Following a Judicial Review and a Ministry of Justice consultation, the way in which Employers’ Liability and Public Liability claims are handled will be drastically overhauled.
The political reasoning behind the changes are beyond the scope of this bulletin, but it is an absolute necessity that you read and understand the changes being made if your business has ever been involved in any of the claim types affected.
Endless literature on the topic has been circulating the insurance industry over the past 12 months and we thought it prudent to summarise the changes in as simple a format as possible. The impact the changes will have could either be of benefit or detriment to your business. Which of these impacts will largely be down to how you react to the changes.
Romero Insurance Brokers is fully committed to helping all of our clients understand and embrace the changes in order that you can benefit from the potential claim savings on offer.
Types of Injury Claims Affected
• Employers’ Liability claims between £1000 and £25,000 in value (of damages).
• Single Defendant Employers’ Liability Disease Claims (i.e. if only one employer is being claimed against).
• Public Liability Claims between £1000 and £25,000 in value.
• Motor Claims (the process for claims up to £10,000 was introduced in 2010, the new reforms will see the value of claims affected increased to £25,000).
Types of Injury Claims not Affected
• Claims with a damages value under £1000 (solicitors are not entitled to any costs for such claims).
• Claims with a damages value of over £25,000.
• Multiple defendant Employers’ Liability Disease claims.
• Public Liability Disease Claims.
• Claims for Abuse.
• Mesothelioma (asbestosis).
• Clinical Negligence.
For incident on or after 31 July 2013, claimants’ solicitors’ costs are set to become recoverable on a fixed rate basis, rather than as they are at present, which is on an hourly rate basis. The level of fixed costs that are recoverable will depend on the size and type of the claim (see tables 3 & 4 ). Whether the claim qualifies for the lower fixed costs will depend on how the claim is handled by you and your insurer. Claims can ‘fall out’ of the process if certain deadlines are not met or if certain decisions are taken on liability that remove the claim from the process.
Keeping claims within the process where possible will be the key to achieving savings.
Solicitors will no longer send a letter of claim but will now be obligated to send a Claim Notification Form (CNF) to you or your insurer to start the process. As all Employers’ Liability insurance carriers are now on a central database called the Employers’ Liability Tracing Office (ELTO), it is likely that the solicitor acting on an EL claim will check ELTO for your insurance details and submit the CNF directly to your insurer via an online portal (you may not, therefore, be aware of a claim being made against you until your insurer informs you).
Public Liability insurance details are not held on any such database and therefore the CNF may come direct to you. Having your staff recognise a CNF and the urgency with which it needs to be dealt with will become crucial. If it is not acknowledged in time, the claim will fall out of the process at the first hurdle and a higher rate of fixed costs can be charged by the claimant’s solicitor.
If any of the relevant deadlines listed below are not met, a higher rate of fixed costs will be recoverable so it is vital that all parties to a claim work together to ensure that they are met.
Deadlines for Employers’ Liability
Deadlines for Public Liability
*Working days are defined as any day other than a Saturday, Sunday, Bank Holiday, Good Friday or Christmas Day. A bank holiday means a bank holiday under the Banking and Financial Dealings Act 1971.
Remember – the clock starts ticking the first business day after the information is sent to the insurer/defendant so if the claims notification form (CNF) goes directly to the defendant the timeline begins the following working day and not the day after it is then sent to the insurer.
Potential pitfalls of the deadlines for you to consider
• If a Claim Notification Form (CNF) is sent to your registered address and you do not reside there or it is not the premises from which you trade. If that is the case you will need to make arrangements to combat this.
• A member of staff receiving the post fails to recognise it as a CNF and the importance and urgency with which it needs to be treated.
• You fail to send an electronic acknowledgement of the CNF to the solicitors with a copy to your insurer by the next working day
• It remains to be seen how insurers will react to a failure on your part to meet the deadlines. Some insurers may seek to recover additional costs they incur if the failure to comply with the process is down to you. Insurers may even consider that you have been in breach of the policy conditions and withdraw indemnity for the claim. This would leave you to deal with the claim in its entirety.
• Once settlement has been agreed payment of damages and costs must be made within 10 days. Insurers will settle any claim net of the policy excess which you have to pay. If you do not pay the excess within the 10 days the claimant’s solicitors may commence enforcement proceedings.
When will a claim fall outside the process for lower level fixed costs?
• When deadlines in Tables 1 & 2 are not met.
• Claims where contributory negligence is alleged. Insurers will need to consider each case carefully as if the reduction in damages due to successful arguments on contributory negligence is less than the savings possible on costs by keeping the claim within the process; it is unlikely they will allege the contributory negligence.
• Cases of fraud.
• Cases where liability is denied in full. Claims that are denied and subsequently paid will not be on the old hourly rate basis, rather the higher rate of fixed costs as per Table 4 below.
What are the Fixed Recoverable Costs – Lower Rate? (Excluding VAT and disbursements)
Stage 1 = Claim Notification and response on liability
Stage 2 = Negotiation of settlement once liability has been admitted.
What will the costs be if the claim falls outside the process?* (excluding VAT and disbursements)
*Costs here are applicable only if the claim settles before court proceedings are issued. If proceedings are issued then further, higher costs are applicable to reflect the further time spent on the case by the solicitor.
** The % of damages will be recoverable from your insurer, not taken from the claimant.
Costs comparison for portal and non-portal claims (Excluding VAT & Disbursements)
1. Ensure that all staff who will deal with claims are aware of the new process and the timescales involved.
2. Ensure all staff who could encounter a Claim Notification Form when opening your post are aware of there importance.
3. Ensure that your staff collate the necessary information following any incident in the venue eg download CCTV images, complete accident book, collate daily checklists, obtain witness statements.
4. Ensure that you gather documentation swiftly following notification of a claim.
5. Provide immediate assistance with liability investigations. Failure to do so could result in insurers refusing to deal with the claim.
6. Support your insurer in making quick decisions on liability. They will provide their advice, but you will need to bear in mind the deadlines to sign it off.
7. Provide wages information immediately on every EL claim – even if it is to support that there was no loss of earnings.
8. You may be required to take a more economical view on matters such as contributory negligence. Insurers will want to drop any arguments if the cost benefits are not there.
9. Once settlement has been agreed pay your excess promptly to prevent the claimant’s solicitors commencing enforcement proceedings.
If you are unsure of anything contained within the bulletin, please speak to your contact at Romero’s or if you are not a client, contact Richard Nicholson or Robin Kinkead on 0113 281 8110 for immediate assistance.