This month, although the national news was dominated by the installation of Boris Johnson as the new Prime Minister, the big news in the insurance claims handling world was the announcement of the new personal injury discount rate at -0.25%, which the ABI called "bad news for insurance customers and taxpayers" but which claimants and their advisers welcomed. The ABI wrote to the Lord Chancellor to object to the misleading nature of the government's Impact Assessment, and the month ended with news that the recent trend of falls in the cost of motor insurance had stalled.
As the parliamentary recess began on 25 July, it became apparent that the MoJ seemed unlikely to respond to the consultation on the Future Provision of Medical Reports in Road Traffic Accident related personal injury claims, despite promising to do so by the end of July (although technically there is still time for it to appear today). Nigel Teasdale has provided a helpful roundup of recent developments in relation to the various interlinking aspects of the reforms and yesterday an MIB update event took place where there was a live demo of the online service that has been built so far.
Also approaching the end of term, the Supreme Court cleared the decks by handing down a number of judgments including decisions in Cape v Dring and X v Kuoni. Next term will see the hearing of two highly anticipated vicarious liability appeals in Various Claimants v Barclays Bank Plc and Various Claimants v Wm Morrisons Supermarket.
Finally, with relatively little fanfare, a statutory instrument was laid, rectifying an inconsistency between the Motor Insurance Directive and the Road Traffic Act 1988 so that insurers will no longer be able to rely on having avoided a policy after an accident to deny compensation under the RTA to third party victims.
We look at these developments below, along with our usual round up of forthcoming cases, and other issues on the horizon.
Update - Asbestos related disease: disclosure. The appeal in Cape Intermediate Ltd v Dring (for and on behalf of Asbestos Victims Support Groups Forum UK) took place in February. At the previous hearings, the issue was the extent to which the court should grant access to documents by non-parties. After the Court of Appeal hearing, Cape appealed arguing that the disclosure ordered was still too wide, and the Forum cross-appealed saying it was too restrictive. In a judgment handed down on 29 July, both appeals were dismissed with the UKSC upholding the Court of Appeal's order, and remitting the case back to the High Court to determine whether there should be further disclosure. The case has wider implications around the scope of CPR r.5.4C(2) and the principle of open justice. Read more in the Law Society Gazette.
Update - Package holidays: vicarious liability. The appeal in X v Kuoni Travel Ltd was heard on 1 May 2019. The case concerns the extent to which a tour operator can be liable for a sexual assault carried out by an employee of one of its supplier hotels, and the appeal considered issues around breach of contract and/or Reg 15 of the Package Travel, Package Holidays and Package Tours Regulations (SI 1992/3288). In a judgment handed down on 24 July, the Supreme Court has decided to refer two questions to the Court of Justice of the European Union concerning the Directive implemented by the above Regulations, specifically in relation to the question of whether any liability of Kuoni is excluded.
Non-party costs: insurance companies. In XYZ v Travelers the issue is: where a liability insurer was contractually obliged to indemnify its insured against the costs of defending claims against it by third parties, in what circumstances is it appropriate to make an order pursuant to s.51 of the Senior Courts Act 1981 the effect of which is to impose on a liability insurer, an extra-contractual liability to pay those third parties’ costs of bringing the claims? The hearing took place on 11 June 2019 and judgment is awaited.
Solicitors' negligence: measure of loss. In Edwards v Hugh James Ford Simey (a firm)the issues are: in what circumstances is the principle of full compensation engaged? and, to what extent should a court admit evidence which was obtained after the date of settlement of the original claim when determining whether a claimant has suffered loss? The hearing took place on 25 July 2019 and judgment is awaited.
Supreme Court cases awaiting developments. No further permission to appeal applications have been published this month. Below are cases which await further official developments following permission to appeal being granted:
Halliburton v Chubb Bermuda Insurance Ltd & Ors – where the Court of Appeal considered whether an arbitrator may accept appointments in multiple references concerning the same or overlapping subject matter, and whether and to what extent he may do so without disclosure.
Update - The vicarious liability case, Various Claimants v Barclays Bank Plc arising from the alleged sexual assaults of employees committed by a doctor in the course of medical examinations carried out at the request of the employer bank. Deans Court Chambers have reported that the hearing will take place on 28 November 2019.
Doughty Street Chambers reported in March that permission to appeal has been granted in Henderson v Dorset Healthcare University NHS Foundation Trust on the question of how the illegality defence operates in the law of tort. The case now appears in the recently published permission to appeal lists.
Update - The data leak/vicarious liability case of Various Claimants v Wm Morrisons Supermarket.The central issue at the previous hearings has been whether an employer is liable in damages to those of its current or former employees whose personal and confidential information has been misused by being disclosed on the web by the criminal act of another employee. The hearing of the appeal is due to take place on 6/7 November 2019.
Stoffel & Co v Grondona a solicitors' negligence case involving mortgage fraud. Permission to appeal has been granted on ground only: whether the Court of Appeal erred in the application of the Patel v Mirza guidelines. Read more in our update on the Court of Appeal decision last year.
7KBW reported in May that permission to appeal has been granted to MMI following this month's Court of Appeal decision in Equitas Insurance Ltd v Municipal Mutual Insurance Ltd concerning the 'spiking' of mesothelioma claims in reinsurance claims. Chambers anticipate that the case will be heard in the first half of next year.
Permission to appeal has been granted in S&T (UK) Ltd v Grove Developments Ltd which concerns 'smash and grab' adjudications. Read more on the background in our update on the Court of Appeal decision last November.
Court of Appeal
Update - Procedure: service of claim form. An appeal in DDM v Al-Zahra (PVT) Hospital & Ors was heard in March and concerned a challenge to the granting of an extension of time for service of a claim form. In a judgment handed down on 27 June, the appeal was successful, so that the extension of time was overturned and service on the defendants was set aside. Read more in the Law Society Gazette.
Update - Costs: ATE premiums. The long awaited appeals in Demouilpied v Stockport NHS Foundation Trust and West v Stockport NHS Foundation Trust took place in June and were livestreamed on the Court of Appeal YouTube channel. They concern reasonableness and proportionality in relation to block rated ATE premiums which are still recoverable in clinical negligence claims. In a judgment handed down on 17 July the Court of Appeal overturned the previous decisions reducing the premiums and provided further guidance. We look at the decision in our update, Court of Appeal guidance on "new" proportionality test & recovery of ATE premiums.
Note: The case of Percy v Anderson-Young is a pre-April 2013 RTA case on a similar point. This case was due to be fixed after the appeal in Demouilpied and we await further details.
Update - Catastrophic injury: accommodation claims. At a personal injury assessment of damages hearing last year in Swift v Carpenter, the judge considered herself bound by Roberts v Johnstone in relation to the quantification of accommodation claims, and given the current negative discount rate made no award. The appeal on 23 July was highly anticipated in light of the newly announced negative discount rate -0.25%. However, in response to the claimant's application to adduce further evidence the Court of Appeal took the opportunity to adjourn the matter to consider the wider implications. Richard Viney, appearing in the case for the defendant has reported that the appeal has been fixed for three days beginning 24 March 2020, and expert evidence has been allowed in four disciplines: IFA, chartered surveyor/valuer, economist and actuary. The recordings of the livestreamed hearings can be viewed here: Part 1 and Part 2.
Procedure: legal professional privilege. The case of Addlesee & Ors v Dentons Europe LLP looked at the issue of legal professional privilege concerning the documents of a dissolved company. The appeal was heard on 23 July 2019 and judgment is awaited.
The following consultations await official responses
If any client wishes to request any DWF consultation responses referred to below they can do so by emailing firstname.lastname@example.org
Motor insurance: implications of ECJ Vnuk ruling for UK legislation. Although the government has never formally responded to its December 2016 consultation Motor Insurance: consideration of the 'Vnuk judgment' we know that its preferred option was for the Motor Insurance Directive to be amended in a way to avoid having to broaden the scope of insurance requirements to reflect the decision in Vnuk. As attention has now turned to the European Commission's proposal to amend the Directive we consider developments below under "Legislation".
Update - Personal injury discount rate: call for evidence. In advance of the first review of the discount rate under the new Civil Liability Act methodology, the MoJ issued a call for evidence seeking up-to-date data and information on a wide range of topics including in particular, investments available to claimants, investment advice provided to claimants, investments made by claimants and model investment portfolios. The Government Actuary's Department then issued a technical memorandum setting out the analytical approach they proposed to adopt as a part of the first review. As the outcome of the first review has now been announced, we consider developments below under "Also on the horizon". For completeness, the MoJ has published the summary of responses to the call for evidence alongside an impact statement and the Lord Chancellor's statement of reasons. The GAD has also published its advice to the Lord Chancellor.
Update - Reforming the soft tissue injury (whiplash) claims process - Part 2. In February 2017 the government published the first part of its response to its November 2016 consultation, Reforming the soft tissue injury (whiplash) claims process, and has since incorporated its whiplash reforms within the Civil Liability Act 2018. In the meantime, a second part to the consultation response is still awaited and is due to look at the outstanding proposals including, the Insurance Fraud Taskforce recommendations, credit hire and rehabilitation. This month, the MOJ responded to a written question asking when the Government's response to Part 2 of the consultation response is due to be published, saying "The Government is considering the issues raised in Part 2 of the consultation paper Reforming the Soft Tissue Injury (whiplash) Claims Process and intends to publish its response by the end of this year". Read more in the Gazette.
Review of low value personal injury claims including package holiday claims. The October 2017 call for evidence on measures to address holiday sickness claims resulted in the introduction of the new Pre-action protocol for resolution of package travel claims along with fixed costs which came into force in May 2018. The call for evidence also invited views on low value claims more generally, and the MoJ asked the Civil Justice Council to consider steps that might be taken to prevent unmeritorious claims and to resolve meritorious ones more quickly and with reduced costs. A cross industry working party met for the first time in May 2018 to identify areas of focus including CMCs, fraudulent behaviour, processes, MedCo and expert evidence generally, ADR, the portal, sanctions and technology. The group was due to report on those areas to the CJC in summer 2018. The synopsis of the CJC meeting (opens in pdf) in October 2018 reported that "The final report on Low Value PI Claims was nearing completion and would be ready for the January 2019 meeting." We await further news.
Review of Fixed Recoverable Costs. Jackson LJ published his Review of Fixed Recoverable Costs in July 2017. His recommendations were to extend fixed costs in claims worth up to £100,000 along with the remaining fast track cases not yet subject to FRCs. On 28 March 2019 the MoJ finally published its Fixed recoverable costs consultation in which it essentially accepts Sir Rupert's recommendations (read more in our update). As hoped, the consultation also includes the proposals for fixed costs in noise induced hearing loss claims and seeks views on the suggested process for dealing with those claims. The consultation closed on 6 June 2019 following which reports emerged outlining various stakeholder responses. A response is due to be published within three months (i.e. by early September) although Dominic Regan has suggested this is already unlikely.
Small claims track increase: medical evidence. On 18 April 2019 the MoJ launched a short consultation on the Future Provision of Medical Reports in Road Traffic Accident related personal injury claims. The consultation sought views on: expanding MedCo's remit to cover initial medical reports for all road traffic accident related personal injury claims under £5,000; whether to widen the type of medical expert who can be registered on the MedCo system; whether to extend the existing fixed cost medical report regime for medical reports; and the procedure for unrepresented claimants to obtain medical evidence. The consultation closed on 17 May 2019 and although a response was promised by July, there is currently no sign of one.
Civil Liability Act: report on savings. During the passage of the Civil Liability Act through parliament, the insurance industry committed to passing on the benefits arising from the reforms to consumers. A provision was therefore added to the Bill requiring insurers to demonstrate whether savings had been passed on. On 21 March, HM Treasury published a consultation seeking views on the draft regulations that will require firms to provide information to the Financial Conduct Authority (FCA). This information will be used in a report by the government which will assess whether firms have passed on the savings. The consultation focuses on the scope of the requirements and methodology for calculating the relevant information. The consultation closed on 3 May 2019.
Credit hire: model directions. In June 2017, the Civil Procedure Rules Committee issued a consultation on the "model order for directions to be used in credit hire cases". Acknowledging that the whole area of credit hire "remains a highly contentious area of litigation" the CPRC identified what they see as relatively simple steps that can be taken to narrow the issues and present the judge with the necessary evidence to make a determination. The proposed directions concern witness evidence and disclosure on impecuniosity and the agreement of hire rates. Stakeholders were urged to confer to try to achieve a consensus or risk a solution being imposed. The consultation closed on 1 August 2017 and DWF responded. Although there is no sign of a formal response, we understand that some courts have already adopted them. In May,FOIL reported that in response to an enquiry, the CPRC confirmed that the work in this area has been delayed due to the weight of other priority work, albeit it does remain on the Committee's agenda.
Update - Default County Court Judgments. At the end of December 2017 the MoJ launched a consultation looking at the processes for money claims issued in the County Court. They have particular interest in views on limiting the circumstances in which an individual can have judgment entered in default against them without their knowledge. DWF submitted a response to highlight the issue of judgment being entered against policyholders in insurance claims when it is an insurer who will ultimately pay the claim – the MoJ had not identified this scenario in its consultation. The consultation closed on 21 February 2018. In May, we also reported having seen in the February 2019 meeting minutes that the Civil Procedure Rule Committee was looking at the construction of CPR r.12.3(1) and the conditions for obtaining judgment in default in the absence of an Acknowledgment of Service. The CPRC issued a short, focused consultation on the issue, which closed on 3 May 2019 andDWF submitted a response. Update - Whilst we await the response from the CPRC, there was a judgment earlier this month in the case of Smith v Berrymans Lace Mawer Service Co. & Anor in which Master McCloud considered the question of whether judgment in default can be entered when a defence has been served late. Having determined that it could not, the judge added the following post script, "After supplying a draft of this judgment to counsel, I was informed by a QB Master who sits on the Civil Procedure Rules Committee (CPRC), to whom I had mentioned my draft judgment, that changes to rule 12 had been approved and will come into effect in October 2019 which have the same effect as this judgment. However on further research and after contacting the CPRC I understand that no Statutory Instrument has been passed containing such a rule change and that the proper approach in the view of the CPRC is that one should in those circumstances proceed without any assumption that such a rule change will take place at all." We therefore await further developments.
Legal services: insurance and compensation. In March 2018 the SRA launched a consultation on changes to the legal insurance and compensation rules with proposals including limits to the compensation fund and reducing minimum PII cover. The SRA said these changes would give firms more flexibility to choose the right level of insurance to suit their business and clients, while making sure there are still appropriate protections for users of legal services. The consultation closed on 15 June and a response was awaited but in December 2018, the SRA confirmed it had put its proposed reforms on the backburner. Read more in the Gazette, which reported (also in December) that the regulator is unlikely even to discuss a response to the PII issue until spring at the earliest. In May, the SRA published its Annual Review for 2017/18 in which it mentions the consultation saying "we will review all the responses and will decide on our next steps."
Update - Access to Justice: court and tribunal reforms. In January the Justice Committee launched an inquiry into the access to justice implications of the programme of reforms underway in Her Majesty’s Courts and Tribunals Service (HMCTS), including the increasing use of digital and video technology and the closures of courts and tribunal hearing centres. Submissions were requested by 11 March and the Law Society strongly encouraged members to respond giving particular attention to: the flexible operating hours pilot, the civil money claims online project and court closures. In May, the Committee published further written evidence, including from the Association of Her Majesty’s District Judges, and on 21 May held its first oral evidence session, reported on by Legal Futures and the Gazette. On 11 June, the Committee held a further oral evidence session, this time on the impact on family and administrative justice. This month, the Committee held its final evidence session on 10 July hearing from senior members of the judiciary as well as then Lord Chancellor David Gauke. Read more in Legal Futures. The Committee is now preparing its report.
Automated vehicles: law commission consultation.On 8 November the Law Commissions of England & Wales and Scotland launched the first of a series of public consultations about crucial reforms which will ensure the country is prepared for the introduction of automated vehicles. Three themes are covered in the preliminary consultation: first, how safety can be assured before automated vehicles are placed on the market, as well as ongoing monitoring and maintenance requirements once they are on the road. Second, criminal and civil liability. Finally, the need to adapt road rules for artificial intelligence. The preliminary consultation closed in February and last month the Law Commissions published their analysis of the 178 responses they received, highlighting 10 key issues arising from the consultation. They are now working on a second consultation paper on automated road passenger services, which is due for publication later this year, and still plan to publish their final report and recommendations in 2021.
Motor insurance: amendment of the Motor Insurance Directive. The now infamous decision of the CJEU concerning a Slovenian tractor in Vnuk in September 2014, produced an interpretation of "use of a vehicle", for the purposes of the compulsory motor insurance regime, which was wider than the definition contained within the Road Traffic Act 1988, and thereby set in motion a review of the legislation both in the UK and Europe. In May 2018, the Commission presented proposals to amend the Directive and it came as a surprise when they proposed to adopt the wider definition from Vnuk. In January, we reported that the Internal Market and Consumer Protection Committee (IMCO) of the European Parliament voted for amendments that would revise the Commission's proposal on scope, by proposing to restrict compulsory cover to vehicles "in traffic" defined as being on a public or private road, but not in a closed area inaccessible to the public, as well as exclusions for motorsports and for new vehicles such as Segways and electric bikes. In February, the full Parliament approved the IMCO amendments. Read more on recent developments and next steps in Amy Jeffs' article MID reform – the journey continues as European Parliament points to pragmatic solution. An update from IMCO at the end of April confirmed that Inter-institutional negotiations on the proposal are expected to start during the new legislative term which starts on 2 July.
New - The Motor Vehicles (Compulsory Insurance) (Miscellaneous Amendments) Regulations 2019. In the meantime, the government has made a new statutory instrument amending the Road Traffic Act 1988 to rectify another inconsistency with the Motor Insurance Directive. Most significantly the proposals will amend s152 of the RTA so that insurers can no longer rely on having avoided a policy after an accident to deny compensation under the RTA to third party victims. The Regulations come into force on 1 November, 2019, meaning that insurers will not be able to avoid their RTA liability where a post-incident declaration is obtained after 1 November, 2019. Read more in our update this month Changes to Road Traffic Act 1988 and declarations of policy avoidance.
Update - Courts and Tribunals (Online Procedure) Bill. On 1 May 2019, the Ministry of Justice announced that the Courts and Tribunals (Online Procedure) Bill had been introduced to the House of Lords. The Bill forms part of the government’s £1 billion court reform programme and will establish a judicially-chaired committee tasked with developing new, simplified rules for online services in civil, family and tribunal proceedings. It would appear to be the Bill that was needed to take forward the Briggs recommendations, taking over from part 2 of the Prisons and Courts Bill, which was dropped when parliament was dissolved in 2017. The second reading of the Bill took place on 14 May when members of the Lords, including two former Lord Chief Justices of England and Wales and a former justice minister, discussed the purpose and key areas of the Bill. In advance of the second reading, both the Law Society and the House of Lords Library produced briefing notes. The Bill had its committee stage in the Lords on 10 June and in the last month has raced through the Commons, completing its committee stage there on 23 July. The Bill now moves onto the report stage in the Commons. You can keep up to date with progress on the Bill's web page and read more on the recent stages in the Gazette and Legal Futures.
Update - Fatal Accidents Act 1976 (Remedial) Order 2019. In May, the MOJ published a proposed remedial order which provides for the award of bereavement damages under the Fatal Accidents Act 1976 s.1A to be available to a person who has cohabited with the deceased person for a period of at least two years immediately prior to the death. This rectifies an incompatibility with the European Convention on Human Rights 1950 art.14 read with art.8 identified by the Court of Appeal in Smith v Lancashire Teaching Hospitals NHS Foundation Trust (2017). Following its publication the Joint Select Committee on Human Rights sought views on the proposals. This month, the committee published its report welcoming the proposed changes but raising wider concerns with the bereavement damages scheme as a whole and recommending that the government undertakes a consultation with a view to reform.
Motor Vehicles (Compulsory Insurance) (Amendment etc.) (EU Exit) Regulations 2019. This SI, which will be required in the event of a no deal Brexit, introduces a policy change which removes the requirements for the Motor Insurers' Bureau to act as a Compensation Body for UK residents injured in road traffic accidents in the EEA, and to reimburse its foreign counterparts in respect of EU27 visitors in the UK who have been compensated by their ‘home’ Compensation Body. The draft SI had to be approved by both Houses. In February it was approved by the House of Lords but not without them emphasising their regret that UK residents "could be denied access to justice when injured abroad as they will have to make claims for compensation in the country in which the injury occurred rather than being able to appoint a claims representative in the United Kingdom” and flagging the "masterpiece of understatement" regarding the requirement to revert to Green Cards in the absence of a deal (though not strictly part of this SI). In March, the Delegated Legislation Committee approved the draft SI, but again not without concerns about access to justice, and the Opposition did not feel it could support the draft. The SI went on to be approved in the House of Commons by 301 votes to 251. The SI was made on 11 March 2019.
We have also been following progress on two Law Commission draft Bills:
Deprivation of liberty: Mental Capacity (Amendment) Bill. In 2014 the Law Commission began a review of the Deprivation of Liberty Safeguards (DoLS) under the Mental Capacity Act. The DoLS aim to protect people who lack mental capacity, but who need to be deprived of liberty so they can be given care and treatment in a hospital or care home. In March 2017 the Law Commission published its final report along with a draft Bill. It recommended that the DoLS be repealed and set out a replacement scheme called the Liberty Protection Safeguards. A year later the government responded to the Law Commission's review and in July 2018, the government started the Mental Capacity (Amendment) Bill in the House of Lords. The Bill received Royal Assent on 16 May. The Bill's webpage contains all of the relevant documents and updates. Counsel, Alex Ruck Keene, has also continued to provide helpful updates on his Mental Capacity Law and Policy blog.
Insurance contract law reform: draft Insurable Interest Bill. In April 2016 the Law Commission and the Scottish Law Commission published a draft Bill following their review of the issue of Insurable Interest, having previously made proposals for reform in 2008 and 2011. They were asked to return to the issue due to the increased numbers of requests to write policies which include cover for children, cohabitants and to insure ‘key employees’ for substantial amounts. The draft Bill was intended to reflect the proposals set out in the issues paper and the Law Commissions invited comments on the draft Bill by 20 May 2016 with a view to publishing a final draft Bill and report in autumn 2016. The project was then put on hold due to other priorities within the team but in June 2018 the Law Commission published their updated draft legislation. The extended deadline for comments was 31 October 2018. Read more in the Law Commission press release from June 2018.
Also on the horizon...
Update - Personal injury discount rate: new rate announced. On 15 July, ahead of schedule the Lord Chancellor announced the outcome of the first discount rate review under the new methodology provided for in the Civil Liability Act 2018. The rate will be -0.25% and it will come into force on 5 August 2019 under The Damages (Personal Injury) Order 2019. Alongside the announcement, the Lord Chancellor published his statement of reasons and the Government Actuary published his advice. It appeared that the GA had produced a figure of +0.25% but the Lord Chancellor had reduced this further by another 0.5% to further minimise the risk of under-compensation. The following week, the GAD published supplementary Ogden Tables containing multipliers at the new discount rate. As we indicated in our own initial reaction to the announcement, insurers were hugely disappointed, whereas claimant advisers were pleasantly surprised (see also Litigation Futures). The ABI subsequently wrote to the Lord Chancellor to object to the misleading nature of the government's Impact Assessment. James Dalton of the ABI responded on Twitter to questions about the impact of the announcement on Civil Liability Act savings, and this was followed by news this week that the recent trend of falls in the cost of motor insurance had stalled. Attention also turned to the case of Swift v Carpenter which was due to be heard in the Court of Appeal on 23 July 2019 and was due to consider the Roberts v Johnstone calculation in relation to accommodation claims in a negative discount rate environment. However, the court adjourned the appeal to next March to allow further evidence to be obtained so that the matter can be properly dealt with as a test case.
Update - Small claims track limit increase: whiplash reforms. The first mention of the increase in the small claims track limit was in George Osborne's 2015 Autumn Statement. A lot has happened since then, including a Justice Committee inquiry in late 2017, and attempts throughout the passage of the Civil Liability Bill to challenge the proposals and/or incorporate them within the bill. The present position is that whilst not forming part of the Civil Liability Act 2018, it does form an integral part of the reform package which is all due to come into force in April 2020. The plan remains for the limit to be increased to £5,000 for RTA personal injury related claims, with those claims being brought through an online portal, and to £2,000 for all other types of personal injury claims, and this will be achieved through secondary legislation. Nigel Teasdale provides a helpful update this month on developments in relation to the various interlinking aspects of the reforms. The press headlines this month focused on the exemption of children from the portal and clarification on how certain items of special damages will fit within the process. We also await reaction to today's (30 July) MIB update event where there was a live demo of the online service that has been built so far. Read more in Legal Futures.
Insurance Fraud. We have for some time been awaiting the government's response to Part 2 of its whiplash consultation which sought views on recommendations made by the Insurance Fraud Taskforce in its final report in January 2016. The latest news on that came in the government's response last July to the Justice Committee's small claims track inquiry, confirming that it was "currently working closely with stakeholders including from the insurance industry to take forward the IFT’s recommendations. Detail will be included in Part Two of the response to the whiplash consultation, which will be published shortly." We have previously reported on the lowering of the standard of proof in solicitors' disciplinary proceedings to the civil standard, which is due to come into force in November 2019. In December 2018, days after an article in the Insurance Post titled The mystery of the missing Insurance Fraud Taskforce report (subscription may be required), the government published its Insurance Fraud Taskforce Report 2017. The report sets out the progress made during 2017, acknowledging that some matters had moved on and that the information in the report is accurate as at December 2017. In April, the FCA published a Memorandum of Understanding (pdf) that it has entered into with the Insurance Fraud Bureau (IFB) "to provide a formal basis for co-operation in relation to claims management activities, including for the exchange of information and investigative assistance." At the end of May, Aviva released its fraud data for 2018. Findings included that whilst the whiplash reforms can be credited for a drop in motor fraud, there has been an increase in liability claims fraud of 20%. Last month the IFB launch a counter fraud intelligence sharing platform which will hold industry data on suspected fraudsters and professional enablers.
MedCo. Last November, we reported on news from the Insurance Post (subscription may be required) that Medco had already started consulting over the creation of a 'litigants in person' portal on the back of the government's whiplash reform programme. In December, MedCo published an Audit Progress Update containing a summary (pdf) of key findings from audits undertaken between January 2017 and September 2018. The Gazette reported on the update noting that "just three per cent of companies wanting to diagnose whiplash claims have been given a clean bill of health by auditors". As we have reported previously, MedCo forms a key part of the proposals put forward in the MoJ's recent consultation on the provision of medical evidence for the new small claims track process. In May, MedCo published a press release (pdf) and its response to the consultation. MedCo will be awaiting the government's response to the consultation so that it can implement any changes in line with the target deadlines.
Update - Claims Management Regulation. After first being announced in March 2016, following the Carol Brady independent review of claims management regulation, the FCA took over the regulation of claims management companies on 1 April 2019. The FCA did a significant amount of work in preparation for the transfer and produced a comprehensive hub on its website, alongside a useful timeline (pdf) and a number of helpful video guides. Both the Gazette and Legal Futures reported on the new regime with the latter noting a further fall in the number of CMCs. And as we reported above, in April the FCA published a Memorandum of Understanding (pdf) that it has entered into with the Insurance Fraud Bureau. Last month,Jonathan Davidson, the FCA’s executive director of supervision, retail and authorisations, told FTAdviser that visits from the FCA supervisory teams to CMCs are imminent as part of the plan to crack down on "rotten apples". Last month, the FCA published a letter it sent to claims management companies, setting out its expectations of CMCs when they carry out financial promotions and/or act for their customers. The FCA has also indicated it is exploring the case for capping the fees claims management companies can charge for bringing claims. This month, the FCA has published its final rules on the extension of the Senior Managers and Certification Regime (SM&CR) to CMCs from 9 December, 2019. Read more in Insurance Age.
Update - FCA activity. In addition to the work being done in relation to claims management regulation, in April the FCA issued a warning to General Insurance firms about manufacturing, sales and distribution approaches that can lead to customers purchasing inappropriate products, paying excessive prices or receiving poor service. The ABI responded to the report saying that the majority of customers should not be concerned. Later in the month it published its Business Plan for 2019/20. The Insurance Times (subscription may be required) looked at the FCA's priorities for Insurance and we note that they propose to monitor claims inflation and developments in motor claims to see whether there is a case for them to intervene (p.42). Also in April, the FCA published a feedback statement following 2018's discussion paper 'A duty of care and potential alternative approaches' and as the Gazette reported, the FCA had gone cold on the idea of a formal 'duty of care'. This month the FCA has launched a consultation on proposed guidance for firms on the fair treatment of vulnerable customers. Comments are requested by 4 October, 2019. Read more in Insurance Age.
Artificial intelligence in insurance and law. On 28 November the Department for Business, Energy & Industrial Strategy announced three new 3-year research projects, to be led by Loughborough, Sheffield and Oxford Universities, investigating how businesses can make best use of AI in insurance and law. The projects backed by £3m through the Industrial Strategy Challenge Fund will focus on (1) how AI can be applied to processes such as underwriting and claims processing, speeding up the process for customers (2) how AI can be put to use in legal services bringing academics, lawyers, businesses and programmers together to develop the skills, training and codes of practice to deliver benefits (3) future uncertainties about the roll-out of new AI technologies in accounting and legal services and analysis of potential barriers to AI-based business model innovation. Read more in Legal Futures. In February, Business Secretary Greg Clark announced a project to develop breakthrough artificial intelligence technology for the anti-fraud sector. The artificial intelligence software will combine AI and voice recognition technology to detect and interpret emotion and linguistics to assess the credibility of insurance claims. It is one of a number of projects set to receive funding to enable the UK accountancy, insurance and legal services industries to transform how they operate. One of the other examples is an analysis tool which looks at images collected by drones to assess flood-damaged areas, using a 3D image recognition system to evaluate flood extent and depth alongside impacts on buildings and infrastructure to help with insurance claim assessments. In March,Professor Richard Susskind spoke on the subject of AI at a Westminster Legal Policy Forum on Technology and the legal market. Read more in the Legal Futures article, Susskind: Lawyers wrong to think technology cannot replace them. In April, Lloyds published two reports on how AI and robots create new risks and opportunities for insurance and society. The Insurance Times looks at the reports in this article (subscription may be required).
Update - Briggs' Civil Courts Structure Review: HMCTS court reform. In July 2016, Lord Justice Briggs published his final report following his review of the structure of the civil courts. The headline recommendation was the introduction of an online court capable of handling claims with a value up to £25,000. A detailed summary can be found in the press release accompanying the report and Simon Denyer analysed the report at the time. The report was commissioned to coincide with and inform a wider, ambitious programme of court reform. An HMCTS webpage sets out the background to, and detail of the reform, along with helpful resources and updates on progress on more than 50 distinct projects. In March, HMCTS announced it was extending the completion date of the reforms by a year to 2023 - see the Gazette and Legal Futures for further comment. March also saw news of the first video hearing featuring two remote litigants, as part of a pilot running in the Manchester County Court. In April, HMCTS reported that its Digital Case System (used in the Crown Court) has saved more than 100 million sheets of paper. This month, HMCTS has published its latest issue of Reform Update - Civil outlining progress in its reform programme in the civil jurisdiction. Also, as we report above, the Justice Committee is now preparing its report in its Court and Tribunal Reforms Inquiry, the Courts and Tribunals (Online Procedure) Bill is rattling through the Commons, and work is ongoing on the portal to be used for the whiplash reforms.
McKenzie Friends. The long awaited response (pdf) to the February 2016 consultation on McKenzie Friends was published at the end of February 2019. Whilst remaining "deeply concerned" about the proliferation of fee charging McKenzie Friends, the Judicial Executive Board said this issue should be considered by the government. Their recommendations included support for a Plain Language Guide for LiPs and McKenzie Friends, and that the current Practice Guidance should be updated. Read more in the Gazette. Then in an interesting development in March, an unqualified legal adviser was held to the same standard as a qualified lawyer in relation to a clinical negligence case. Following that decision, the chair of the Commons Justice Select Committee, Bob Neill, repeated his call for a ban on paid McKenzie Friend and Colm Nugent, who was involved in the case wrote an article in The Times calling for action. We await further developments.
LASPO Part 2 post-implementation review: QOCS & DBAs. In February, the MoJ published the outcome of its review, suggesting no change to the essential aspects of the LASPO Part 2 reforms, and resisting arguments from parts of the claimant lobby for further change. The government said it would consider amendments to the DBA Regulations to try to provide an alternative method of funding claims, as well as a possible extension of the QOCS regime beyond injury cases to other types of claim. Read more on the outcome, outstanding issues and next steps in Simon Denyer's February update Government response on LASPO review allows assessment of the current state of the litigation reform process. In March, Dominic Regan reported on Twitter that a report on DBAs is coming proposing new workable measures. Whilst we await further developments, Dominic Regan again indicated on Twitter last month that the MoJ has "not rejected proposals to revamp DBAs"... yet.
Update - SRA activity. Last July, we reported that personal injury claims featured in the SRA's risk outlook for 2018/19 as part of a new priority risk: managing claims. In the accompanying press release Paul Philip, SRA Chief Executive said, "... For the first time, we are highlighting how claims are managed as a key risk. This follows concerns over issues such as firms failing to properly check on the validity of personal injury claims…" The Autumn Update highlighted that they are still receiving reports of firms paying prohibited referral fees, and concerns that some holiday sickness claims are being submitted without proper analysis. Following the introduction of the new Transparency Rules in December, solicitors were in March warned to expect the scope of the rules to be increased. Personal injury claims are not currently covered by the new rules, so this is an area to keep an eye on. Also in March the SRA announced that its plans to allow solicitors to practise from unregulated firms and enable freelance solicitors to do more will come into effect on 25 November 2019. In April,both the Law Society and the Legal Services Consumer Panel (pdf) made submissions to the LSB on the SRA's recent rule change application (pdf) for PII and the Compensation Fund as they are concerned that the proposed rules for freelance solicitors do not provide sufficient protections. Read more in the Gazette and Legal Futures. Last month, the LSB approved the controversial plans which mean that freelance solicitors will not be required to take out professional indemnity insurance. May also saw the publication of the SRA's 2017/18 Annual Review, with their press release setting out the key points, and Legal Futures highlighting that the number of law firms shut down by the SRA fell to a 10-year low in 2018, but payouts to victims of dishonest solicitors increased. This month Legal Futures reports on a series of guidance notes issued by the SRA on its new Standards and Regulations rulebook, which comes into force on 25 November. The article also reports that the SRA suggests that the new "freelance solicitors" could join forces in a chambers-style arrangement.
In the long grass?
Issues where there has been no activity for some time:
Legal services regulation: removing barriers to competition. In July 2016 the MoJ announced a consultation on proposals to reduce barriers to market entry, and regulatory burdens on Alternative Business Structures in legal services. Lord Faulks’ ministerial statement also mentioned the government’s intention to consider a further consultation on regulatory independence. The current consultation closed on 3 August 2016 but to date there has been no response, although in the interim the Legal Services Board published a report on its research into alternative business structures and investment in legal services. In December 2017, while responding to the CMA Legal Services Market Study, the government confirmed it would not be going ahead with a consultation on regulatory independence as it believes there is scope to make more progress within the existing framework.
Note - separately there is currently underway an Independent Review of Legal Services Regulation, being undertaken by the Centre for Ethics and Law in the UCL Faculty of Laws. It began in October 2018 and is due to report to the MoJ in January 2020. Head of the Review, Honorary Professor Stephen Mayson spoke about it last month at the Legal Futures Regulation and Compliance Conference. Further details can be found on the Review webpage.
For further information please contact Alex Fusco, Professional Support Lawyer on 0161 603 5211.
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