The NIHL bandwagon: do you really want to jump on for the ride?

Holland: NIHL work can be a high indemnity risk

Posted by Zoe Holland, managing director of Litigation Futures sponsor Zebra Legal Consulting

Whichever way we turn, new noise-induced hearing loss (NIHL) departments within personal injury firms are cropping up around the country. In a similar vein to clinical negligence, firms are looking to NIHL work as a shiny new apple to replace lost income from fast-track RTA.

This raises the blood pressure. It is not as easy to manage this specialist area of work as some might think. In fact, if not managed correctly, it can become a costly drain on cash flow and also quickly become an area of high indemnity risk.

Last week the Court of Appeal handed down its judgment in Malone v Relyon Heating Engineering Ltd [2014] EWCA Civ 904, a noise-induced hearing loss case. In a significant decision on limitation, the Court of Appeal dismissed the claimant’s claim and provided helpful guidance on the correct approach to the exercise of the court’s section 33 discretion to disapply the limitation period.

Indemnity risks

As independent auditors, we see where limitation is often an area where inexperienced firms get out of their depth. On a recent due diligence process on a small department, 27% of the firm’s cases were at risk of negligence for a failure to properly consider limitation. Malone v Relyon is set to increase this risk even further.

Considering limitation at the outset is a key part of the case selection and screening process. Knowing the right questions to ask from the start comes with skill and experience.

During the investigation stage, identifying the correct defendant to sue is critical. This can be fraught with challenges. Defendant(s) might no longer exist and identifying their insurer can be problematic. Our largest concern is where fee-earners fail to fully understand what action they need to take to maximise the claimant’s position/prospects of succeeding if the defendant has ceased to exist or is in receivership/liquidation or bankruptcy. In experienced departments, we see where adverse costs orders are on the increase.

Evidence gathering, if poorly undertaken, can result in under-settling as well as poor risk assessment, meaning that low prospect cases are managed badly for too long.

Risk trends

Our audit data reveals trends within inexperienced firms. Our top list categories are:

  • Poor assessment of limitation;
  • Lack of knowledge and poor assessment of defendant issues;
  • Lack of understanding of apportionment;
  • Lack of understanding of the mechanism of the injury;
  • Poor witness statements;
  • Use of experts without the requisite skill and knowledge;
  • Lack of knowledge of divisible and non divisible injuries; and
  • An inability to assess the complexity scale of the work.

In light of the appeal court’s decision, the decision by firms to jump on the NIHL band wagon needs some pause for thought.

We are increasingly asked by banks to assess this area in ‘new to bank’ and additional funding requests at an early stage in the department set-up. It is the heightening concern about indemnity risk that is very much on the agenda.

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