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Extension of the RTA PI Scheme: Proposals on fixed recoverable costs

The current consultation on pre-action protocols for low value personal injury claims involving the use of a portal-based process for road traffic accidents, as well as EL and PL claims, worth up to £25,000, closes this Friday 23 November (click here to see our Guide to the Draft Protocols).

With a week to go, the Ministry of Justice has at last announced the proposed levels of Fixed Recoverable Costs (FRC) that are intended to apply to RTA, EL and PL claims, involving personal injury, after 1 April 2013.

The announcement lays to rest any remaining doubts as to whether the Government intends to apply fixed costs in fast track cases worth up to £25,000 outside the portal - the answer is that they do.

Claims falling within the Portal process

It is logical to have opted for two bands, firstly up to £10,000 which is of course the limit of the current RTA portal, and secondly for claims valued at between £10,000 and £25,000. There has been much speculation on the level to which the current RTA portal figure of £1,200 would be reduced. We now know that the proposal is that it should be £500. This is close to the figure for which insurers had argued and ought not to cause particular difficulty. The fact that the RTA figure for higher value claims is higher at £800 is perhaps justifiable.

The corresponding figures for EL and PL are significantly higher, almost double in the case of the lower value claims worth up to £10,000, and exactly double in the case of the higher value claims worth up to £25,000. Insurers may have some concern as to whether there is sufficient difference in EL and PL claims to justify those figures being so much higher than for RTA claims.

The MoJ say that they have arrived at these figures by deducting referral fees which are currently paid, and adding something back in for inflation. It seems to us that the vast majority of the referral fees have in fact been discounted, and we expect claimants to argue that the discount is too great. They will say that they will still have to pay for getting the claims into their businesses somehow, such as through marketing, and this should be taken account of within FRC. Do not expect any significant change of view by the MoJ as a result though.

Claims falling outside the Portal process

Lord Justice Jackson's work has been built on and what we have is a model, like the predictable costs regime currently applying to motor claims worth up to £10,000 found in CPR Part 45, which is based partly on the value of the agreed damages. There are differing figures depending on whether the claim is for an RTA, for EL or for PL, and also dependent upon the stage at which the matter concludes. Those stages cover the entire progress of the action from settlement prior to issue of proceedings, through to trial.

It is worth noting that within the FRC costs outside the portal, there is an escape clause, just as there is within the current RTA predictable costs regime. Where the court considers there are "exceptional circumstances", and where the claimant expects to be able to recover costs at least 20% higher than fixed costs, the claimant can seek ordinary standard basis costs. However, the limited decisions that have been made on this point to date would suggest that it would only be a small minority of claims that would fall within this description. One authority suggests that it is between 1 or 2% or possibly up to 10% of cases where the test will be met. The lower percentages might not concern insurers, but the higher figure of 10% could. It does though seem clear that there will need to be something exceptional about the claim to fall into the exceptional category, which we think the court is likely to equate to "truly exceptional". Lord Justice Jackson supported this approach involving the use of exceptions from FRC, and the MoJ has accepted his advice. However, it is reasonable to expect some satellite litigation testing how the exception will be applied in practice.

Comment

What we have here for the first time is a clear commitment from Government to implement Lord Woolf's proposal made over 10 years ago that costs in the fast track should be fixed for the whole action. Paying parties will be comforted by this declaration of intent.

In formulating their responses to the current Civil Procedure Rules Committee consultation on the draft protocols, insurers will now be able to measure the additional costs that will be incurred by a matter leaving the portal process, and instead entering the matrix that applies to non-portal claims. The differential that remains between the two sets of figures will no doubt be justification for some claimants and their advisors to seek to remove matters from the portal process but the difference is nowhere near as much as it would have been had costs on the fast track generally not been fixed and had claimants and their advisors been aiming at ordinary standard basis costs outside the portal.

This announcement involves the Government suggesting a good deal more certainty around not only a reduced level of costs for RTA portal claims for personal injury worth up to £10,000, but corresponding levels of costs for other portal claims, as well as reasonably certain costs figures outside the portal that will assist in setting more accurate reserves. The announcement is to be welcomed.

There is to be a consultation on this announcement until 4 January 2013, before which there is an opportunity to present any supporting evidence. We are currently finalising our response to the draft protocols consultation. If you would like assistance with your own response, or with the issues raised in this fixed costs consultation please contact Simon Denyer.

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

Simon Denyer

Partner

I am the Strategic Legal Development Partner within the Insurance team.

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