At a glance
- Introduced in April 2013, the ‘Jackson reforms’ significantly altered the way that personal injury claims were administered
- Lord Jackson is now undertaking a further review, primarily focusing on altering legislation around fixed recoverable costs
- We explore the background to the review, the expected result and the potential implications for brokers and customers
In 2009, in response to spiralling litigation costs for personal injury claims, Lord Jackson released a report with suggestions for making civil litigation cheaper and more efficient.
The Government implemented these suggestions – known as the Jackson reforms – in April 2013 through the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO). The reforms significantly altered the way that personal injury claims are administered, and represented the biggest overhaul to personal injury law in more than a decade.
Fast forward less than five years and Lord Jackson is undertaking a further review, primarily tasked with examining fixed recoverable costs.
So, what do brokers and customers need to know about the review and its potential implications?
Background to the 2013 Jackson reforms
Lord Jackson commenced his review into civil costs in 2009. The aim was to assess whether the costs of civil litigation had any bearing on access to justice.
In the foreword to his review, Jackson concluded that in some areas of civil litigation, disproportionate costs “impede access to justice”. In some smaller cases, the costs of litigation were often greater than the value of claims owing to claimants.
Among the main recommendations impacting brokers and their customers, Lord Jackson suggested:
- An introduction of fixed recoverable costs (FRC) to personal injury claims up to £25,000
- That the Ministry of Justice (MoJ) Claims Portal be extended beyond road traffic accidents to include employers’ liability and public liability cases up to £25,000
- An introduction of cost budgeting for cases with a value of under £10m (cost budgets need to be submitted by both parties for the entire litigation)
- An end to the recovery of success fees and after-the-event insurance premiums from the losing party
- The introduction of qualified one-way cost shifting – meaning that claimants are not at risk of paying the defendant’s costs if they lose
Why the need for further review?
There were mixed reactions in the immediate aftermath of the Jackson reforms. In particular, it was argued that while the review may limit the creep of ‘compensation culture’, aspects such as abolishing referral fees and limiting ‘after-the-event’ (ATE) insurance could be counterproductive.
Of particular concern was whether limiting the effectiveness of ‘no win, no fee’ would be detrimental for those who may otherwise struggle to access legal redress.
Despite these arguments to the contrary, Jackson has maintained that fixed costs have proven to be an effective way of providing certainty and predictability, avoiding the need for cost budgeting and assessment, and saving time and money for all parties.
What are the expected outcomes?
The main focus of the latest review is fixed recoverable costs, a commitment first outlined by the Government in September. The hope is to provide greater transparency and ensure that the amount of legal work and money spent is proportional to the claim.
Jackson is an advocate of extending fixed costs, and it is likely that significant reforms will be undertaken. As they stand, proposals will ensure that the costs of a case going to court will be “more certain, transparent and proportionate for litigants.”
The main proposal is that fixed costs should be introduced for all claims up to £250,000, ten times the current limit. This has been met with some resistance, largely because claims for this type of compensation will include instances of serious personal injury, where some argue that the application of fixed costs would be inappropriate.
Jackson has suggested a grid system, which sets out proposals in relation to fixed costs. Four bands will each detail the maximum fixed legal costs depending on the amount in dispute. In addition, the review is considering the types and areas of litigation where fixed costs should be extended and value of claims that should be applied.
What this means for brokers and customers
If, as seems likely, fixed costs are introduced to higher value claims, then a greater number of claims will be progressed through the MoJ Claims Portal. Given the tight time limits in place for progressing a claim through the portal, extending the upper limit on fixed costs could place even greater pressure on customers, brokers and insurers to progress claims quickly.
If this proves to be the case, it is essential that brokers are aware of time limits, and educate customers on the importance of acting quickly in the event of a claim.
In addition, following the first round of Jackson reforms, the cost of ATE premiums dropped in line with the fall in legal costs. With the expansion of fixed costs, it seems likely that ATE premiums will see another drop.
At this stage, however, it is ultimately still unclear what will be included in the further Jackson reforms and what suggestions the Government will take on board. In the meantime, it is essential for brokers and their customers to be aware of how the reforms progress and what formal proposals are made over the next few months.
For more information please speak to your local Zurich contact.