Preparing the way

The Ministry of Justice (MoJ) published its final proposals on low-value road traffic accident (RTA) claims on 6 October 2009. Essentially, the MoJ has issued a detailed policy statement about the future handling of these claims '“ broadly speaking fast-track cases with a general damages element of under £10,000.

The delivery of the RTA process and the approach it sets out will be left to the Rule Committee and to the stakeholders involved '“ mainly claimants, solicitors and insurers. These stakeholders have, for the past two years or so, been in discussions with the MoJ about the details. It is expected that the rules and practice directions necessary to implement the scheme will be in place by April 2010, and that the scheme will apply to accidents occurring thereafter.

The MoJ has set out a staged, streamlined claims process relying on electronic information exchange and on decisions within tight time limits. For example, the insurer has to make a decision on liability within 15 days of notification, which is one sixth of the 90 days under the current pre-action protocol. Admitting liability on time is the key to the process. Claims will simply exit the process '“ and not return to it '“ in the event of denial, late response or no response.

Admitting liability is the first of three stages, each of which is distinct and which attracts stage-specific fixed costs. Stage II relates to collating evidence on quantum and to negotiation between the parties. A 'settlement pack' of heads of claim and offers and counter offers is developed by the parties, with the aim to promote settlement at this stage. Should the claim not settle, however, an application may be made to the court for a determination of quantum. Such a determination represents stage III of the process, and will normally be by way of paper hearing with specified elements of the settlement pack being reviewed by the court.

Fixed costs at each stage are cumulative, and are as follows: stage I £400; stage II £800; and stage III £250 (or £500 for an oral hearing). Standard disbursements are set out and fixed success fees will apply, being 12.5 per cent at stages I and II and 100 per cent at stage III (for stage III costs only). The maximum base costs for settled (i.e. non-litigated) claims of any value within the new scheme (up to £10,000 general damages) will therefore be £1,200, and for disputed claims £1,700. This is in contrast to the present fixed recoverable costs rules for settled claims which allow, for example, base costs of £1,400 on a £3,000 claim and of £1,950 on a £6,000 claim. (Further examples are provided in the table below).

So, the proposals seem to reduce costs dramatically, particularly with regard to claims of higher values within scope. One might therefore ask what the benefits might be of the new process for practitioners?

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Changes and challenges for practitioners

First, the question above is probably framed too narrowly. One of the stated aims of the MoJ's first consultation about the RTA claims process in 2007 was to reduce costs in the broader public interest, and the evidence suggests it will achieve that.

Second, as the process is essentially a liability-admitted model, certain aspects of claims work relating to liability issues should no longer have to be done, with a consequent reduction in costs. This liability-admitted setting is valid: statistics from the Compensation Recovery Unit serve as a proxy for successful claims and show that the success rate in motor claims in 2005-09 is, year on year, within a single percentage point of 90 per cent.

The very necessary check and balance with regard to liability work not being carried out in anticipation of a quick admission is that should it be late, there be no response, or a denial, then the claim falls out of the process and conventional costs provisions will apply from then on.

This new process represents a real challenge to current business models for both claimant and defendant practitioners. The costs for the claimant side are clearly lower than at present, and at first sight on the defence side the involvement in the handling and litigating of claims looks potentially reduced.

With implementation due next April, there is just about enough time for practitioners to review, and to change, how these claims are processed. Those who can adapt to the quick timetables and to the electronic sharing of claims information will thrive.

In so doing they will position themselves smartly in anticipation of the likely recommendations of Lord Justice Jackson's review, which may well include fixed costs across all fast-track injury claims. The advent of alternative business structures and external ownership of firms '“ both very probably within a year of Jackson '“ will further accelerate the pace of change in how firms handle modest value injury claims and how they are rewarded for that work.

So, the claims landscape is evolving fast. Practitioners need to understand fully the forces and interests at work and seek to adapt to the new environment '“ Darwinism at work in injury litigation, perhaps?