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Myclaim Market Update February 2010

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LORD JUSTICE JACKSON PROPOSES RADICAL CHANGES

The recent report by Lord Justice Rupert Jackson concerning the costs of civil litigation has produced a lot of comment, both positive and negative.  The report is over five hundred pages long and some of the recommendations, if implemented, would certainly bring about radical changes to the way civil litigation, including personal injury claims, would be sourced and progressed.

One of the key recommendations is making success fees and the premiums for after the even insurance policies irrecoverable from the losing side.  The report concludes that these elements are the greatest contributors to disproportionate costs.  In personal injury claims these are obtained by the claimant often at the start of the case.  The success fee represents a percentage increase on legal costs that the claimant’s solicitor can claim if successful, in part to reflect the risk of taking on the case and not winning. The premium for the after the event insurance policy is for a policy to protect the claimant mostly from having to pay the opponent’s legal costs if the case is lost.

As these would not be recoverable from the opponent, they would have to be deducted from the claimant’s compensation.  To offset, the report recommends that damages for injuries, referred to by lawyers as general damages, would have to be increased by 10%.  The proposals also include what is called qualified “one way costs shifting”, which implies that defendants are unlikely to be able to recover more than a small contribution of their costs from an unsuccessful claimant.

The report also recommends that solicitors should be prohibited from paying referral fees to claims management companies.  This clearly would be a very radical step and potentially could be very damaging to the claims management industry.  Other recommendations include fixed costs for fast track cases in the interests of certainty and the promotion of Before the Event Insurance policies to encourage people to take out this type of cover when they obtain insurance, such as household policies.

Clearly the reforms proposed by Lord Justice Jackson are so radical some of them would require primary statutory implementation.  It is interesting to speculate if the forthcoming general election might affect the eventual implementation of the reforms particularly if it leads to a change of government.

ABI says costs of November floods over £200 million

The devastating flooding in November 2009 in Cumbria has cost over £200 million.  Insurers have been paying for alternative accommodation for individuals and businesses whose homes and premises were damaged, for repairs to property and interim payments to help with coping with the immediate problems.

This included working with a hotel to ensure it would still be ready for the busy Christmas period and drying, refitting and rewiring a shop in Cockermouth to get it open again.  The insurance industry is hoping the forthcoming enactment of the Flood and Water Management Bill will assist with better measures to cope with flooding and extreme weather.

FSA warns about clients’ assets

The Financial Services Authority has written to a thousand of the largest insurance brokerages and investment firms to draw their attention to the need to have proper controls over holding client’s money.  This followed an inspection of the way this was carried in fifty firms over the last six months.  These inspections lead, in some cases, to measures being taken as a result including the freezing of assets, disciplinary measures and prohibiting companies from taking on new business until matters were resolved.

The FSA commented that these measures are supposed to be in place for the protection of customers and will take enforcement action when required.

Victims of “Frost Jacking” risk losing insurance cover

The recent cold snap has had implications for the insurance industry.  One particular scenario is where a driver starts their car and then leaves it with the engine running so it warms up while they go inside.  Opportunistic thieves take advantage of the situation and drive off with the car, which will have its keys in the ignition.

The difficulty is that generally motor insurance policies have an exception that if you leave your car unattended with the engine running and someone steals it, you will not be covered by your insurance.  On the other side of the coin, drivers also face risks if they drive off without sufficiently de-icing their vehicle.  Driving with impaired visibility, for example from ice, can lead to criminal liability.