Sorry seems to be the hardest (and most expensive) word

Posted by Sian Stanton, business developer at Litigation Futures Associate Allianz Legal Protection

Stanton: Lack of understanding regarding the ATE market and insurance in general

One of the first lessons we teach children is that when you do something wrong, you have to say sorry. Perhaps inevitably, as we get older and the mistakes and their consequences get larger, the apologies become more difficult but also more meaningful. Nowhere more is this the case than in clinical negligence disputes.

The latest report of the Civil Justice Council’s (CJC) working group on fixed recoverable costs (FRC) seems both to acknowledge that and also find it difficult to formally enshrine in any new FRC scheme.

Many of the non-cost related parts of the process require a radical shift in the way resolution is achieved for victims of clinical negligence. Whilst an apology from the defendant trust might be seen as good practice, the report questions whether the formal pre-action process can go further than recommending that the defendant consider an apology.

The CJC appears to have little problem with introducing procedural steps which favour defendants and adding in safeguards to appease claimant solicitors, but the injured person still isn’t being placed at the heart of the process.

If there’s an admission of liability, then logic dictates that it’s based on the facts of the negligent act(s) and so providing an apology seems to be an integral part of making claimants whole again. In my experience, the provision of apologies seems to be patchy and inconsistent. Until the culture changes at the frontline of the NHS through learning and patient safety recommendations, I find it difficult to see how the concomitant claims handling will change.

Apology or no apology, many of the CJC proposals seek to increase the value of disbursements required to pursue claims with no viable answer as to who’s going to pick up these costs. Asking claimants to sacrifice more and more of their damages – an amount intended to compensate them for suffering a negligent act – doesn’t seem like a just or equitable position.

As our claims manager, James Barclay, eloquently puts it: “It isn’t surprising that, with solicitors coming under increasing pressure regarding their own costs and margins getting squeezed, firms are looking at different ways of working. Indeed we would encourage innovative thinking. However, an unwelcome side effect of some of this innovation and/or change in behaviour seems to be an increase in our average ATE [after-the-event insurance] claims cost.

“For example, something we’ve seen in our clinical negligence book is an increase in the frequency of pagination costs being claimed. Therefore, it’s clear that more solicitors are now outsourcing this activity when they might have done it in-house previously. Obviously there’s nothing wrong with that change, but it’s factors like this that we, as insurers, need to be aware of and, unfortunately, ATE premiums will need to increase.”

The introduction of FRC is certainly not going to improve the situation. Although careful management of costs and disbursements is certainly possible, there needs to be scope to enable responsible ATE insurers to continue providing first class coverage in a sustainable manner.

It feels like 2013 all over again, whereby the entire landscape of ATE insurance needed to evolve and adapt to ensure that future policyholders can be supported.

There seems to be a lack of understanding regarding the ATE market and insurance in general, such as sweeping statements about ATE picking up extra costs of the proposed early neutral evaluation without any corresponding price increase.

Nowhere is this more perfectly demonstrated than by the suggestion that there is “a formula based on the actual or anticipated fees for experts on liability or causation”. This is in fact already a fundamental factor in calculating ATE premiums which, contrary to some beliefs, aren’t plucked out of thin air.

This poor grasp of insurance does perhaps go some way in explaining why the statutory framework often ends up producing such perverse outcomes which don’t provide access to justice.

Alternatively, asking an insurer to work to a cap means that the product is being designed backwards – starting with price and seeing what cover can be shoehorned into that level of premium. Not only does that seem to be an unethical proposition but it’s likely to be in breach of Financial Conduct Authority rules for insurers. Reverse engineering an ATE product will leave policyholders inadequately insured and the product not fit for purpose.

Although expert reports and witness statements won’t need to be reformatted to ‘trial ready’, those documents for cases where proceedings need to be issued will be, resulting in an increase in costs.

The report is largely unfinished in terms of being able to solve the expert fees issue – it would seem that experts would view this reformatting to be trial ready as either addendum type work or as a brand new report.

Other burdens on law firms could come in the form of increasing costs and difficulties in obtaining professional indemnity insurance in an already challenging market, if the proposals to make early quantum offers without obtaining evidence a part of the standard track. It’s not difficult to see this leading to under settlements or the risk of same for which law firms would have to provision for.

Despite the concerns around the cost of recoverable ATE and the CJC demanding that more of the burden falls on policyholders and insurers, the market will adapt in whatever way necessary.


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