How does Briggs’ Final Report impact on claims faced by insurers?
5 August 2016
Last week saw the publication of the final report from Lord Justice Briggs on the proposed future introduction of an Online Court (OC) to handle low value claims. Important issues for insurers are how the Briggs proposals would affect not only their handling of claims on the basis of the current compensation system, but additionally whether Briggs can offer any solutions as to how claims processes will operate if and when the proposed Autumn Statement reforms including the increase in the small claims track limit to £5,000 are introduced.
We reviewed the likely impact of his interim report when it was published in January. What is new now and how does this project curently look in terms of likely future impact for insurers?
In summary, for injury dealt with on the current compensation system, Briggs continues to be of the view that the existing portal process allied with use of the fast track for defended claims involving widespread use of fixed costs is a better solution than a switch to the OC.
However, assuming a rise in the injury SCT limit to £5,000, his answer on potential use of the OC for those claims is an ambiguous one, though he does highlight certain relevant issues which will need to be considered by government and other stakeholders in trying to achieve the right answers as part of a procedural package underpinning this reform.
What will a future Online Court look like?
Briggs reports that the MoJ has agreed to the concept of an OC in principle, and that legislation is being prepared for a new online procedure and for new simplified rules, distinct from the CPR.
Briggs’ view on what the OC would look like as set out in his final report is in truth similar to that set out in the interim report, but incorporating some additional developments. The current vision is:
The OC would deal with most claims worth up to £25,000, and would be compulsory for claims which fell within its remit.
There would though be excluded categories of claim which essentially Briggs sees as unsuitable for the OC, or where suitable alternative processes exist. As far as insurers are concerned, excluded categories could include injury claims, clinical negligence claims and other professional negligence claims. We look more closely at the position regarding injury claims as well as the other types of claims dealt with by insurers below.
There would not be a big bang start for the OC at that £25,000 level; instead there would be a soft launch either at £10,000, or just involving certain types of claim, of which we would see debt claims as an example as being easier to fit within the new processes.
The process would have the same 3 stages as outlined in the initial report: the triage stage when the parties submit their cases and evidence in support; a second stage involving a mixture of conciliation and case management; and a final stage if necessary of judicial determination.
There is no “design objective” in setting up an OC to exclude lawyers, but in practice their involvement would be limited by the limited costs recovery allowed.
The costs regime would broadly follow that of the current small claims track with allows recovery only of very limited costs. However, to assist unrepresented parties, limited fixed recoverable costs (FRCs) should be allowed for “early, bespoke, affordable advice” from a qualified lawyer to potential litigants on the merits of their case. This, thinks Briggs, should discourage parties from pursuing weak claims. A legal market or an economic model providing that service could then develop. The initial advice would for insurers add to the cost of settling a claim, but the availability of that advice would also be a disincentive to potential litigants using unqualified and uninsured advisors such as McKenzie Friends, the judge says.
Some claims which are based on resolving conflicting oral evidence would benefit from skilled cross-examination at trial and Briggs sees some advantage in allowing “a modest element of fixed costs” for that as well when that input is needed.
He gives no specific figures for what these FRCs should be: instead the Civil Justice Council should be involved in resolving that exercise.
The new court could be called the Online Solutions Court.
The report is addressed to the Lord Chief Justice and to the Master of the Rolls, effectively the senior judiciary. But in reality it will be for government in the form of the MoJ and for Her Majesty’s Courts and Tribunals Service to consider. We continue to expect it to fall into fertile ground as there is already government momentum along the same lines.
Nothing is said specifically in the final report as to when the OC would go live. Lord Justice Briggs has previously identified that the current funding of the HMCTS reform programme to the tune of £700m including IT investment runs until April 2020 and that this is the time frame within which the funding to take forward these aims will be available.
It may therefore be realistic to see that assuming approval is given, that implementation should be expected by 2020. The report refers with approval to the fact that an early start has already been made on the design, development and testing of the knowledge engineering needed for stage 1 of the OC.
How would injury claims on the current compensation system be affected?
On the current system, with the SCT limit for injury claims at only £1,000, the impact of the proposed new OC would be minimal, as Briggs recommends that injury (and clinical negligence) claims which would otherwise fall on either the fast track or indeed the multi-track should be within the categories of claim which are excluded from the OC. This is the same recommendation as was made in the initial report.
Briggs notes that there is “no significant appetite” for inclusion of these claims within the OC. He sees the current combination of the “streamlined portal” and the fast track with its FRCs as already suitable for those claims, so that the OC is not needed.
He is probably more strongly in favour of the exclusion of injury claims from the OC now when compared to the interim report, commenting now that current processes have led to “the highly efficient conduct of quite small claims”
The portal comes in for particularly favourable review this time round, and is seen as “a forerunner of stage 1 of the OC, in the sense that it is an online tool for communicating information about claims, and leads to many being settled without recourse to court”. The only difference identified between the portal and the OC is that, at least currently, the portal is only accessible to lawyers and insurers.
He does not comment in any detail on the types of injury claims under £25,000 which are not subject to FRCs such as disease claims outside the portal and clinical negligence claims, though an expectation of reform in both of those claims types would fill those gaps anyway.
It now seems clear that following the production of the interim report, Briggs is better aware of the use of FRCs across most of injury claims, and there is no longer mention of “widely disproportionate” costs being incurred in this report, as indeed would be expected where FRCs already apply.
In summary, if the OC is implemented against the background of the current compensation processes, it seems clear that injury claims will be excluded from it and those current processes, improved where it proves necessary no doubt, are likely to continue to apply.
How would injury claims be affected if and when the SCT rises to £5,000?
His recommendations are much vaguer on this scenario. It will be recalled that the initial report was published only shortly after the Chancellor’s Autumn Statement on 25 November last year, and that the initial report had only had time to begin to consider its effects.
This time round, again there is uncertainty partly caused by other steps in the reform programme being awaited. Pre-referendum, the Autumn Statement had been expected to be published by now, but of course the referendum result coupled with the consequent changes in personnel in the government including at the MoJ has caused delay. In this report, Briggs says only that the consultation is likely to appear “later this year”.
In the recommendations section of the final report he says only that “voluntary admission may need to be considered” of claims which are within an increased SCT limit.
In his initial report, he said that he thought the OC was the right venue for this type of claim if the SCT limit was raised, though we commented at the time that it seemed to us that the then recommendations in that area needed further thought. Briggs now agrees, accepting that the initial recommendations in this area were perhaps over-simplistic, and accepts that the question of inclusion of injury claims on this basis is much more difficult.
His approach this time round seems to be claimant-centric, wanting to ensure that a suitable way forwards is available to them to be able to bring claims if they wish to do so. He says the choice as to inclusion within the OC or exclusion should lie “with the claimants” in this area.
The fact that the judge has been open to claimant arguments can be seen from the inclusion in this report of the claimant argument that without legal representation, claimants would when dealing with “experienced insurers’ claims departments” be going “like lambs to the slaughter”.
Briggs’ alternative approaches
His ultimate positions are these:
On the one hand, if a new economic model can be built under which claimants can still be legally represented, which allows current portal processes to be used, and the OC is incompatible with that, then claimants should be allowed, he seems to suggest, to influence a decision that this should be the way forwards.
On the other hand, if claimants are not to be legally represented and would otherwise be within the SCT, he says he cannot see why they should not be allowed to use the OC, presumably from whatever date it goes live. He seems to assume that the OC will be ready by when the Autumn Statement reforms are implemented, but it is unclear whether this is realistic, even if those reforms are now delayed into 2018.
Claimant representations to Briggs
His thinking in this area is likely to have been impacted upon by what he was told by the claimant lobby. They apparently told him, consistent with their response to the issues raised by the intention to raise the SCT limit, that serious access to justice issues would arise.
While CFAs would clearly no longer be the retainer of choice within an increased SCT limit as presumably there would be few if any recoverable costs to apply a success fee to, the only other type of retainer which Lord Justice Briggs was apparently told of was a DBA.
Even if they started to be used, and the current 25% cap for injury claims was removed, the claimant lobby have left Briggs with the impression that where damages recovery is less than £5,000, there would be “an insufficient proportion for paying lawyers without digging too deeply into the damages to make it attractive to potential claimants”.
On this, certain claimant operations are known to operate more flexible arrangements which are neither CFAs nor DBAs and which already allow claims of limited value to be pursued and also enable proportions of damages larger than 25% to be retained by the lawyers. On this basis it could be said that with a new market being reasonably expected to develop, the judge’s preference for continued use of the portal would be a potential way forwards.
What though of the question as to what court process should be used if the portal did not conclude a claim under a raised SCT limit? This broader issue remains as indeed is also raised by the government intention to raise the SCT limit. Briggs has no direct answer to it. He limits himself to the comment that in comparison to the portal, “the SCT would be an inefficient vehicle” for these claims. Presumably this is a reference to relaxed way in which evidence becomes available in that type of claim, often only at a late stage.
Non injury claims
For these, the SCT limit is of course already £10,000 and there is no current intention to increase it. If the OC is introduced initially at £10,000 then it will replicate that level. The approach as to recovery of only limited costs will be the same it seems on the OC as on the SCT as currently.
Assuming then an increase in the OC to £25,000, this would then bring non injury up to that level into the remit of the OC, together with wider use of FRCs for that type of claim. There are of course no FRCs currently in this type of claim but the move into the OC could provide them, though of course the potential more general widening of the current use of FRCs advocated by Lord Justice Jackson might do so in the meantime anyway.
Briggs does however recommend the exclusion of professional negligence claims from the OC, on the grounds of complexity and inequality of arms.
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.