Quarterly Scottish Insurance Focus
Welcome to the first edition of our Scottish Insurance Publication. This is a quarterly update on the most pressing issues in the Insurance market in Scotland. We will bring you crucial decisions from the courts, updates on government activity, and interviews from key people in the market. All of this will keep you fully informed of the Scottish landscape to enable you to make informed strategic decisions.
Need to know
Quantum agreed at £250,000 with liability in dispute. The pursuer alleged that the accident was caused when he lost control of his motorcycle due to the defective road surface. He claimed that the eroded area constituted a hazard that gave rise to a significant risk of an accident to a careful road user. The defenders denied that they were at fault. They say that they had a reasonable system of road inspection and that the road was properly inspected and maintained.
The road surface was worn away along a length of some 15 to 20 metres adjacent to the edge of the road. The width of the damaged strip varied along its length, but was approximately 25 to 40cm from the edge of the road into the carriageway.
Whilst the defenders accepted that there was some erosion of the carriageway surface at the roadside, they contended that this was not of sufficient severity to warrant repair under and in terms of their maintenance and repair policy. The defenders’ position was that the road was not dangerous to a motorcyclist, so long as he exercised reasonable care.
The defenders' position and expert evidence was preferred and there was therefore no negligence established on behalf of the road inspector for the council.
The defender was driving her vehicle on a rural road shortly after midnight on 5th January 2013. She was in fifth gear and using her full beam lights when she encountered the pursuer in the road and struck him. He was wearing dark clothing. Evidence suggested the defender had not been speeding. The pursuer failed to establish that if exercising reasonable care, the defender would have been able to avoid colliding with him.
Lady Carmichael made the following observations:
While it cannot be literally true that the pursuer 'came out of nowhere', I am not prepared to accept that, on the balance of probabilities, the pursuer must have been visible to the defender at a time such as to permit her to avoid the collision. The accident happened at night in the hours of darkness. The pursuer was wearing dark clothes and it was not clear which way he was facing at the time of impact. The presence of a pedestrian on a rural roadway, late in the evening, would have been unexpected.
Liability was admitted in this "fiercely disputed" case and the issue before the court was that of causation. Further, at the outset the defenders asked the court to dismiss the action - the basis of their submission being allegations of fundamental dishonesty.
Unlike England and Wales, Scotland has no statutory basis for the application of fundamental dishonesty. We have been monitoring this case in the hope it would provide some guidance on its potential incorporation into Scottish jurisprudence.
Lord Kinclaven rejected the defender's submissions on fundamental dishonesty stating they were "not well founded in fact" and that the "pursuer's conduct did not merit such a course"
The pursuer sought damages of £182,880.80 and was ultimately awarded £7,321.32.
While the pursuer was not accepted as credible and reliable on all things, that was not sufficient to establish fundamental dishonesty
The judge was critical of defence witnesses who were held to be neither credible nor reliable (but whose witness statements had no doubt informed the defender's decision to fight the case)
He was also critical of the approach to skilled witnesses, as at least one expert witness had changed his opinion on the basis of evidence which was not placed before the court
The judge said that a finding of fundamental dishonesty would be an "extreme conclusion"
ASPIC - First Jury Trial
Karen Blakely v North Ayrshire Council, ASPIC, 09/05/17
This case was the first reported decision in respect of civil jury trial from the All Scotland Personal Injury Court (ASPIC). Prior to the passing of the Courts Reform (Scotland) Act 2014, civil jury trials did not exist in the Sheriff Court. The 2014 Act introduced these in actions raised in ASPIC. This case was presided over by Sheriff Mackie.
The pursuer claimed damages for injuries suffered by her son while playing in his primary school playground. Damages were agreed at £15,000 on full liability, and while it was admitted that the child had had an accident in which he suffered an injury to his leg, the local authority denied liability.
The jury returned a verdict in favour of the pursuer, but they found the child to have contributed to the accident to the extent of 96.5%. The pursuer was therefore awarded £525 but also received 100% of her judicial expenses.
Government Activity/ Scottish Parliament
We continue to monitor the progress of key legislation on expenses and abuse claims as they progress through the Scottish Parliament.
The Limitation (Childhood Abuse) (Scotland) Bill
Current Position – Passed Stage 3 on 22nd June 2017(unanimously). The Bill will now be submitted to the Queen for Royal Assent and should come into force this year.
Key Facts - to remove the three-year limit on survivors of childhood abuse seeking civil damages in court.
Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill
Current position - Stage 1 (Justice Committee), 13 June 2017
Key Facts – QOCS, DBAs, regulation of success fee agreements
Andrew Lothian discusses the impact of the above bill in this month's Journal of The Law Society of Scotland published this month.
Scottish Civil Justice Council Activity
The SCJC are currently trialling a number of pre-action protocols for Clinical Negligence and Disease.
Compulsory Clinical Negligence Pre-Action Protocol – the trial with this is continuing with good feedback from those currently using it. The limit has been increased to £100,000 for the trial protocol. Progress will be evaluated in June with next steps discussed then.
Compulsory Disease Pre-Action Protocol – this is at an earlier stage than the trial for clinical negligence. The group are working towards a draft protocol to be agreed in the next few months with the trial starting thereafter.
It is likely following the initial trial period we will see these follow suit of the compulsory Personal Injury Protocol.
A word from...Alastair Ross, ABI
We have formed a close relationship with Alastair Ross, Assistant Director & Head of Public Policy (Scotland, Wales & NI) over the past year. Alastair has attended the majority of our events and has introduced us to important connections in the Scottish Government and across the insurance industry. We very much value our relationship with him and are grateful for his support of the work we are trying to achieve in Scotland. Alastair has kindly agreed to answer a few questions for our inaugural issue.
What has been the biggest impact in the Scottish insurance market in the last 12 months?
Based on my conversations with insurers and others across the market that’s easy – the change in the discount rate from 2.5% to -0.75%. It’s the subject that people raise most with me, despite the other strategic challenges we face on Brexit, constitutional change, or civil justice reforms. There are a number of different aspects to the discount rate, including how we explain its impact to politicians, brokers and customers so they understand the extent it will affect premiums on the one hand and pricing models on the other. The ABI’s put in a huge amount of work in response to the previous Lord Chancellor’s decision to change the rate and I know we ruffled some feathers in our response where we described it as “crazy”. However, it’s one of the most important issues general insurance faces and so it’s essential that the Government understands it and reaches a fair and workable solution now that they have accepted the need for reform. We’ve been encouraged by the positive comments from the new Lord Chancellor David Lidington and Economic Secretary to the Treasury Stephen Barclay but there’s still a lot of work to do.
What are the ABI's main concerns/worries about the future in the Scottish insurance market?
The Scottish insurance market is in good health – something that’s illustrated by the research we commissioned for our Helping Britain Thrive initiative which shows that insurance and long term savings supports 10,000 jobs and represented £1bn a year in GVA for the Glasgow city region, while Edinburgh benefits to the level of 8,000 jobs and £1.78bn. When I talk to insurers in Scotland the same points keep coming up on the quality of the labour force here as part of the competitive advantage Edinburgh and Glasgow have in particular over other UK cities when it comes to insurers deciding where to invest in the business. However, to stay ahead of the rest the industry Scotland needs to maintain its standards of quality and performance alongside cost efficiency. That’s made more challenging by the commercial and political uncertainty caused by Brexit. The impact of civil justice reforms which we expect will lead to more personal injury claims in Scotland, including historic abuse actions dating back to the 1960s, is a concern for insurers and their insureds. DWF’s doing some great work to highlight the importance of counter-fraud activity to disrupt the organised criminal gangs which are bringing crash for cash and other scams into the Scottish market, and the rise in claims management companies is also something we need to see tackled by the justice system.
How can insurers work closer with the ABI and other bodies to influence change?
The short answer is by getting involved – so give me a call or send me an email! The ABI’s role is to give its members the benefit of strength through association which means getting the inside track via the ABI’s engagement with UK, Scottish and international Governments, Parliaments and regulators because they look to us to hear what the industry thinks. Our work with the Scottish Government and the Scottish Parliament on the new Civil Litigation Bill is just one example where the ABI can influence change if we work together with insurers using data and hard evidence to demonstrate how the market will respond to reforms. I see our work as an investment which pays a dividend in better regulation which improves the insurance market.
What does the immediate future hold for Scotland and looking to the future what weight are the ABI giving to things such as driverless cars?
The future for Scotland and the rest of the UK looks challenging, whether that’s in terms of Brexit and political change, the economic prospects of rising inflation and subdued growth, or the disruptive effect of new technology. But change also creates opportunities and new ways for the industry to develop if we recognise them and act on them. Autonomous vehicles is a great example of that. Just last week I was told by a senior politician this was one of the biggest challenges facing insurance in the next decade and he was suitably impressed when I set out the ABI’s work on this and the strength of our voice with Government and the other figures who are leading this. One of my personal mottoes is the Charles Darwin quote that it is not the strongest of the species that survives, nor the most intelligent, but the one most responsive to change.
What has your experience been of working with DWF?
Working with DWF has been great – and not just because you give me the chance to do things like this interview. The firm has a great focus on its clients and understanding what they need from their lawyers which goes beyond legal advice and far into the commercial, operational and strategic fields. Your Disrupt to Progress forum on counter-fraud is a powerful example of innovative thinking and action which sets you apart and it’s great to see that recognised in the honours it’s collecting. I’ve really appreciated being able to work with DWF and draw on your collective knowledge and experience which is a great help in my own role.
Claims Management Companies/ Holiday Sickness Claims
Counter Fraud Scotland held its second ‘Disrupt to Progress’ Forum in Glasgow on 5th July. Bringing together key industry figures from ABTA, IFED, IFB, ABI, the Law Society of Scotland, the Forum of Scottish Claims Managers and Police Scotland the event focused on the current concerns around regulation of CMC's and the meteoric rise of holiday sickness claims.
CMC Regulation - One of the main enablers for fraudsters in Scotland is the fact the claims management companies (CMC's) are not regulated unlike the position in England and Wales. We have drawn this to the attention of the Scottish Government when Jill Sinclair and Andy Lothian addressed them in person recently and we continue to highlight the issue in our alerts to clients and in our Consultation responses to the Government. Our message is clearly getting through and we were delighted this month when one of our alerts was referenced in the House of Lords when the House were considering the Financial Guidance and Claims Bill. This is from the speech by the Earl of Kinnoull:
"My concerns are widely held. I know that they are held by at least two noble Lords, while DWF, the respected Manchester-based international law practice that has offices in Scotland, commented in February that “in recent years increased levels of fraud have been detected in Scotland, along with a significant rise in injury claims. In part this is thought to be due to the effect of LASPO in England pushing claims management companies into Scotland, where their activities are not regulated and referral fees are allowed”.
We believe the Financial Guidance and Claims Bill presents an opportunity for introducing regulation for CMS's in Scotland. The Bill seeks to transfer the regulation of CMC's in England and Wales from the claims regulator to the Financial Conduct Authority (FCA) The FCA is a UK-wide regulator and representation are being made that it would make sense to have the territorial scope of the Bill across the whole UK.
DWF Scottish Counter Fraud team was unanimously awarded the Innovation in Practice Award at the 2017 Scott + Co Scottish Legal Awards which looks to recognise the highest performers in legal practices across the country. The team were recognised for its success in setting up a Counter Fraud Legal Team underpinned by a market leading team of Predictive Analytics/Profiling/Intelligence Consultants who look to tackle fraud across all service areas and consistently look for innovative solutions to combat fraud risks as they emerge, resulting in substantially reducing indemnity spend for clients and improving loss ratios.
Top Tip - Make savings on your claims spend
Maxi-Cosi car seats replaced for free
Insurers and handlers should be alert to UIL claims for replacement Maxi-Cosi car seats. If a claim is made you can direct them to the link below as Maxi-Cosi will replace the seats free of charge if they have been involved in an accident.
DWF contacted Maxi-Cosi and they confirmed that they will replace the car seat base too if it was being used at the time of the accident. Given the cost of these seats and their Iso Fix bases this can be upward of £500.
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.