piBlawg

the personal injury and clinical negligence blog

A collaboration between Rebmark Legal Solutions and 1 Chancery Lane

Government Whiplash Reforms - On Hold?

The Law Society Gazette is reporting that the Justice Secretary is not intending to proceed with the personal injury reforms set out in last year’s Autumn Statement “at the moment”. We blogged on those proposals at the time here which, as a reminder, were that the small claims track limit should be raised to £5,000 and the removal of the right to general damages for minor soft tissue injuries. Apparently the MOJ has stressed that it is still committed to tackling the high cost of whiplash claims. The Gazette reports that fresh proposals are in the works and could be introduced by the end of the year. It seems the original proposals came very much from the Treasury rather than the MOJ so it will be interesting to see what the MOJ’s solution is. Hopefully they will find a formula which will satisfy everyone by effectively tackling fraud while maintaining access to justice. As ever, watch this space for updates.

Claims of alleged fraud not exempt from Denton

“The court cannot ignore that insurers are professional litigants, who can properly be held responsible for any blatant disregard of their own commercial interests.” - Gentry v Miller & Anor [2016] EWCA Civ 141 at 34. Such was the warning sent to insurers by the Court of Appeal earlier this month in allowing a Claimant’s appeal against a decision to set aside default judgment in what the Defendant’s insurer alleged was a fraudulent claim. The Facts The Claimant, Mr Gentry, alleged that he was in a road traffic accident with a Mr Miller on 17th March 2013 in a claims notification form valuing the claim at under £10,000. On 2nd April 2013 Mr Miller’s insurer admitted liability. On 8th April the Claimant’s solicitors wrote requesting immediate payment of the pre-accident value of his car (being £16,000) and warning that until that was received he was hiring a replacement vehicle under a credit hire facility. Proceedings were issued against Mr Miller alone on 3rd July and on 8th August the Claimant obtained default judgement. At no point in this period did the insurer instruct solicitors and it replied to only one of seven letters. In late August the insurer made a voluntary interim payment of £14,000 and a Part 36 Offer of £1,870. A further interim payment of £2,000 was ordered in September and paid. At a disposal hearing on 17th October 2013, DJ Benson awarded the Claimant damages of £75,089 consisting mostly of hire charges. On receipt of notification of this award the insurer instructed solicitors who, on 25th November, issued an application referring to CPR 13.3 (1). On 10th February 2014 those same solicitors applied to come off the record for Mr Miller, to add the insurer as the second defendant and to set aside both the default judgment and the order of 17th October. For the first time they alleged that Mr Gentry and Mr Miller were well known to each other and that the claim was a fraud. The application to set aside was granted by DJ Henthorn on 17th March 2014 and on 4th February 2015 Mr Recorder Gregory (as he then was) dismissed the Claimant’s appeal. The decision of the Court of Appeal The Court of Appeal considered the applications under CPR 13.3 and 39.3. In relation to the former Vos LJ was satisfied that the Defendant had demonstrated that it had a real prospect of successfully defending the claim but had to consider under CPR 13.3 (2) whether the application was made promptly. The delay to the application of 25th November was inexcusable. In particular Vos LJ noted that the insurer: Failed to adduce any evidence of its postal systems to explain how documents might not have reached it; Must have been aware after admitting liability at the beginning of April 2013 that it was at risk if it did not defend or attempt to settle the claim; Did not instruct solicitors or investigate fraud in the seven months after that admission; Was repeatedly warned of hire charge risks so that the suggestion that it believed the claim to be small and therefore impliedly not worth investigating did not hold water; In ignoring those warnings allowed the claim to grow; While not notified of the default judgment of 8th August as promptly as it might have been, clearly knew that proceedings were on foot when it made a Part 36 offer on 22nd August; Must also have been aware of proceedings when it paid the interim payment ordered by the court; Upon receiving costs schedules on 19th and 23rd September sent “ahead of the upcoming application hearing”, made no enquiry as to what that hearing was about. The court’s analysis then continued by application of the Denton test. It was common ground that Mr Miller’s default in not filing an acknowledgment of service was serious or significant. The fact that it was not served with the proceedings gave the insurer some reasonable excuse or explanation but it could and should have protected itself when it knew proceedings were being issued by appointing solicitors to accept service on behalf of Mr Miller. Finally, looking to all of the circumstances and in particular factors a) and b) it was held that “insurers are in a particularly good position to conduct litigation efficiently and proportionately and to comply with rules and orders”. It cannot avail an insurer who knows the risk from the moment it admits liability to say it was not a party at the time. The application under CPR 39.3 to set aside the order of 17th October, despite the insurer having notice, (although not a copy), of that order since 25th October, was not made until 26th February 2014. It had not been made promptly and therefore, even if the insurer could show it had a good reason for not attending the trial and a reasonable prospect of success, the application could not be granted. Again, it would in any event probably have failed the third stage of the Denton test. Key Lessons There are two key lessons for insurers arising out of this decision. The first is the reminder at the start of this post that insurers will be treated as professional litigants capable of protecting their own interests. The second is that a credible allegation of fraud is not a trump card. When weighing the competing policy interests of the desirability of testing the allegation of fraud against the requirement that there be finality of litigation, the latter at least can outweigh the former. At some point the insurer must be left to bring its own action in relation to the fraud.

Autumn Statement for PI Lawyers

The government has released a summary of the Autumn Statement with 20 Key Announcements, the last of which will be of great interest to personal injury lawyers. It reads as follows: “20. People will no longer be able to get cash compensation for minor whiplash claims To make it harder for people to claim compensation for exaggerated or fraudulent whiplash claims, the government is ending the right to cash compensation. More injuries will also be able to go to the small claims court as the upper limit for these claims will be increased from £1,000 to £5,000. This means that annual insurance costs for drivers could fall by between £40 to £50 a year.” George Osbourne anticipates these changes “will remove over £1bn from the cost of providing motor insurance” and expects insurers to pass on that saving to consumers. There had already been speculation over the last week that the government was going to introduce its previously shelved plan to increase the small claims limit for personal injury claims when the insurance fraud taskforce reported next month. What is surprising though is the reference to “ending the right to cash compensation”. It is as yet unclear what it meant by this. Footnote 55 to the Autumn Statement gives some clarification by explaining that “Claimants will still be entitled to claim for ‘special damages’ (including treatment for any injury if required and any loss of earnings) but entitlements for general damages will be removed.” It will be interesting to see though how it will be decided that a case falls into the category in which there is no entitlement to general damages. Elsewhere in the Autumn Statement is a statement that the government will reduce the excessive costs to insurers of whiplash claims by “removing the right to general damages for minor soft tissue injuries”. This would seem to cover more than just whiplash injuries. There may also be interesting arguments where multiple injuries are involved. These problems are unlikely to be straightforward and may result in substantial argument, inevitably using court time. It seems likely we will have to wait for the report of the insurance fraud taskforce, due before the end of the year, for further details.  Keen readers who can’t wait until then might be interested in the research briefing published in advance of last Wednesday’s debate in Parliament. Otherwise, watch this space!

Stroke Caused By Beauty Facial Case Settles

Claims against negligent beauticians and the like are not altogether uncommon. The injuries tend to be dermatological in nature consequent of some allergic reaction to an untested product. But who would have thought it possible, let alone likely, for someone to suffer a stroke as a result of a beauty facial treatment? Tragically that is what happened to Elizabeth Hughes after her visit to the spa at the Eastwell Manor Hotel. What should have been a weekend treat resulted in a serious stroke that left her disabled for life. Her claim, which otherwise would have been tried in the High Court this week, settled for an undisclosed amount. How did it happen? The medical experts on both sides were agreed that the stroke occurred as a result of a dissection to the carotid artery. The dissection was in all probability caused when beauty cream was massaged onto the sides of her neck by the beauty therapist. The issue was whether she was negligent or had applied an excessive degree of force. Unlike sports injury or deep tissue massages, where there are reported cases of stroke, this was a novel situation. This type of injury had not been encountered previously by beauty therapists. Mrs Hughes who was employed by the NHS as a nurse was left significantly disabled. Her disabilities prevented her from returning to employment in the nursing sector. The case has been watched closely by the beauty industry and the press. (http://www.mirror.co.uk/news/uk-news/nurse-disabled-stroke-after-allegedly-6798935) Elizabeth Hughes was represented by Edward Bishop QC and Kiril Waite at 1 Chancery Lane, instructed by Ciaran McCabe at Moore Blatch Legal Resolve.

Delaney v Secretary of State for Transport - the “crime exception" is contrary to EU law

The High Court has held that the “crime exception", contained in clause 6(1)(e)(iii) of the Uninsured Drivers' Agreement 1999, is in breach of the United Kingdom's obligations under the EU Motor Insurance Directives and that the claimant is entitled to Francovich damages as a result therof ([2014] EWHC 1785 (QB); see www.bailii.org/ew/cases/EWHC/QB/2014/1785.html).   Given the widespread implications for both insurers and the State, it is likely this decision will be subject to appeal.    

Fighting Fraud - paying off for motor insurers and their customers?

Recent growth has been seen in the litigation market in the field of allegations of fraud in road traffic accident cases. Insurers (particularly certain insurers) have latterly been far more confident in fighting claims where there is good evidence of something untoward: dishonesty, such as contrived accidents, phantom passengers or exaggerated medical symptoms.   This strategy appears to be working. Miles Costello in The Times' Business Section reported yesterday that an analysis by EY of Britain's motor insurers annual profits to March 2014, shows they paid out less in claims than they received in premiums for the fist time since 1994. The article however quite properly cites other reasons for this, such as the ban on referral fees and restructuring of the fees recoverable under "new" CFAs. The knock-on effect has been felt by the motorist - this time in a good way - with a 16.6 per cent drop in premiums over the last year to March.   It would be interesting to see if this trend continues. Certainly as the new costs provisions become the norm, it is likely to. The effect of allegedly to be tighter "rules" for diagnosing whiplash injuries (if brought in) are likely to reinforce it as are bans on "distasteful" advertising and incentives such as free tablet computers and cash advances promised to potential claimants. 

Can a Defendant be required to disclose information about its insurance position? A recent decision with a sting in the tail

Any practitioner who has had to grapple with the issue posed in the title to this article will have come to realise that there are two conflicting decisions on the point.       In Harcourt v Griffin (2007) EWHC 1500 (QB), liability was admitted in a multi-million pound personal injury claim. The claimants expressed doubts about the wealth of the Defendants and made a request under CPR Part 18 to elicit the extent of any insurance cover.  Irwin J concluded that the court had power pursuant to CPR 18 to order a defendant to provide this information.   By contrast, in West London Pipeline v Total (UK) (2008) EWHC 1296, a £700m claim for property damage arising out of the Buncefield explosion, David Steel J took a very different view. He concluded that neither CPR 31 nor 18 gave the court power to disclose a copy of, or information about, a Defendant’s insurance policy.  He cited a number of earlier Court of Appeal and High Court decisions which had not been placed before the Court in Harcourt and suggested that Irwin J’s decision might well have been different if they had been.     In X, Y and Z v Various (2013) EWHC 3643 the Court was concerned with a huge group action (in excess of one thousands Claimants) bringing claims for personal injury caused by defective breast implants, an issue which received wide-spread publicity in the news. The claimants had serious concerns about the financial position of one of the Defendants and submitted that unless it had adequate insurance i) successful claims against it would not be met and costs (all incurred under CFAs) would not be paid and/or ii) the relevant defendant would collapse before or at the time of trial, with obvious consequences for the timetable and the resolution of the other claims.   Thirwall J (who is case-managing the breast-implant litigation) agreed with David Steel’s analysis of the power to order disclosure under CPR 18. She concluded that “the insurance position of the defendant is not a matter in dispute in these proceedings. Information about it does not relate to any matter in dispute”.   However, the Claimants had also sought disclosure of the same information under CPR 3.1(2)(m), which provides:   “except where these rules provide otherwise, the court may…take any…step or make any…order for the purpose of managing the case and furthering the overriding objective”.     The Defendant argued that this rule could not possibly be used to achieve, through the back door, that which was not possible under CPR 18 or 31. Parts 18 and 31 of the CPR were, the Defendant submitted, a “comprehensive and complete code which regulates the obtaining and use of documents and other information in civil litigation”.   Thirwall J disagreed. She concluded that whilst she should not order any information about whether the Defendant had sufficient funds to i) meet any order for damages and ii) meet any order for costs, she would order it to disclose whether it had sufficient funds to cover its participation in the litigation to the end of trial. This was a matter going directly to case management of the group litigation since if she were to “revise the directions now and it later transpired that (the Defendant) had been adequately insured all along, the litigation would plainly have consumed (indeed wasted) more than its appropriate share of the court’s resources for no good reason”.   One cannot help but feel some sympathy for the Defendant’s position. Some 6 pages (of 7) of Thirwall J’s judgment were devoted to the question of disclosure under CPR Part 18, in respect of which the application was roundly dismissed. To have allowed the application under an extremely broad ‘catch-all’ provision dealing with case-management plainly left a bitter taste in the mouth.   Nonetheless, the significance of the decision should not be overstated. The order was expressly limited only to information relevant to the Defendant’s financial position to the end of the trial. This was perhaps uniquely relevant in the context of huge group litigation with a total value of £13m. In smaller, single party claims it seems unlikely that there will be any equivalent necessity for the disclosure of such information. Information relating to the Defendant’s ability to meet a judgment or pay costs after trial remains effectively ‘out of bounds’.