PI claims - Industry rounds on MoJ proposals

Proposed changes to the PI claims process by the government have come in response to the consultation paper Case-Track Limits and the Claims Process for Personal Injury Claims.

The small-claims limit will remain at £1,000, while the fast-track limit will rise to £25,000. Liability for road traffic accidents will have to be responded to by insurers within 15 days.

The industry's reaction to the report has been damning and many have accused the government of caving into pressure from the unions and missing out on a great opportunity for radical reform, especially over rehabilitation. Another overlooked prospect has been the failure to introduce transparent guidelines for the costs involved for items such as claimant lawyers' expenses and referral fees.

John Bell, head of claims at Aon Risk Services, was scathing: "After lengthy delays, (the report) has now been delivered late and so watered down as to be almost unfit for purpose. All reform has been limited to injuries following road traffic accidents. Costs and time limits for all other employers' and public liability claims are unchanged and the government has turned its back on the possibility of sea-change reforms to tackle the burgeoning compensation culture for businesses."

Zurich is particularly concerned about the role of legal cost negotiators acting on behalf of solicitors to manage bills and the insurer has started to run some cases against them in order to reduce what it sees as disproportionate legal costs associated with the PI system. In May 2008, Zurich took Delta Legal to court in Anthony Ramsay & others v. Instore Plc and others. The judge concluded that Delta Legal had exaggerated its claims for costs and, as a result, the negotiator withdrew five bills of cost. Andrew Parker, head of strategic litigation at Beachcroft, acted with Zurich and told PB that the government's proposals failed to help claimants or produce transparency over costs. This view was shared by Peter Ashdown Barr, chief executive of InterResolve, who said that insurers will take matters increasingly into their own hands when trying to cope with the costs involved.

Simon Evans, partner at Cardiff-based law firm Dolmans - specialists in public liability claims - criticised the status quo regarding after-the-event premiums: "To do nothing about the excessive claimant costs, those of ATE premiums, and to allow recovery of those fees before a defendant even knows the case it has to meet and has had a chance to respond, is very disappointing."

The government said that its proposals would have a great impact on claims for road traffic accidents, which account for around 75% of PI claims. Bridget Prentice, parliamentary under-secretary of state for the Ministry of Justice, said: "Having carefully considered the proposals, the government has decided to establish a new claims process that will apply to RTAs valued between £1,000 and £10,000. This new streamlined procedure provides for early notification, promotes early admissions of liability and settlements and removes duplication."

Government aims

The government has advocated a streamlined procedure for the early notification of claims of between £1,000 and £10,000 for road traffic accidents, which accounts for around 75% of all RTA claims; it believes that the process promotes early admissions of liability and early settlements and removes duplication of work from the process.

- The small-claims limit will remain at £1,000.

- The fast-track limit will be increased to £25,000.

Employers' liability and public liability cases are not included in the new process, which is restricted to RTA cases that incur claims of under £10,000. Insurers have 15 days to respond regarding liability for RTA cases with no extensions.