We are running out of descriptors to convey the current state of the Brexit process. In our last Looking Ahead we were at "fever pitch" and it's safe to say we're beyond that now (you can choose your own word). Credit then to the Lord Chancellor for commencing the first discount rate under the Civil Liability Act 2018, albeit on the last day available to him within the 90 day period to do so. In the last week, HM Treasury has also (relatively) quietly launched a consultation on the means of requiring insurers to demonstrate they will have passed on any savings arising from the Civil Liability Act reforms.
Over the past year or so we have reported on the FCA's preparations to take over regulation of claims management companies and this will now happen from 1 April. The FCA has also this month published its policy statement confirming the increase in the Financial Ombudsman Service award limit.
Last month, the Judicial Executive Board finally responded to the McKenzie Friends consultation. Having indicated that the issue of paid McKenzie Friends is one for the government to consider, there was almost immediately a case in the news arising from the negligence of an unqualified adviser leading to the chair of the Justice Select Committee, Bob Neill repeating his call for a ban on paid McKenzie Friends.
Looking ahead, Dominic Regan is predicting the fixed costs consultation by the summer, imminent progress on fixed costs in clinical negligence claims, a report on DBAs, and that "something else big is in the reform pipeline" so that next year is "beginning to look like a re-run of 2013"
We look at these developments below, along with our usual round up of forthcoming cases, and other issues on the horizon.
Update 28 March: since publishing Looking Ahead, the MoJ has launched the consultation on extending fixed recoverable costs following the 2017 Jackson report. The consultation closes on 6 June 2019: Fixed recoverable costs consultation - GOV.UK
Local authority: protection from harassment. The Court of Appeal in CN v Poole Borough Council held that a local authority owed no duty of care in the exercise of its social services child protection functions, to protect two children from harassment by a neighbouring family. The Supreme Court heard the appeal on 16/17 July 2018 and judgment is still awaited. Read more on the Court of Appeal decision in our update from December 2017.
Update - Professional negligence: solicitors. The appeal in Perry v Raleys Solicitors a professional negligence claim concerning the alleged under-settlement of a vibration white finger claim was heard on 27 November 2018. In a judgment handed down on 13 February 2019 the Supreme Court allowed Raleys' appeal. Read more in our update last month Perry v Raleys: Supreme Court considers the constituent elements of causation and loss in professional negligence cases
Update - Motor insurance: unnamed defendant. In Cameron v Hussain & LV= the issue was whether a claimant is entitled to bring a claim for damages against an unnamed defendant, if the claimant has been the victim of an unidentified hit-and-run driver, and the car driven by the unidentified driver is covered by an insurance policy, albeit one in the name of someone untraceable. The appeal was heard on 28 November 2018 and in a judgment handed down on 20 February the Supreme Court allowed the insurer's appeal, finding that the claimant was not entitled to claim against an unidentified driver and that she should have brought her claim under the untraced driver's agreement. Read more in our update last month Cameron v Hussain: Supreme Court allows insurer's appeal
Update - Motor insurance: "use" of vehicle. The issue in R&S Pilling T/A Phoenix Engineering v UK Insurance Limited is whether on its true construction, a policy of motor insurance extends to liability for damage to the property of third parties because of fire caused by repair work to the car when it is immobilised. The appeal was heard on 13 December 2018 and in a judgment handed down on 27 March 2018 the Supreme Court unanimously allowed UK Insurance's appeal - a vehicle being repaired on private property is not being "used".
Duty of care: parent companies. The Supreme Court heard an appeal in Vedanta Resources Plc & Anor v Lungowe & Ors on 15 and 16 January 2019. Amongst other issues, this case considers the duty of care owed by a parent company to employees of its subsidiary. Judgment is awaited.
Asbestos related disease: disclosure. The appeal in Cape Intermediate Ltd v Dring (for and on behalf of Asbestos Victims Support Groups Forum UK) took place on 18 and 19 February 2019 and judgment is awaited. At the previous hearings, the issue was the extent to which the court should grant access to documents by non-parties. In December, Litigation Futures reported on the issues involved in the appeal and cross-appeal.
New – Permission to appeal. The permission to appeal applications for November 2018 to February 2019 have been published and can be found here. Of note, the Supreme Court has granted permission in the following cases:
Edwards v Hugh James Ford Simey (a firm) – a solicitors' negligence claim. Permission has been granted on the single ground of whether in an action brought against a lawyer in respect of the negligent loss of a claim, the prospects of success of that claim are to be judged as at the date when the claim was lost or as at the date when damages are awarded against the lawyer.
XYZ v Travelers – concerning the application under s.51 Senior Courts Act 1981 for a non-party costs order against the insurers in a product liability claim.
Halliburton v Chubb Bermuda Insurance Ltd & Ors – where the Court of Appeal considered whether an arbitrator may accept appointments in multiple references concerning the same or overlapping subject matter, and whether and to what extent he may do so without disclosure.
The vicarious liability case, Various Claimants v Barclays Bank Plc arising from the alleged sexual assaults of employees committed by a doctor in the course of medical examinations carried out at the request of the employer bank.
Permission to appeal was also granted at the end of October in X v Kuoni Travel Ltd concerning the extent to which a tour operator could be liable for a sexual assault carried out by an employee of one of its supplier hotels.
Doughty Street Chambers reports this month that permission to appeal has been granted in Henderson v Dorset Healthcare University NHS Foundation Trust on the question of how the illegality defence operates in the law of tort.
Court of Appeal
Professional indemnity insurance: claims notification. An appeal in Euro Pools Plc v Royal and Sun Alliance Plc concerning issues around claims notification took place on 23 and 24 January 2019. Judgment was reserved. Read more about the issues and the first instance in this 4 New Square update from last year.
Update - Limitation: mesothelioma contribution claim. The case of RSA Insurance plc v Assicurazoni Generali Spa concerns the recovery of payments between insurers in a mesothelioma claim. HHJ Rawlings held that the limitation period was two years from the date of settlement, as in a damages contribution claim, as opposed to six years for a debt claim. The appeal was heard on 7 February 2019 but it appears that the matter was compromised before any judgment was delivered.
New – EL reinsurance: mesothelioma. The case of Equitas Insurance Ltd v Municipal Mutual Insurance Ltd is an appeal against an arbitration award, and concerns the treatment of mesothelioma claims for the purposes of certain contracts of employers' liability reinsurance. The appeal was heard on 18 March 2019. Read more in the judgment granting permission to appeal from last May.
Update – Personal injury: contempt. In October 2018, a solicitor and a doctor were found to be in contempt of court arising from their involvement in a fraudulent personal injury claim. An appeal in Liverpool Victoria Insurance Company Limited v Zafar was heard on 12 February 2019, in which the insurer appealed against the lenience of the doctor's sentence. In a judgment handed down on 19 March, the Court of Appeal found that the sentence was inappropriate and unduly lenient and so allowed LV='s appeal. However the doctor's sentence was not increased, with the court saying that the purpose of the judgment was to give guidance on sentencing in contempt cases. Read more in the Gazette.
New - Procedure: service of claim form. An appeal was due to take place in DDM v Al-Zahra (PVT) Hospital & Ors on 19 March and concerns a challenge to the granting of an extension of time for service of a claim form.
Update - Costs: success fees in low-value PI claims. In Herbert v HH Law the Court of Appeal has been asked to consider the legality of what has become the industry model for handling low-value personal injury claims, with firms charging clients a 100% success fee as standard. The appeal was heard on 20 March 2019 with the Gazette writing two articles on the hearing, Court 'on precipice' of thousands of costs challenges by ex-clients and Client did not give informed consent to deductions, costs appeal hears. Judgment is awaited. Update 28 March: Robin Dunne of Hardwicke Chambers has tweeted that judgment will be handed down on 3 April 2019.
Update - Acoustic shock: breach of duty & causation. At first instance in Goldscheider v Royal Opera House, the claimant viola player successfully alleged that during a rehearsal of Wagner's Ring Cycle he was exposed to noise levels which created a risk to and resulted in injury to his hearing, namely acoustic shock. The defendant's appeal took place on 19 and 20 March 2019 and judgment has been reserved.
New - Contempt: power to revoke refusal of permission. Zurich Insurance v Romaine concerns an application for permission to commence committal proceedings for contempt of court in relation to a personal injury claim. At the last hearing, the issue was whether the High Court had the power to revoke a refusal of permission made on the papers, and hear an oral application. Permission was then refused on the renewed application. An appeal is due to take place on 3 April 2019.
New - Procedure: service defect & technical games. Phoenix Healthcare Distribution Ltd v Woodward & Anor involves an application for retrospective validation of the defective service of a claim form and whether the overriding objective required the defendant to alert his opponent to the mistake. The appeal is due to be heard on 15 or 16 May 2019.
Update - McKenzie Friends. In February 2016, a Judiciary Consultation Reforming the courts’ approach to McKenzie Friends was launched following a Working Group review looking into the increasing numbers of fee charging McKenzie Friends. The consultation invited views on possible reform including the revision of Practice Guidance, or codification of the practice and procedure relating to McKenzie Friends. As part of that, the consultation asked whether there should be a ban on fee charging McKenzie Friends. Last month, the long awaited response (pdf) was published. The Judicial Executive Board "remain deeply concerned about the proliferation of McKenzie Friends who in effect provide professional services for reward when they are unqualified, unregulated, uninsured and not subject to the same professional obligations and duties, both to their clients and the courts, as are professional lawyers." However, they say this issue should be considered by the government. Their recommendations include support for a Plain Language Guide for LiPs and McKenzie Friends, and that the current Practice Guidance should be updated. Read more in the Gazette. In an interesting development this month, an unqualified legal adviser was held to the same standard as a qualified lawyer in relation to a clinical negligence case. Following that decision, the chair of the Commons Justice Select Committee, Bob Neill, has repeated his call for a ban on paid McKenzie Friends.
Update - Financial Ombudsman Service: SMEs & financial award. Following a consultation earlier in 2018, in October the FCA published its policy statement on extending access to the FOS to SMEs. At the same time, it issued a consultation "Increasing the award limit for the Financial Ombudsman Service" which closed on 21 December. On 8 March, the FCA published its policy statement confirming the increase in the FOS award limit, to £350,000 for complaints about acts or omissions by firms which took place on or after 1 April 2019; and £160,000 for complaints about acts or omissions by firms which took place before 1 April 2019, and which are referred to the ombudsman service on or after 1 April 2019. Read more in our update this month Widening access to FOS for small businesses: FCA publishes policy statement on increasing the FOS financial award limit
Update - LASPO Part 2: post-implementation review. In June 2018, the MoJ published an initial assessment of the Part 2 LASPO reforms for its post-implementation review, and invited views by 24 August. Last month, the MoJ published the outcome of its review, suggesting no change to the essential aspects of the LASPO Part 2 reforms, and resisting arguments from parts of the claimant lobby for further change. The report believes that the reforms have met their objectives in terms of achieving a slight reduction in the number of claims made, including fewer unmeritorious claims, as well as a reduction in costs, believed to be 8-10% in injury claims. The government say they will consider amendments to the DBA Regulations to try to provide an alternative method of funding claims, as well as a possible extension of the QOCS regime beyond injury cases to other types of claim. Read more on the outcome, outstanding issues and next steps in Simon Denyer's update last month Government response on LASPO review allows assessment of the current state of the litigation reform process. This month, Dominic Regan has reported on Twitter that a report on DBAs is coming proposing new, workable measures.
The following consultations are currently open
New - Civil Liability Act: report on savings. During the passage of the Civil Liability Act through parliament, the insurance industry committed to passing on the benefits arising from the reforms to consumers. A provision was therefore added to the Bill requiring insurers to demonstrate whether savings had been passed on. On 21 March, HM Treasury published a consultation seeking views on the draft regulations that will require firms to provide information to the Financial Conduct Authority (FCA). This information will be used in a report by the government which will assess whether firms have passed on the savings. The consultation focuses on the scope of the requirements and methodology for calculating the relevant information. The consultation closes on 3 May 2019.
The following consultations await official responses
If any client wishes to request any DWF consultation responses referred to below they can do so by emailing firstname.lastname@example.org
Motor insurance: implications of ECJ Vnuk ruling for UK legislation. Although the government has never formally responded to its December 2016 consultation Motor Insurance: consideration of the 'Vnuk judgment' we know that its preferred option was for the Motor Insurance Directive to be amended in a way to avoid having to broaden the scope of insurance requirements to reflect the decision in Vnuk. As attention has now turned to the European Commission's proposal to amend the Directive we consider developments below under "Legislation".
Update - Personal injury discount rate: call for evidence. We have previously reported on the a call for evidence seeking up-to-date data and information on a wide range of topics including in particular, investments available to claimants, investment advice provided to claimants, investments made by claimants and model investment portfolios. We also reported on the Government Actuary's Department's technical memorandum setting out the analytical approach they propose to adopt as a part of the first review of the discount rate. As the Lord Chancellor has now (19 March) commenced the first review, we consider developments below under "Also on the horizon".
Reforming the soft tissue injury (whiplash) claims process - Part 2. In February 2017 the government published the first part of its response to its November 2016 consultation, Reforming the soft tissue injury (whiplash) claims process, and has since incorporated its whiplash reforms within the Civil Liability Act 2018. In the meantime, a second part to the consultation response is still awaited and is due to look at the outstanding proposals including, the Insurance Fraud Taskforce recommendations, credit hire and rehabilitation. In July 2018, Part 2 of the consultation response received a mention in the government's response last July to the Justice Committee's small claims track inquiry with the government confirming that it was "currently working closely with stakeholders including from the insurance industry to take forward the IFT’s recommendations. Detail will be included in Part Two of the response to the whiplash consultation, which will be published shortly." As Simon Denyer pointed out in November's Civil Liability Bill update, we expect the MoJ to turn their attention to their response during 2019.
Update - Review of Fixed Recoverable Costs. Jackson LJ published his Review of Fixed Recoverable Costs, to which DWF contributed, in July 2017. His proposals are to extend fixed costs in claims worth up to £100,000 along with the remaining fast track cases not yet subject to FRCs. During 2018 there were a number of comments from ministers to the effect that the government was considering the report and would announce the next steps in due course. Now that the government has published its post-implementation review of Part 2 of LASPO we would expect the consultation to follow soon. This month Dominic Regan reports on Twitter that the MoJ has confirmed that the consultation will be out by the summer. We presume this will include the proposals for fixed costs in noise induced hearing loss which we had kicked into the "long grass" section below. Also this week in response to a written question Justice Minister Lucy Frazer stated that "The Civil Justice Council (CJC) is expected to report shortly on proposals to extend fixed recoverable costs (FRC) in clinical negligence cases up to £25k damages. The Government will consult before implementing any extension of FRC following the CJC report."
Review of low value personal injury claims including package holiday claims. In the October 2017 call for evidence on measures to address holiday sickness claims, the MoJ also invited views on low value claims more generally, and asked the Civil Justice Council to consider steps that might be taken to prevent unmeritorious claims and to resolve meritorious ones more quickly and with reduced costs. The outcome of the work done on package holiday claims was the introduction of the new Pre-action protocol for resolution of package travel claims along with fixed costs which came into force in May 2018. In July, the government published a summary of the consultation responses and details of the way forward confirming for the first time that fixed costs would not be extended beyond gastric illness claims. And as we reported in June, attention has now turned to the review of low value claims more generally. A cross industry working party met for the first time last May to identify areas of focus which will include CMCs, fraudulent behaviour, processes, MedCo and expert evidence generally, ADR, the portal, sanctions and technology. The group was then due to report on those areas to the CJC in the summer. The synopsis of the CJC meeting (opens in pdf) in October 2018 reported that "The final report on Low Value PI Claims was nearing completion and would be ready for the January 2019 meeting." We await further news.
Credit hire: model directions. In June 2017, the Civil Procedure Rules Committee issued a consultation on the "model order for directions to be used in credit hire cases". Acknowledging that the whole area of credit hire "remains a highly contentious area of litigation" the CPRC identified what they see as relatively simple steps that can be taken to narrow the issues and present the judge with the necessary evidence to make a determination. The proposed directions concern witness evidence and disclosure on impecuniosity and the agreement of hire rates. Stakeholders were urged to confer to try to achieve a consensus or risk a solution being imposed. The consultation closed on 1 August 2017 and DWF responded. Although there is no sign of a formal response, we understand that some courts have already adopted them.
Default County Court Judgments. At the end of December 2017 the MoJ launched a consultation looking at the processes for money claims issued in the County Court. They have particular interest in views on limiting the circumstances in which an individual can have judgment entered in default against them without their knowledge. DWF submitted a response to highlight the issue of judgment being entered against policyholders in insurance claims when it is an insurer who will ultimately pay the claim – the MoJ had not identified this scenario in its consultation. The consultation closed on 21 February 2018.
Legal services: insurance and compensation. In March 2018 the SRA launched a consultation on changes to the legal insurance and compensation rules with proposals including limits to the compensation fund and reducing minimum PII cover. The SRA said these changes would give firms more flexibility to choose the right level of insurance to suit their business and clients, while making sure there are still appropriate protections for users of legal services. The consultation closed on 15 June and a response was awaited but in December 2018, the SRA confirmed it had put its proposed reforms on the backburner. Read more in the Gazette, which reports that the regulator is unlikely even to discuss a response to the PII issue until spring at the earliest.
Update - Solicitors Disciplinary Proceedings: standard of proof. In July the Solicitors Disciplinary Tribunal launched a consultation on the making of procedural rules in relation to first instance applications to the Tribunal. The current standard of proof used in disciplinary proceedings before the Tribunal is the criminal standard. The Tribunal invited views on whether instead it should apply the civil standard in line with other professional regulators. Whilst the move is clearly being considered for a number of reasons, it could be seen as complimenting the Insurance Fraud Taskforce's recommendation that the SRA toughen its stance on dishonest solicitors. The consultation closed last October and over the past couple of months we have highlighted the responses from the SRA, the Law Society and the Legal Services Consumer Panel. In October the Gazette reported on comments from SRA executive director Richard Collins that lowering standard of proof in disciplinary proceedings is ‘inevitable’, even if the change does not happen immediately. This month, Legal Futures reports that the LSB has said the decision of the Solicitors Disciplinary Tribunal is expected by Easter.
Claims management companies: Senior Managers and Certification Regime. In September, the FCA launched a further consultation in preparation for them taking over the regulation of CMCs. All firms regulated by the FCA and authorised under the Financial Services and Markets Act 2000, along with individuals performing regulated activities, need to comply with the FCA's rules on professionalism, conduct and governance, known as the Senior Managers and Certification Regime (SM&CR). This consultation sets out the draft rules and guidance for CMCs relating to the SM&CR, and was open until 6 December. The FCA will publish a Policy Statement on its approach and the outcome of the consultation in the next few months. Read more on the consultation in this helpful summary from Legal Futures.
New - Access to Justice: court and tribunal reforms. In January the Justice Committee launched an inquiry into the access to justice implications of the programme of reforms underway in Her Majesty’s Courts and Tribunals Service (HMCTS), including the increasing use of digital and video technology and the closures of courts and tribunal hearing centres. Last month, the Law Society strongly encouraged members to respond by 11 March giving particular attention to: the flexible operating hours pilot, the civil money claims online project and court closures.
Automated vehicles: law commission consultation. On 8 November the Law Commissions of England & Wales and Scotland launched the first of a series of public consultations about crucial reforms which will ensure the country is prepared for the introduction of automated vehicles. Three themes are covered in the preliminary consultation: first, how safety can be assured before automated vehicles are placed on the market, as well as ongoing monitoring and maintenance requirements once they are on the road. Second, criminal and civil liability. Finally, the need to adapt road rules for artificial intelligence. The preliminary consultation was due to close on 8 February 2019 but was extended following several requests until 18 February 2019. A final report and recommendations will be published by March 2021.
Update – Motor insurance: amendment of the Motor Insurance Directive. The now infamous decision of the CJEU concerning a Slovenian tractor in Vnuk in September 2014, produced an interpretation of "use of a vehicle", for the purposes of the compulsory motor insurance regime, which was wider than the definition contained within the Road Traffic Act 1988, and thereby set in motion a review of the legislation both in the UK and Europe. In May 2018, the Commission presented proposals to amend the Directive and it came as a surprise when they proposed to follow Vnuk so that, "[t]he 'use of a vehicle' means any use of the vehicle, intended normally to serve as a means of transport, that is consistent with the normal function of that vehicle, irrespective of the vehicle's characteristics and irrespective of the terrain on which the motor vehicle is used and of whether it is stationary or in motion." In January, we reported that the Internal Market and Consumer Protection Committee (IMCO) of the European Parliament voted for amendments that would revise the Commission's proposal on scope, by proposing to restrict compulsory cover to vehicles "in traffic" defined as being on a public or private road, but not in a closed area inaccessible to the public, as well as exclusions for motorsports and for new vehicles such as Segways and electric bikes. In February, the full Parliament approved the IMCO amendments. Read more on recent developments and next steps in Amy Jeffs' article MID reform – the journey continues as European Parliament points to pragmatic solution
New - Motor Vehicles (Compulsory Insurance) (Amendment etc.) (EU Exit) Regulations 2019. This SI, which will be required in the event of a no deal Brexit, introduces a policy change which removes the requirements for the Motor Insurers' Bureau to act as a Compensation Body for UK residents injured in road traffic accidents in the EEA, and to reimburse its foreign counterparts in respect of EU27 visitors in the UK who have been compensated by their ‘home’ Compensation Body. The draft SI had to be approved by both Houses. In February it was approved by the House of Lords but not without them emphasising their regret that UK residents "could be denied access to justice when injured abroad as they will have to make claims for compensation in the country in which the injury occurred rather than being able to appoint a claims representative in the United Kingdom” and flagging the "masterpiece of understatement" regarding the requirement to revert to Green Cards in the absence of a deal (though not strictly part of this SI). This month the Delegated Legislation Committee approved the draft SI, but again not without concerns about access to justice, and the Opposition did not feel it could support the draft. The SI went on to be approved in the House of Commons by 301 votes to 251. The SI was made on 11 March 2019
Jersey discount rate: Damages (Jersey) Law. On 26 October 2018, the States Assembly of Jersey launched a consultation on a new legislative approach to setting the discount rate in Jersey, with the lodging of the Draft Damages (Jersey) Law. The draft Law introduces a statutory discount rate for lump sum damages awards and provides a statutory power to award damages by way of PPOs. The Law provides for a dual rate, so that the rate is 0.5% where the compensation award covers a period up to 20 years and 1.8% where the award covers a period of more than 20 years. On 29 January, the draft law was debated and the States Assembly unanimously voted to adopt it. In terms of commencement, the report on the draft law (opens in pdf) states "from the date on which the draft Law comes into force – that date being 7 days after registration in the Royal Court if adopted by the States and sanctioned by the Privy Council – a court, including an appeal court, will apply the new provisions." It appears the new law is still waiting to be registered. Read more in Graham Dickinson's October update The Discount Rate: The Channel Islands lead again
We have also been following progress on two Law Commission draft Bills:
Update - Deprivation of liberty: Mental Capacity (Amendment) Bill. In 2014 the Law Commission began a review of the Deprivation of Liberty Safeguards (DoLS) under the Mental Capacity Act. The DoLS aim to protect people who lack mental capacity, but who need to be deprived of liberty so they can be given care and treatment in a hospital or care home. In March 2017 the Law Commission published its final report along with a draft Bill. It recommended that the DoLS be repealed and set out a replacement scheme called the Liberty Protection Safeguards. A year later the government responded to the Law Commission's review and in July 2018, the government started the Mental Capacity (Amendment) Bill in the House of Lords. The Bill has now reached the Ping Pong stage and was considered in the House of Lords on 27 February. A date is awaited for further consideration in the Commons. You can follow the Bill's progress here, and there is a helpful round-up of recent developments on the parliament website. Counsel, Alex Ruck Keene, also provides helpful updates on his Mental Capacity Law and Policy blog.
Insurance contract law reform: draft Insurable Interest Bill. In April 2016 the Law Commission and the Scottish Law Commission published a draft Bill following their review of the issue of Insurable Interest, having previously made proposals for reform in 2008 and 2011. They were asked to return to the issue due to the increased numbers of requests to write policies which include cover for children, cohabitants and to insure ‘key employees’ for substantial amounts. The draft Bill was intended to reflect the proposals set out in the issues paper and the Law Commissions invited comments on the draft Bill by 20 May 2016 with a view to publishing a final draft Bill and report in autumn 2016. The project was then put on hold due to other priorities within the team but in June 2018 the Law Commission published their updated draft legislation. The extended deadline for comments was 31 October 2018. Read more in the Law Commission press release.
Also on the horizon...
Update - Personal injury discount rate: first review launched. We have previously reported on the MoJ call for evidence seeking up-to-date data and information on a wide range of topics including in particular, investments available to claimants, investment advice provided to claimants, investments made by claimants and model investment portfolios. The consultation closed on 30 January 2019. In the meantime, on 22 January the Government Actuary's Department published a technical memorandum setting out the analytical approach they to adopt as a part of the first review of the discount rate. They were not specifically seeking views on their approach but comments were welcomed by 18 February 2019. On 19 March the Lord Chancellor commenced the first review of the discount rate under the new methodology introduced by Part 2 of the Civil Liability Act 2018. The Lord Chancellor now has 140 days to conduct the review, meaning determination about the rate will be made on or before 5 August 2019. See the Lord Chancellor's written statement, reaction from the ABI, and press coverage in the Insurance Post and the Gazette. The terms of reference for the Treasury (pdf) and the Government Actuary (pdf) are also now available.
Update - Small claims track limit increase. The first mention of the increase in the small claims track limit was in George Osborne's 2015 Autumn Statement. A lot has happened since then, including a Justice Committee inquiry in late 2017, and attempts throughout the passage of the Civil Liability Bill to challenge the proposals and/or incorporate them within the bill. The present position is that whilst not forming part of the Civil Liability Act 2018, it does form an integral part of the reform package which is all due to come into force in April 2020. The plan remains for the limit to be increased to £5,000 for RTA personal injury related claims and to £2,000 for all other types of personal injury claims, and this will be achieved through secondary legislation, which is expected to be introduced in the second half of 2019. On that, the Civil Procedure Rule Committee has just release the minutes of its December 2018 meeting. The Committee discussed the drafting of proposals for rule changes by the June 2019 meeting before testing of the online process is due to begin in the autumn. It was also agreed that the MoJ would produce a paper for the February 2019 meeting and that a CPRC subcommittee would be formed. Also this month, the MoJ published its latest civil justice statistics following which concerns have been highlighted about the increasing time it is taking for small claims track cases to come to trial, given that more claims are likely to fall within the small claims track under the reforms.
Update - Insurance Fraud. We have for some time been awaiting the government's response to Part 2 of its whiplash consultation which sought views on certain recommendations made by the Insurance Fraud Taskforce in its final report in January 2016. The latest news on that came in the government's response last July to the Justice Committee's small claims track inquiry, confirming that it was "currently working closely with stakeholders including from the insurance industry to take forward the IFT’s recommendations. Detail will be included in Part Two of the response to the whiplash consultation, which will be published shortly." Also last July, the Solicitors' Disciplinary Tribunal launched a consultation on whether to lower the standard of proof in disciplinary proceedings to the civil standard, a move which could be seen as a response to the IFT's recommendation to toughen action against dishonest solicitors. According to the Legal Services Board this month, a decision on this is expected by Easter. In December 2018, days after an article in the Insurance Post titled The mystery of the missing Insurance Fraud Taskforce report (subscription may be required), the government published its Insurance Fraud Taskforce Report 2017. The report sets out the progress made during 2017 on the original 26 recommendations, acknowledging that some matters had moved on and that the information in the report is accurate as at December 2017. This month, Cifas released new figures showing a marked increase in the number of individuals committing insurance fraud with false claims. It reports on a nationwide increase of 27% in fraudulent insurance claims between 2017 and 2018.
MedCo. In November, we reported on news from the Insurance Post (subscription may be required) that Medco had already started consulting over the creation of a 'litigants in person' portal on the back of the government's whiplash reform programme. In December MedCo published an Audit Progress Update containing a summary (pdf) of key findings from audits undertaken between January 2017 and September 2018. The Gazette reports on the update noting that "just three per cent of companies wanting to diagnose whiplash claims have been given a clean bill of health by auditors".
Update - Claims Management Regulation. After first being announced in March 2016, following the Carol Brady independent review of claims management regulation, the FCA will become the regulator of claims management companies on 1 April 2019. The FCA has done a significant amount of work in preparation for the transfer and has produced a comprehensive hub on its website, alongside a useful timeline (pdf) and a number of helpful video guides on how to prepare for FCA regulation. The MoJ has now published its final CMR Bulletin and the Financial Ombudsman Service has produced some Q&As in advance of them taking over responsibility for resolving complaints about CMCs.
Update - FCA activity. In addition to the work being done in relation to claims management regulation, at the end of November the FCA launched a general insurance market study setting out the issues it will focus on as part of a review into how general insurance (GI) firms charge their customers for home and motor insurance. An interim report is forecast for summer 2019. We also await details of the assessment of claims inflation in general insurance that was included in the FCA's 2018/19 business plan and was scheduled for Q4 2018/19. At the end of January, the FCA launched a consultation on general Insurance value measures data setting out proposals to introduce rules requiring firms to report value measures data for publication. In February, the FCA published its Wholesale Insurance Brokers Market Study final report, concluding that overall, the FCA did not find evidence of significant levels of harm that merit the introduction of intrusive remedies. Finally, this month saw the first meeting of the PRA and FCA’s joint Climate Financial Risk Forum. The objective is to build capacity and share best practice across financial regulators and industry to advance financial sector responses to the financial risks from climate change.
Update - Artificial intelligence in insurance and law. On 28 November the Department for Business, Energy & Industrial Strategy announced three new 3-year research projects, to be led by Loughborough, Sheffield and Oxford Universities, investigating how businesses can make best use of AI in insurance and law. The projects backed by £3m through the Industrial Strategy Challenge Fund will focus on (1) how AI can be applied to processes such as underwriting and claims processing, speeding up the process for customers (2) how AI can be put to use in legal services bringing academics, lawyers, businesses and programmers together to develop the skills, training and codes of practice to deliver benefits (3) future uncertainties about the roll-out of new AI technologies in accounting and legal services and analysis of potential barriers to AI-based business model innovation. Read more in Legal Futures. Last month, Business Secretary Greg Clark announced a project to develop breakthrough artificial intelligence technology for the anti-fraud sector. The artificial intelligence software will combine AI and voice recognition technology to detect and interpret emotion and linguistics to assess the credibility of insurance claims. It is one of a number of projects set to receive funding to enable the UK accountancy, insurance and legal services industries to transform how they operate. One of the other examples is an analysis tool which looks at images collected by drones to assess flood-damaged areas, using a 3D image recognition system to evaluate flood extent and depth alongside impacts on buildings and infrastructure to help with insurance claim assessments. This month Professor Richard Susskind spoke on the subject of AI at a Westminster Legal Policy Forum on Technology and the legal market. Read more in the Legal Futures article, Susskind: Lawyers wrong to think technology cannot replace them
Update - Briggs' Civil Courts Structure Review: HMCTS court reform. In July 2016, Lord Justice Briggs published his final report following his review of the structure of the civil courts. The headline recommendation was the introduction of an online court capable of handling claims with a value up to £25,000. A detailed summary can be found in the press release accompanying the report and Simon Denyer analysed the report at the time. The report was commissioned to coincide with and inform a wider, ambitious programme of court reform. An HMCTS webpage sets out the background to, and detail of the reform, along with helpful resources and updates on progress on more than 50 distinct projects. Earlier this month, HMCTS announced it was extending the completion date of the reforms by a year to 2023 - see the Gazette and Legal Futures for further comment. This month also saw news of the first video hearing featuring two remote litigants, as part of a pilot running in the Manchester County Court.
New - Riot compensation claims: new guidance. The Chartered Insurance Institute has this month launched a guide for the compensation of claims in the event of a riot. The new guide has been published to make the application of the Riot Compensation Act (RCA) 2016 as clear as possible for those handling claims. The ‘Riot Claims Handling Best Practice Guide' has been created in conjunction with the Home Office, with significant input from the ABI, Chartered Institute of Loss Adjusters, and the police. It sets out core procedures and technical guidance for handling compensation claims against local policing bodies fore riot damage. Read more in the CII news release which links to the guide and an accompanying report which sets out a high-level model for RCA claims management in the event of a large-scale riot, from preliminary planning stages through to claims handling and ongoing improvements to processes.
Update - SRA activity. Last July, we reported that personal injury claims featured in the SRA's risk outlook for 2018/19 as part of a new priority risk: managing claims. In the accompanying press release Paul Philip, SRA Chief Executive said, "... For the first time, we are highlighting how claims are managed as a key risk. This follows concerns over issues such as firms failing to properly check on the validity of personal injury claims…" The Autumn Update highlighted that they are still receiving reports of firms paying prohibited referral fees, and concerns that some holiday sickness claims are being submitted without proper analysis. Following the introduction of the new Transparency Rules in December, solicitors have this month been warned to expect the scope of the rules to be increased. Personal injury claims are not currently covered by the new rules, so this is an area to keep an eye on. There is also news this month that the SRA's plans to allow solicitors to practise from unregulated firms and enable freelance solicitors to do more will come into effect on 25 November 2019 and not this spring as anticipated. This follows further criticism of the plans and the LSB's role last month from the Law Society.
In the long grass?
Issues where there has been no activity for some time:
We recently moved QOCS and DBAs out of the long grass for now as it appears there are prospects for developments in these areas following the MoJ's post-implementation review of Part 2 of LASPO discussed further above and in Simon Denyer's February update. With no meaningful developments since September 2017 we had reluctantly moved CJC's NIHL claims handling proposals to the long grass but we are optimistic there may be developments here too with the anticipated fixed costs consultation.
NIHL claims: Government action. In June 2015 the ABI published its report Tackling the Compensation Culture: Noise Induced Hearing Loss, improving the claims system for everyone, which highlighted concerns about the increasing numbers and cost of NIHL claims. In response to those concerns the MoJ asked the Civil Justice Council to consider the issue and make recommendations. The CJC published its long awaited report in September 2017, although Jackson LJ had spoilt the surprise by announcing and endorsing the agreed fixed recoverable costs matrix as part of his own review (see Simon Denyer's review of the proposals). The new news then was the proposals for reform of the claims handling process. You can read more about the proposals in our comprehensive update. We also took the opportunity to comment on the handling of NIHL claims in the call for evidence in relation to holiday sickness claims and low value personal injury claims.
Legal services regulation: removing barriers to competition. In July 2016 the MoJ announced a consultation on proposals to reduce barriers to market entry, and regulatory burdens on Alternative Business Structures in legal services. Lord Faulks’ ministerial statement also mentioned the government’s intention to consider a further consultation on regulatory independence. The current consultation closed on 3 August 2016 but to date there has been no response, although in the interim the Legal Services Board published a report on its research into alternative business structures and investment in legal services. In December 2017, while responding to the CMA Legal Services Market Study, the government confirmed it would not be going ahead with a consultation on regulatory independence as it believes there is scope to make more progress within the existing framework.
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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.