5 February 2013Print This Post

Insuring part 36 risks after April

Posted by Carolyn Holmes of Litigation Futures sponsor TheJudge

Settlement: will part 36 rules encourage more?

Kain Knight recently hosted a seminar to discuss the Jackson reforms and the effect they will have once implemented, via the Legal Aid, Sentencing and Punishment of Offenders Act (LASPO), in April.

Although this meant much of the seminar discussed various hypotheses, the explanations given by the keynote speakers helped to provide clarity on a number of issues surrounding the reforms. The seminar also confirmed the general consensus that there are areas of the reforms which remain shrouded in uncertainty.

Simon Browne QC from Temple Garden Chambers gave an extremely helpful breakdown of the effects of section 55 of LASPO on part 36 offers. Mr Browne said “the present rules aren’t being changed, they are simply being added to”, and that they “create additional benefits to a claimant due to the sanctions on a defendant in certain scenarios”.

For example, if a claimant matches or beats their own part 36 offer at trial, then the court may award an additional 10% of damages or 10% of costs to the claimant (subject to a cap). The policy reasons behind this are to encourage the defendant to make reasonable part 36 offers and for more cases to settle before trial.

Of course, the current risk of having to pay the defendant’s costs would still 1D0-420 apply if that offer was not exceeded or matched. Yet, given that some after-the-event (ATE) insurance policies can cover failure to beat part 36 offers, perhaps this might not be such a strong deterrent after all.

What Mr Browne made clear is that the transitional provisions, which as yet are unknown, will be vital as to whether this reform is a success in practice.

Richard Banks of Kain Knight discussed the effect of qualified one-way cost shifting (QOCS), which are not part of LASPO but requires amendments to the Civil Procedure Rules. From April onwards, QOCS will apply to personal injury and clinical negligence litigation. It means that a successful claimant will be able to recover their costs from an unsuccessful defendant; however a defendant cannot recover costs from an unsuccessful
074-679 claimant, subject to the following exceptions:

  • If claimant is found to be fraudulent;
  • If the claim is struck out; and/or
  • If claimant has failed to beat a defendant’s part 36 offer.

Therefore, although QOCS was designed to reduce the need for ATE insurance in personal injury and clinical negligence litigation, there is still a risk that claimants could be liable for adverse costs. Without adverse costs insurance, there is a concern that we may see claimants accepting a part 36 offer at a significant undervalue. Consequently, many providers are creating products which will cover this risk. Although ATE insurance premiums will no longer be recoverable, the reasonable pricing of premiums will enable claimants to protect themselves from significant adverse costs orders.

The points raised by this seminar highlight the importance of knowing what products will be on the market after April to cover part 36 risks. At the moment, we are waiting to hear what insurers will offer in terms of coverage and how they will set the premium rates.

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