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Fixed costs: The future for personal injury litigation and After The Event insurance

Earlier this month Lord Justice Jackson was calling again for the extension of the fixed cost regime to all civil litigation cases with a value of less than £250,000. The government has not given a clear response to this proposal, but has been somewhat clearer on its position in relation to personal injury claims.

A clinical negligence fixed costs regime is actively being worked on together with a new streamlined process for personal injury claims with a value of less than £25,000. An announcement is due imminently. Following clinical negligence there has been a clear suggestion that noise induced hearing loss claims are the next to receive the same treatment.

So how will this affect personal injury litigation?

On the bright side, it will see an end for the need for cost budgeting and cost assessments but this comes at a heavy price. In a qualified one way costs shifting environment, defendants i.e. insurers, and their solicitors are not expecting to recover costs and therefore their litigation budget will remain unaltered. Claimants, however, will invariably be instructing their solicitors by way of CFA where only a maximum of 25% of their damages can be deducted for solicitors costs. Remember, this success fee deduction is allowed to help the solicitor cover the costs of those cases which fail, not to make up the shortfall of costs on those cases that succeed.

In a fixed cost regime the claimant solicitor will not be paid for the work they carried out but will be paid costs "proportionate” to the value of the claim. Unfortunately however, clinical negligence and noise induced hearing loss claims are equally complex and time-consuming whether the claim is valued at £1000 or £10,000. Meaning that defendants will be at an even greater advantage in defending claims because claimant solicitors will be handcuffed in the time they can spend in dealing with a file, particularly in lower value cases.

The introduction of the fixed costs regime in RTA and non-RTA personal injury claims has already led to an observable inequality of arms, but in these less complex cases, the disadvantage has not been so stark.

After The Event Insurance

Personal injury After The Event insurance policies will themselves be little affected, because qualified one way shifting is in place. The real risk of an adverse costs award in a QOCS protected claim is when a part 36 offer is not beaten or if an interim or pre-action application is unsuccessful, neither of which will be affected by the fixed costs regime.

If, however, the fixed costs regime is extended to general litigation, this might lead to a reduction in ATE insurance premiums for cases which do not have the protection of QOCS where the costs risk should in theory reduce.  Unfortunately this comes at a heavy price and one that claimants might prefer not to pay.

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