10‑25K.
However, unlike EL accident claims, if the EL disease claim drops out of the portal, then FRCs no longer apply, and until the Government comes forward with further proposals for FRCs for disease claims outside the portal, then the traditional hourly rate structures will still remain.
Claimant behaviours seen to date
The loss of recoverable success fees in disease claims as at 1 April was seen as particularly significant. There was a significant level of pre 1 April activity to generate new disease claims, to join claimants to CFAs with recoverable success fees and to take out ATE policies, in both cases before 1 April. In most of these claims, the letter of claim was also sent before 1 April so as to make it clear to insurers that the new retainer had been initiated before that date. Most insurers found a significant increase in the number of new notifications as at that time.
Faced then with the next raft of changes as at 31 July, and preferring to avoid submitting claims into the new EL/PL portal and having to accept FRCs inside the portal, there was another surge of notifications of new claims over the period up to 30 July. Whereas for EL and PL accident claims it is of course the date of the accident which determines whether or not the claim enters the portal, and this is not a date that the claimant's solicitors can change, in the case of EL disease claims, the claimant's solicitors could effectively determine the process to be used because the process was entirely dependent on the date of the initial notification, so giving rise to the opportunity on the part of the claimant's advisers to select the existing process rather than the new.
The first MI for the extended portal scheme has recently been published covering the first month of new claims. 143 disease claims entered the portal in August and 105 remain in it. Clearly it is too soon to import any significance into these figures, especially if we bear in mind that many claimants sent letters of claim before 31 July to avoid the portal.
Anticipated future portal conduct by claimant advisers
Claimants' solicitors are likely to see the new EL/PL portal as an unfamiliar process, unless they already have experience of the RTA portal. There is a widespread view that is understandable that while the portal is suitable for straightforward accident claims, it has not been designed for the intricacies of disease claims and is unsuitable for them. We believe that claimant lawyers are likely to seek to avoid the portal for disease claims wherever they can.
Claimants' solicitors will be aware of the types of claim that are excluded from the portal, and may be keen to see whether they can ensure that a claim falls into one of the excluded categories. For instance, it is only EL disease claims which need to be submitted to the portal, that is a claim against an employer arising out of bodily injury sustained during the course of employment. Will claimants look to find potential PL claims which will be outside the portal? In the case of divisible diseases such as deafness, where at present claimants may have elected only to proceed against the employer who would pay the majority share of any settlement, will claimants now be keener to add an additional defendant so as to take the claim outside the portal even though the contribution from the extra party will be small in terms of damages as hourly rate costs can be incurred seeking the contributions of both defendants? Alternatively, as the portal only applies where the claimant values the claim at not more than £25,000 on a full liability basis, are claimant lawyers more likely to suggest the value of claims exceeds £25,000?
Another tactic that a claimant's lawyer may adopt where a claim is submitted into the portal is to take the case out of the portal too quickly, for reasons such as a marginally late response from the defendant or the insurer. Whilst any insurer should in our opinion look to comply with the timelines involved in any portal claim, where that is not possible, the action in question should be done as soon as possible afterwards so as to be able to set up a position that any delay is short and should not affect the ability of the matter to be able to continue under the portal.
Insurers should be aware of CPR 45.24(2). This is the rule that applies sanctions to a claimant who acts unreasonably in not submitting a claim to the portal which ought to have gone into the portal for any reason including exaggerating quantum to avoid the portal, or who takes the claim out of the portal unreasonably. Those claimants can be penalised by being allowed to recover only the costs that the portal would have allowed had the case remained within the portal.
Insurers' response to EL disease claims submitted in the portal
In the same way that claimant advisers may see the portal as unsuitable for EL disease claims, some insurers are unlikely to disagree with that viewpoint. Other defence interests may take a different view, particularly where they are used to seeing particular types of disease claim, often against the same factual background, where they have already formed a view that subject to certain checks being made in each claim, those cases are likely to succeed. Those defence interests may see the availability of the FRCs in the portal as an additional justification to seek to conclude those matters within the portal rather than to allow them to fall outside the portal and into hourly rate costs.
In our view, it is a matter for each insurer's strategic consideration as to whether or not to seek to keep EL disease claims, or particular types of claim, within the portal, for the benefit of having the FRCs which are available for portal settlements. If an insurer wishes to consider the strategic approach and potentially keeping certain types of EL disease claims within the portal, then it could identify the parameters that its claims handlers would adopt when applying this approach. Is it possible, for instance, to keep certain types of more routine deafness or HAVS claims within the portal, at least where there are not expected to be liability or limitation issues?
As to causation, any admission made within the six week EL investigation period does of course include an admission of causation, alongside liability and is confirmation of the fact that no limitation defence is being raised. There will of course be no medical evidence available at the time any admission is being considered. After any admission, medical evidence will subsequently be delivered by the claimant as part of the stage 2 settlement pack. Insurers should recognise that upon receipt of medical evidence, it is possible to review the issue of causation, as paragraph 7.36(b) of the EL/PL pre-action protocol provides that within three weeks of receiving the stage 2 settlement pack including the claimant's medical evidence, the defendants have the option of withdrawing the admission of causation. This right could be used where the claimant's medical evidence is, perhaps unexpectedly, read as suggesting that the claimant's case on causation does not stack up.
One of the difficulties with the portal in the case of EL disease claims is simply that of speed. Whilst EL disease claims with more than one defendant are excluded from the process, claims against one defendant can of course include more than one insurer, and it can be difficult to achieve an agreed strategy between insurers within the limited investigation period allowed. If the insurance industry as a whole sees there to be worthwhile strategic advantages form allowing EL disease claims or at least certain types of them to be dealt with within the portal, then there would be advantage in reaching industry agreement that allows one insurer to be able to handle that type of claim to a conclusion without necessarily having the chance of notifying other insurers at the time because there is insufficient opportunity to do so, on the basis that the insurer subsequently notified and on risk would be willing to subsequently pay their share of the costs of settlement.
This may be an area worthy of further attention in the months and years ahead. At the same time, as insurers begin to deal with the first post 30 July new EL disease CNFs, there is opportunity for insurers to conclude their own strategic thinking in relation to the new issues raised by the portalisation of these claims.
For more information contact Simon Denyer, Partner on 0161
This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.