CJC proposals for fixed costs and improved claims handling for NIHL claims may link into new MoJ consultation on process reform
It was July 2015 when the Ministry of Justice asked the Civil Justice Council (CJC) to look into the increasing numbers and cost of NIHL claims. In September, the CJC published its long awaited report which, along with proposals for a fixed costs regime, sets out measures to streamline the current process for handling NIHL claims. The fixed costs proposals had already been outlined by Lord Justice Jackson, who had seen the report as part of his own review into the wider extension of fixed costs. The CJC has now submitted the report to the MoJ and has asked for it to be considered as part of that wider review.
There was representation within the working group from both sides of the claims process, and as a result, the report is essentially a negotiated outcome. Indeed a number of issues were ones where no agreement could be reached. The outcomes recommended were not easily concluded and required two mediations to be achieved. Against that difficult process, it is probably unsurprising that even though it had originally been intended, the group was unable to go on to consider the same issues in other disease claims.
Matters have moved forward with an MoJ call for evidence which runs until 10 November and which considers not only gastric illness claims but also other low value personal injury claims including those for NIHL. This call for evidence is another potential route into reform of the processes used for handling these claims and one which we suggest is taken up.
Proposals and issues - a summary
The aim of the report is to focus the process of handling NIHL claims both prior to litigation and in litigation. It does not though consider the current processes which apply to the handling of NIHL claims which fall into the EL disease portal: either when those claims are progressing within the portal or the litigation processes which apply when those claims subsequently drop out of the portal as an overwhelming majority of them do. It is therefore a stage on the reform journey and its limitations should be recognised.
The continued use of the EL disease portal in its present form where less than 10% of claims are concluded within it will require consideration elsewhere. Indeed, a current opportunity for potential development of portal processes for NIHL claims now arises from the MoJ's current call for evidence in relation to gastric illness and other low value claims including those for NIHL.
The new processes proposed by the report would rely on the parties being able to succeed in following the new pre litigation procedure proposed, as well as having confidence in each other in terms of providing accurate information and giving full disclosure within that process, and additionally having confidence in the "agreed" audiologists who would provide the analysis of hearing loss underpinning these claims.
In practical terms and taking account of how defendants and their insurers are currently dealing with NIHL claims, if a dispute remains on the issue of the "agreed" audiologists, then the majority of cases are likely to fall out of the proposed scheme where causation is disputed and a medical report or repeat audiogram is likely to be requested. Additionally, the same result is likely to be achieved where there are multiple defendants (more than three), or in claims with issues over breach of duty and/or apportionment.
If the report's recommendations are implemented and parties do follow the procedures as recommended by the report, then this should reduce the claims spend in NIHL claims. The introduction of fixed costs into NIHL claims beyond the limited proportion of them which conclude in the portal is overdue and will also prove beneficial. On the other hand, parties may find that many claims fall out of the fixed fee regime due to a number of "exceptions" provided for in the report; the most common reasons would be the need either to repeat audiograms or to obtain the defendant's own medical evidence which is usually requested when causation is in dispute.
Clearly, there are still many issues to be ironed out as discussed below; however in overall terms, the report is a step in the right direction, though reform of the use of the portal for these claims needs further thought and indeed change reflecting the reforms proposed for claims outside of it. While a response to the report beyond Lord Justice Jackson's acceptance of its principles as to fixed costs is awaited, the extent to which it will work in practice remains to be seen. It is unclear in fact when the proposals would be considered and potentially implemented given the overlap with Jackson's proposals and the fact that the government is likely to be focused on Brexit and other related issues at present.
Unless process reform is to be taken forward separately, which may be possible, the fixed costs aspects are expected to be capable of being initiated only as part of the broader fixed costs exercise proposed by Jackson proposed for claims generally valued at up to £100,000. The government's formal response to his report is awaited, and early indications are supportive as expected, but if as likely there is to be a move to implement its recommendations, that may not be achieved till 2019.
As far as the practicality and timing of process reform for NIHL is concerned, there is likely to be an overlap with the government's current call for evidence in relation to gastric illness and other low value injury claims which is open until 10 November. NIHL claims are specifically identified in the call for evidence which seeks proposals for improvement of current processes including the nature and timing of evidence needed to support these claims. This current opportunity should be one in which the need for improvement to the processes involved in the handling of NIHL claims both inside and outside the portal can be highlighted.
Pre issue process and behaviours
It is proposed that the conduct of the parties at this pre-issue stage should still be governed by the current Pre-Action Protocol for Disease and Illness Claims but a new letter of claim and a new letter of response have been recommended. The aim of this is to assist with the early settlement of meritorious claims and the identification of real issues in dispute on contested cases.
Letter of claim
The new proposed letter of claim would contain what will effectively be answers to a detailed questionnaire from the claimant asking for a level of information which, if provided, should enable the defendant to take a realistic view on breach and limitation. Furthermore, the new letter of claim will have to include with it an HMRC Schedule, an ELTO search and an audiogram from an acceptable “quality standard” audiologist. It is anticipated that with the letter of claim providing detailed allegations and particulars along with a suitable audiogram, it should be easier for defendants to conduct meaningful investigations and take stock of the real issues in dispute.
The report acknowledges that the issue of the quality of the audiologist and of the testing facilities is central to improve the current process. At present, it is believed that most claimant firms will have hedged their bets by obtaining screening audiometry before proceeding with the claim in any event. If claimant firms now opt to obtain a robust initial audiogram through an accredited audiologist, this may have a positive impact for insurers on the number of new claim notifications.
Whilst the details of a system of accreditation have not been agreed to date, the report notes that some groundwork has already been done on the claimant side with input from the British Society of Audiology and the British Academy of Audiology as well as from Professor Mark Lutman to identify a “minimum quality standard”. Further details are yet to be thrashed out but it is anticipated that a robust system should considerably reduce the need for re-testing. It seems to us that the system will need to have a number of characteristics of the MedCo processes as used in whiplash claims: indeed adoption of MedCo may be appropriate.
The idea behind reliable audiometry is that where breach is admitted within the protocol procedures and causation or limitation is not disputed, the report of an audiologist will be used as the basis for settlement negotiations rather than incurring the additional cost of an ENT surgeon's report. The CJC report provides that the evidence of a suitably qualified audiologist would be sufficient to validate the level of NIHL, as well as whether or not hearing aids would be necessary, in those circumstances.
Letter of response
The new proposed letter of response should identify whether delegated authority applies (if relevant) under the ABI's Noise Induced Hearing Loss Claims Handling Guidelines and the name of the coordinating insurer and their reference. Defendants should not make a blanket request for further information and only ask for material information that is missing from that required by the checklist for the letter of claim.
Litigation and post issue behaviours
It is agreed in the report that it is expected that the proposals for improving pre action conduct on both sides will largely deliver the improvements required to streamline cases and reduce costs. However the report does highlight some post litigation issues which could be improved.
It is noted in the report that there is currently a variation between courts when it comes to case management and directions in NIHL claims. The report therefore proposes that courts adopt standard directions for NIHL cases allocated to the fast track in order to streamline the process and save time and costs. The proposed approach is that the majority of routine NIHL claims will be allocated to the fast track providing that both sides have adhered to the proposed changes in pre litigation conduct.
Limitation as a preliminary issue
The report has not been able to agree on whether a preliminary trial on limitation should take a claim out of fixed costs. If the MoJ decides that such cases should stay within fixed costs regime, then it has been agreed that:
- The same fees would apply to preparing the case to preliminary issue trial as are applied to a full trial;
- Should the claim continue after the preliminary trial, then the claim will commence within the fee structure from issue to allocation stage;
- Counsel's fees for preliminary trials will be payable in addition to fixed costs; and
- The claim should be stayed against any defendant who does not seek a preliminary trial until the outcome of that trial.
It should be noted however, that in his report Jackson LJ "strongly discourage[s] the ordering of preliminary issue trials in the fast track" and says the practice is "generally unwise" giving 4 reasons:
- The overlap in evidence between limitation and liability
- Protracted litigation if the limitation issue goes to appeal.
- Two trials in a fast track case increases costs and is disproportionate.
- A limitation trial is a waste of time if a claimant goes on to lose on liability.
It seems likely that defendants will continue to favour trials on the issue of limitation in the right cases. Consequently in any case where a limitation trial is sought, they will need to demonstrate why Jackson LJ's rationale should be displaced and why there is advantage in holding a preliminary issue trial of the issue of limitation. This is likely to be linked to the strength of the defendant's prospects in bringing the litigation to a close at that stage.
Third Parties (Rights against Insurers) Act 2010
The report also addresses the issue of the need to restore dissolved companies for the purpose of proceedings. It may have been assumed by parliament that the Third Parties (Right against Insurers) Act 2010 would render the restoration process unnecessary in the majority of scenarios going forward. However this is not currently the case due to the limited application of the 2010 Act to cases where either the cause of action arises on or after 1 August 2016 (the date the provision was enacted) or the company became insolvent on or after that date.
The position was confirmed in the recent case of Redman v Zurich Insurance Plc & Anor  EWHC 1919 (QB). DWF acting for Zurich made a successful application to strike out the claim on the basis that both the employer's insolvency and any alleged liability occurred before 1 August 2016 so that the 2010 Act could not apply.
The CJC report proposes extending the 2010 Act to apply to all claims first notified on or after 1 August 2016 and hence removing the need to restore dissolved companies going forward. It is unclear whether the recommendation for that proposed change to the legislation would if accepted apply to all disease claims or just NIHL claims, but in any event the issue is found in other types of disease claims as well, especially those for asbestos related disease. Without this type of reform, in the case of NIHL claims where often both the insolvency and the alleged liability occurred well before 2016, the advantages brought about by the 2010 Act will not be available.
While not considered by this report, reform of legislation is also needed due to the incoming 2010 Act so that insurers can continue to seek contributions from other liable parties where following application of the terms of that Act a defunct insured settling a claim does not need to be restored to the register by the claimant at Companies House. We consider that this could best be achieved by amendment to the Companies Act 2006 so that as is the case with claimants, insurers can restore dissolved companies at any time so that they can pursue rights of subrogation.
The agreed costs
Pre litigation costs
The broad concept from the report is to split claims into 3 stages and to allow the level of fixed costs set out in the table below:
Stage 1 up to and including the letter of claim
Stage 2 cases where liability is admitted
Stage 3 liability not admitted
Stage 2A/3A where papers have not been prepared for issue
Stage 2B/3B additional allowance for costs of preparing cases to issue
|Stage||1 defendant||2 defendants||3 defendants|
The costs involved in stage 1 are subsumed into the agreed costs for cases which settle at either stage 2 or stage 3.
The above sums are exclusive of VAT and reasonable disbursements.
Stage 2B/3B provides for £500 more than stage 2A/3A for costs incurred as a result of preparing papers (whether incurred by solicitors or by counsel).
There is no additional allowance (save for the £500 discussed above) for counsel's fees for any work carried out pre-litigation.
The fee for restoring a company is £1,280 inclusive of counsel's fee, but exclusive of reasonable disbursements.
A figure for making a PAD application could not be agreed.
Post litigation costs
|Stage||1 defendant||2 defendants||3 defendants|
|L1: Issue to Allocation||£1,650||£1,980||£2,310|
|L2: Allocation to Listing||£1,656||£1,987||£2,318|
|L3: Listing to Trial||£1,881||£2,257||£2,633|
Once a claim moves into one of the above stages, the fee relating to that stage will be paid in full.
Counsel's fees will be recoverable post litigation on a disbursement basis.
Standard trial advocacy fees under CPR Part 45 apply.
Where fixed costs apply pre-litigation, but the claim falls out of the fixed costs regime post-litigation, then the pre-litigation fixed fee will apply but post-litigation costs will be paid on a standard basis.
Lord Justice Jackson's matrix
As mentioned previously, Jackson LJ had already seen the CJC report before completing his own review. Endorsing the agreed costs he set them out in a simpler format which can now be seen as effectively superseding the CJC report:
|Stage:||NIHL claims with value less than £25,000|
|Pre-issue||£4,000 + £500 per extra defendant (reduced by £1,000 if there is an early admission of liability or by £500 if settled before proceedings drafted)|
|Post-issue, pre-allocation||£5,650 + £830 uplift per extra defendant|
|Post-allocation, pre-listing||£7,306 + £1,161 uplift per extra defendant|
|Post-listing, pre-trial||£9,187 + £1,537 uplift per extra defendant|
|Trial advocacy fee||£1,380|
In addition to the above, a fee of £1,280 is recoverable for restoring a company.
Multiple defendants and unilateral settlements
The report acknowledges that there may be problems where there are multiple defendants and they settle at different stages. In such cases, the first defendant to settle would meet 100% of the costs incurred up to that particular stage. If claim then settles against additional defendants, then the claimant would be entitled to full costs entitlement, which would need to be calculated and apportioned between the defendants. Eventual apportionment of costs would need to be dealt with between defendants. Where a claimant settles against one (or more) defendant and then proceeds to trial against another and loses or discontinues, fixed costs would be payable only to those stages which the claimant incurred against the defendants who settle.
Exceptions for both pre litigation and post litigation claims
The report highlights various situations where the claim would fall out of proposed fixed costs regime and these include:
Military claims, and claims valued at more than £25,000/multi track claims;
Claims involving more than 3 defendants;
Any other case where:
- De minimis exposure is alleged;
- Any defendant requests a repeat audiogram;
- Any defendant requests its own medical evidence;
- The case is considered to be a "test case" (scope of that definition was not agreed)
The proposed exclusion from fixed costs of NIHL claims worth more than £25,000 or those allocated to the multi-track can be seen to have been superseded by publication of Jackson LJ's latest report. As part of that approach he recommends fixing costs in most claims valued at up to £100,000, and this of course would include NIHL claims. For NIHL claims worth up to £25,000 he is in favour as noted above of using the report's recommended costs figures instead of including these cases within the fixed costs figures he suggests for other disease claims.
As noted, the report does not directly consider the use of the portal in relation to single defendant NIHL claims. It merely makes certain references to all insurers having to pre-elect to receive new claims within the portal for the portal to apply, but it is not possible to gain a clear understanding of point being made when comparison is made to how the EL disease portal currently operates.
As the report does not consider either the operation of the portal, or how the new recommended processes would fit alongside it, it is clear these aspects still need further consideration as part of a wider review of processes, not just in connection with NIHL claims, but disease claims generally.
Work is needed to achieve a negotiated and improved process for handling NIHL claims, and disease claims generally brought against a single defendant within the portal, and thought is needed as to how that adapted process should mirror the anticipated reforms outside the portal in terms of evidence presented and timescales and so become more suitable for disease as opposed to accident claims, Whilst not currently able to handle multi-defendant claims, the portal could in the future potentially be developed in a way that it could do so.
A new Pre Action Protocol for Low Value EL Disease Claims would be appropriate, and again would need development, probably again through the auspices of the CJC.
The gastric illness consultation may present a suitable opportunity to raise these matters with the MoJ and we will be responding on behalf of insurers. We would be pleased to share that response on request.
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.