26 November 2012Print This Post

Defendants dismiss 20% escape risk and say insurers should save £1,000 per case post-April

Thomas: concern over disease claims

Defendants should not worry too much about the risk of claimants triggering the 20% ‘escape’ in the proposed new fixed costs regime, it has been claimed.

Meanwhile, a top defendant lawyer has calculated that the end of recoverability and the new fixed fees should save insurers £1,000 on each routine claim that settles without litigation.

After a claimant costs lawyer suggested last week that the lower fees would make it easier to use the 20% escape, Steve Thomas, director of market affairs at leading defendant firm Keoghs, noted that the current escape from fixed recoverable costs contained in CPR 45.12 and 45.13 requires “exceptional circumstances” and the discretion of the court.

In a client briefing, he wrote: “The key here is the word ‘exceptional’ and history confirms that such a mark-up has only been allowed on very rare occasions. For almost all low-value personal injury claims, this aspect of the table can be ignored and calculations based upon the fixed costs only.”

More generally, Mr Thomas welcomed the Ministry of Justice’s proposed fee levels, but suggested that they may promote the use of damages-based agreements to supplement the level of the fixed fee.

“We do remain concerned that financial incentives remain to litigate and such potential behaviour must be monitored closely as claimant lawyers seek to recover revenue,” he said.

Mr Thomas added that Keoghs has been in touch with the Ministry of Justice regarding disease claims and the statement in minister Helen Grant’s letter to stakeholders that Table B will apply to claims “which exit the protocol process”. He explained: “As many disease claims will not enter that process and so, by definition, cannot exit it, we have flagged immediate concern that the drafting is loose and open to interpretation by the claimant lobby.”

Meanwhile, Anthony Hughes, partner and chief executive of insurance litigation law firm Horwich Farrelly, admitted that the proposed figures are lower than he expected and so he was not surprised that organisations such as the Association of Personal Injury Lawyers are already talking about a judicial review. “If nothing else that would at least flush out the basis for the level of fees that have been set, which has been very opaque to date.”

He continued: “A lot of emphasis has been placed upon the ban on referral fees which I'm afraid in my personal opinion is a red herring and indeed my understanding of the recommendations made by Lord Justice Jackson was that he had ignored the issue of referral fees when making his recommendations regarding the appropriate level of fixed costs albeit these have now been significantly discounted.

“The claimant community will undoubtedly be feeling very sore about this. However, they are an ingenious bunch and my suspicion is that once they have dusted themselves down they will simply adjust their business models and look to ways in which they can continue to operate successfully and indeed maximise opportunities.”

Mr Hughes, a former president of the Forum of Insurance Lawyers, said he feared that driving fees down to a level beyond a ‘tipping point’ will change claimant lawyers’ behaviour and encourage them to be far more adversarial than has been the case since the introduction of the portal.

He added: “There is no doubt that insurers ought to be celebrating. My estimation is that this reduction in costs and the removal of recoverability for both success fees and after-the-event insurance policies will mean that they ought to save over £1,000 per case on routine claims which settle without litigation. The question is, how many can they keep out of litigation in the brave new world?

“Some commentators are already suggesting that this will see a 75% reduction in third-party costs paid by insurers in personal injury cases per se. I do not think that that is wide of the mark so no doubt we can all see cheaper insurance premiums on the horizon.”

By Neil Rose