Page 1
Introduction
8 December 2009
A major change is imminent in the handling of road traffic personal injury claims valued up to
£10,000. The new claims process is scheduled to apply to claims arising from accidents
occurring on or after 30 April 2010.
This e-briefing provides detailed commentaries on the new process which have been
prepared by BLM´s motor specialists.
The new process will complete a widely-known programme of reform which was launched by
the Ministry of Justice (MoJ) back in 2007. Key elements have been known for quite some
time, for example: that claims information will be shared electronically, that liability decisions
should be made within 15 days as opposed to 90 under the present Protocol, and that legal
costs will be fixed and recoverable on a staged basis.
The new claims process should – if implemented effectively and operated efficiently by
stakeholders – streamline the handling of these claims and see an end to marginal liability
arguments and to counter productive ‘haggling’ on quantum or contributory negligence.
In return for making quick and binding decisions within the new process insurers should
anticipate:
(a)
significant savings on claimant solicitors’ costs, in conventional claims over £2,000
and in infant claims over £5,333 (see chart below) and
(b)
potential indirect savings in overheads arising from a swifter and largely paperless
process.
BLM has analysed the MoJ’s proposals in detail. The flow charts and commentaries, for which
you will find the links below, will help you understand the MoJ’s three stage process and to
identify key issues now. We are sure you will find much more to consider as you read
through.
The Civil Procedure Rules (CPR) which will govern the new process have yet to be published.
We expect this to happen in the next few weeks and we will update you again on publication,
and should any changes emerge in the run up to implementation next April.
Pending publication of the CPR update there are, inevitably, areas of uncertainty, notably: the
detail of the application of Part 36, finding insurers’ best response to an inadequately drafted
notification, and dealing with the rapid transition from stage 2 to stage 3.
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BLM will be at hand to continue to provide best advice and support both during the
development of the Rules and after the implementation of the reforms. Please feel free to
contact any of the team listed on the left for further information.
Contacts
Mike Dobson
Partner, BLM Birmingham
mike.dobson@blm-law.com
DDI: 0121 633 6638
Kerris Dale
Partner, BLM Cardiff
kerris.dale@blm-law.com
DDI: 02920 477 640
Chris Coughlin
Partner, BLM Leeds
chris.coughlin@blm-law.com
DDI: 0113 261 5551
Rodney Wilson
Partner, BLM Liverpool
rodney.wilson@blm-law.com
DDI: 0151 471 5421
Jenny Moates
Partner, BLM London
jenny.moates@blm-law.com
DDI: 020 7865 3342
Ruth Graham
Partner, BLM Manchester
ruth.graham@blm-law.com
DDI: 0161 838 6741
Andrew Hibbert
Partner, BLM Southampton
andrew.hibbert@blm-law.com
DDI: 023 8038 2613
Tony Walton
Partner, BLM Stockton-on-Tees
tony.walton@blm-law.com
DDI: 01642 661 686
Contents
Stage 1
Stage 2
Stage 3
Credit hire
Fraud
Exit points commentary
Page 3
Stage 1 - Flowchart
Do general damages and special
damages (excluding damage to the
vehicle and hire costs) fall in the
bracket £1,000 to £10,000?
No
Claim falls outside the scheme and
CPR will apply
Yes
The claimant submits a Claim
Notification Form (CNF) for the new
claims process
No
Is the CNF complete? Is claimant
insurer known? What if certain
information is not provided?
The insurer should (probably) request
the missing information
Yes
The insurer should consider fraud
screening of the claim
Does the claimant provide sufficient
information so as to enable the insurer
to make liability decision within 15 days
Yes
No
Are there any fraud indicators?
Yes
No
Is there a claim for credit hire?
Claim will exit the process
Insurer does not admit liability in 15
days and claim exits the process
No
Yes
Insurer should consider mitigation
questionnaire and seek details of
any alleged impecuniosity of
claimant
Does the insurer admit liability within
15 business days?
No
Yes
The claim exits the process
Does the insurer pay the fixed
recoverable costs of £400 within 10 days
from the end of the 15 day period
allowed for responding to the CNF?
Yes
End of stage 1
No
The claim reverts to start of CPR
Pre-action Protocol 90 day
admission period
Page 4
Stage 1 - Commentary
Scope of the new process


The process applies only if general damages for injury and associated special
damages (excluding damage to the vehicle and hire costs) fall in the bracket £1,000
to £10,000.
If there is no element of personal injury the claim falls outside the process and CPR
will apply. So a claim for hire only does not follow the new procedure.
Claim Notification Form






All parts of the Claims Notification Form (CNF) are mandatory – save that the
claimant need not provide details of the referral source.
Some claimants may not provide complete information (eg TBA). Insurers should
then immediately seek any further information which is needed.
If the claimant does not provide sufficient information so as to enable the insurer to
make the liability decision within 15 days (30 days for MIB claims) then the claim exits
the process – and cannot return to it subsequently – but if the information omitted
should have been readily obtained by the claimant’s solicitor the ultimate costs may
be limited to those within this process.
Other than concerning liability (immediately above) there is no specific provision
about defective CNFs. It would appear that an insurer could, by admitting, waive any
non-liability related defects so that the claim would stay in the process. Doing so
might, however, in certain circumstances, create subsequent complications (for
example if the claimant turned out to be a minor and therefore entitled to higher costs,
due to the additional quantum advice and approval hearing fees).
Therefore, there could be satellite litigation on what information should or should not
be provided/obtained. Persistent abuse here could/should be monitored and if
necessary raised as a conduct issue with potentially adverse costs consequences.
Note that the claimant’s motor insurance details are not specified in the CNF.
Liability decision within 15 business days of receiving CNF (30 days for MIB claims)


The MoJ’s stated aim is that the admission will reflect the policy intention that the
‘Insurer admits that their policyholder was negligent and caused the accident. Some
damage was caused, but the insurer does not admit the nature or extent of the
damage.’ (The precise wording is still under consideration).
The admission is standardised, and made by ticking boxes in the CNF response form.
Hence there appears to be no option to qualify the admission. The options used in the
CNF response form (more than one may/should be ticked) are:
Accident occurred
Caused by the defendant’s breach of duty
Caused some loss to the claimant, the nature and extent of which is not admitted





Fraud screening should therefore be conducted at a very early stage.
If there are some positive fraud indicators then it may be better not to respond at all
so that the claim exits the process and falls back into the Personal Injury Pre-action
Protocol.
The claim exits the process if liability is denied. Reasons need to be given with a
denial.
If the claim exits the process at this stage it is deemed to be at the start of the 90 day
admission period in the Personal Injury Pre-action Protocol.
If there is a claim for credit hire then insurers should consider sending the claimant a
mitigation questionnaire and seek details of any alleged impecuniosity of the
claimant. This information will almost certainly be needed before the insurer can
make an offer at stage 2.
Page 5
Contributory negligence



If contributory negligence is alleged (other than a failure to wear a seat belt) the claim
exits the process.
If there is a significant costs saving to be made by staying in the system then it may
be preferable to concede liability in full rather than argue for a small discount for
contributory negligence.
A cost/benefit analysis will be required in each claim. It seems unlikely, however, that
arguments of, say, 10% contrib in cases not involving seat belts would be worthwhile.
Stage 1 costs following admission



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If liability is admitted then the insurer must pay the stage 1 fixed recoverable costs of
£400 within 10 days from the end of 15 day period allowed for responding to the CNF.
It is essential that wherever possible a fraudulent claim is identified before any
admission is made, given that payment of stage 1 costs follows automatically after
admission.
Insurers will need procedures in place to comply with this payment deadline. If costs
are not paid within the 10 days the claim exits the process.
Insurers should make it clear when paying these costs that they expect to be
reimbursed if the claim is not pursued.
Consideration should also be given to what may happen if at stage 2 it transpires that
the claim falls outside the bracket £1,000 to £10,000. See stage 2 commentary.
Analysis of stage 1 liability options and outcomes
Insurer action
Impact on the process
1. No response or late response
Exits
2. Admit
Stays in
3. Contrib – generally
Exits
4. Contrib – seat belt case
Stays in
5. Deny – must give reasons
Exits
6. Allege fraud – will need evidence
Exits
Costs consequences
Nothing to pay
Pay £400 stage 1 costs
Pay £400 stage 1 costs
Pay £400 stage 1 costs
Nothing to pay
Nothing to pay
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Stage 2 - Flowchart
Has the insurer admitted liability at stage 1?
Yes
The claimant obtains a medical report,
checks for factual accuracy and forwards
to the insurer
The insurer takes a view that the medical
report supports the value of the claim
within the scope of the new process, ie
PSLA £1,000 - £10,000
No
There are different costs
consequences if <£1,000 or if
>£10,000
Yes
Do the contents of the medical report
cause the insurer to withdraw the
admission of liability or take a causation
point?
Yes
No
Does the stage 2 settlement pack
forwarded by the claimant contain a gross
offer together with documentary evidence
in support of special damages?
The claimant may issue
immediately
No
The insurer should
request missing
information/documentation
O
The insurer does not make a
counter offer or does nothing
No
Does the insurer accept the claimant’s
offer within 15 business days? If so, the
claimant solicitor is entitled to a 12.5%
success fee where a CFA applies
The insurer makes a
payment of the claim and
stage 2 costs within 10
days commencing the
end of the 15 day period
The claim exits the process see exit points section
Yes
Are there any fraud indicators?
Yes
The claim exits the process see exit points section
The claim exits the process - see
exit points section
No
The insurer must make a
counter-offer within 15 days.
Parties have a further 20 days
for negotiations beginning
when the 15 day period ends
Late
offer
Without an agreed extension,
this will cause the claim to exit
the process
Negotiations fail
End of stage 2
Within 10 days of the end of the negotiation period the insurer must pay the
full amount of its offer by way of an interim payment.
The claim then proceeds to stage 3
Page 7
Stage 2 - Commentary
Medical report




Following an admission at stage 1, the claimant obtains the medical report in the
prescribed format.
There is no prescribed time period during which the claimant’s solicitors are to obtain
and disclose the medical report. The absence of a time limit may introduce
unnecessary delay.
The medical report is to be sent to the insurer within 15 days of the claimant
confirming its factual accuracy. This is the only opportunity for it to be checked. Note
that there is currently no provision for either party to put questions to the expert.
The completed settlement pack, with documents, plus the claimant’s offer to settle
are sent with the medical report.
Settlement pack and offer







Within 15 days of the medical report being confirmed as factually accurate the
claimant’s solicitors complete a stage 2 settlement pack which is sent electronically to
the insurer.
Evidence relating to special damages must also be sent at that time, together with
receipts for disbursements incurred as a result of the claims process.
The settlement pack will include a gross and a net (ie net of CRU) offer from the
claimant. If relevant – and it will only be so in seat belt cases – the offer will reflect
any discount for contributory negligence.
The settlement pack may include a claim for unpaid costs (£400) which were due at
stage 1.
It has been proposed that the reasoned withdrawal of an offer will cause the claim to
exit the process.
Despite being placed on notice via the CNF that the claimant intends to present a
claim for hire charges and repair costs, it is only on receipt of the settlement pack that
insurers will be provided with the details.
Given that the valuation of the claim (for the purposes of this process) excludes
vehicle repair costs and hire costs, insurers could be met with a substantial claim for
credit hire/repair costs with only 15 days to respond.
15 days to respond to settlement pack


Insurers have only 15 business days from receipt of the settlement pack to consider
and either accept the claimant’s offer or make a counter-offer. The 15 day period
starts the day after the settlement pack was sent by the claimant’s solicitor.
Unless the parties have agreed to an extension beyond the 15 day period, the claim
will exit the process where the time limit for responding to the first offer has not been
adhered to. It is likely that claimant’s solicitors will seek to take full advantage of the
strict time limits to exit the process.
Counter offer and 20 day negotiation



If the claimant’s offer is not accepted, the insurer must make a counter-offer using the
settlement pack form. The insurer will give details of both the gross and net offer.
Parties then have a further 20 days for negotiations, beginning when the 15 day
period has closed.
Insurers should also be aware that their counter-offer made at stage 2 transposes
automatically to stage 3. This should encourage insurers to make these offers as
competitive as possible.
To avoid last minute offers, any stage 2 offers made inside the last five days of the 20
period will extend the period by five days.
Page 8
Raising causation


On reviewing the medical report, the insurer may wish to question or deny
causation. Reasons should be given and the claim will leave the process.
The decision whether to raise causation as an issue will require the insurer to
undertake a cost benefit analysis, having regard to
–
the likely value of the claim and
–
the stage 2 and 3 costs when compared to the present ‘predictable’ costs
regime (CPR 45.9) which will apply if the claim exits the process.
Small claims valuation?



On seeing the medical report it may become apparent to the insurer that the personal
injury element is below £1,000 and therefore the claim falls within the small-claims
track.
This creates a potential windfall for the claimant’s solicitors in such cases – they
would already have received £400 by way of stage 1 costs. They may also be entitled
to stage 2 costs of £800 if the claim settles and there was a reasonable expectation
that the personal injury element was >£1,000.
Currently there appears to be no provision / mechanism for an insurer to recover the
stage 1 costs (over)payment where the claim exits the new process into the smallclaims track.
Paying offer and costs at end stage 2



Within 10 business days of the end of the negotiation period (ie 15 or 20 days) the
insurer must pay the full amount of its offer by way of an interim payment, subject to
CRU deduction. If the CRU certificate will expire during this payment period then the
insurer will have 30 days to make the interim payment (having refreshed the CRU
certificate).
Currently there is no detail available as to the prospect/mechanism of the insurer
recovering money should a lower sum be awarded at stage 3.
Stage 2 costs of £800 will also be paid at this point.
Relevant additional stage 2 provisions
Medical records and notes



The cost of obtaining medical records will only be allowed where the medical expert
has identified a need for them. The probable consequence may be that the claimant’s
solicitors will be less likely than previously to obtain GP records.
A medical expert may decide he/she wants to review the records, but they might no
longer be provided by the claimant as a matter of course.
Any request by an insurer for the medical records to be considered will not (in itself)
cause the claim to exit process.
Subsequent medical reports (same discipline)


A subsequent medical report may be obtained and the cost recovered where the
initial report indicates the need for a further examination at the end of a specified
period, either where ongoing treatment is necessary, or the period is needed to
establish final prognosis.
Notwithstanding that the parties may agree a stay in relation to the personal injury
element of the claim, it is expected that the claimant’s solicitors may conduct work in
relation to the non-personal injury element eg vehicle and hire claim (if applicable).
Page 9
Further medical reports (different discipline)


Where it is clear that an additional medical expert is necessary from a medical expert
of a different discipline, a second report may be obtained from a medical expert in
that discipline.
A third or fourth medical report can only be obtained on the recommendation of either
of the two medical experts of different disciplines already consulted. No further
reports will be allowed at that stage.
Interim settlement pack (cases with more than one medical report)



An interim settlement pack is used when sending the first medical report. Within 10
days of receipt of it, insurers must make an interim payment of £1,000.
The claimant’s solicitor may request an interim payment of more than £1,000 and
should provide reasons. An insurer may refuse this and must provide reasons.
However, there is a residual obligation on the insurer to pay the sum of £1,000 within
10 days of receipt of the pack.
If the claimant’s solicitor elects to pursue the full amount of the interim payment the
claim will exit the process. If the court subsequently finds that it was not reasonable
for the claimant to pursue the interim payment over £1,000, the claimant’s costs may
be limited to the fixed recoverable costs of the process (ie stage 1 and stage 2
costs).
Page 10
Stage 3 - Flowchart
Still part of stage 2
At the end of the 20 day period for negotiation, the claimant solicitor will prepare the
stage 3 version of the Settlement Pack Form (A) and (B) which includes final stage 2
offers.
NB There is no further opportunity at stage 3 to provide new documents/evidence
except where ordered by a judge
Claimant solicitor sends stage 3 settlement pack electronically
to the insurer who has 5 business days to check accuracy of
the forms and return them electronically
If the insurer fails respond the claimant may assume the insurer
has nothing to add
The claimant solicitor may make
application to court in accordance with
CPR after 10 business days from date
he sent the stage 3 settlement pack to
the insurer

The claimant solicitor files at court
 A claim form (not the CNF)
 Medical report
 Stage 3 settlement pack
Receipts supporting special damages and disbursements
The claimant solicitor lodges both parties’ final offers in the stage 3 Settlement Pack
Form (A) and lodges it in sealed envelope to be seen by the judge only after a decision
has been made
 The offers are exclusive interest
 Part 36 applies to the stage 3 offers only
There is a paper hearing unless the judge
directs or either party requests an oral hearing
Credit hire disputes about issues
other than quantum (eg a
challenge to validity of the hire
agreement) will cause the claim
to exit the process
The hearing concludes
The judge’s valuation is checked against sealed envelope
The interest is calculated by the court
Claimant solicitors fixed recoverable costs for stage 3
 £250 paper hearing
 £500 oral hearing
 fixed success fee of 100% for stage 3 costs only, if
claimant wins (success fee is 12.5% for stages 1 &
2)
 Time for payment of stage 3 costs is in accordance
with CPR/or as ordered by the court
Defendant solicitors fixed recoverable
costs for stage 3
 £250 paper hearing
 £500 oral hearing
 There may also be a success fee
Page 11
Stage 3 - Commentary
Stage 3 – Quantum-only determination initiated by claimant

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

It begins only if agreement on quantum has not been reached by the end of the 20
day negotiation period set out at stage 2. Stage 3 is initiated by the claimant. The
idea that the insurers could do so has been dropped.
The claimant prepares the stage 3 settlement pack, to include:
–
final stage 2 offers (sealed); and
–
claimant solicitor 'comments' so the judge is made aware, of each disputed head
of damage, the amount in dispute and the reasons for the dispute.
It is critical to note that the insurer’s offer and comments in the stage 3 settlement
pack will in practice amount to the counter-schedule.
The comments are the only opportunity to explain the reasons for the amounts/heads
of damages claimed and in dispute. There will be no further opportunity in stage 3 to
provide new documents or evidence save where ordered by the judge.
5 days to respond to stage 3



The insurer has only 5 business days from receipt of the stage 3 settlement pack to:
–
check the accuracy of the stage 3 settlement pack
–
provide further brief comments where necessary; and
–
return it electronically
as noted above, the insurer responses here will effectively be the counter-schedule.
There is no extension to the 5 day period save by agreement. As this is an extremely
short period the key for insurers will be to get everything organised, in advance,
at stage 2.
Where the insurer fails to return the stage 3 settlement pack within the time period,
the claimant can assume that the insurer has nothing further to add.
The stage 3 application



10 business days from the date that the claimant sent the stage 3 settlement pack to
the insurer, the claimant may apply to the court for the amount of damages to be
determined whether or not a response has been received from the insurer.
A simple application process is proposed that will require the lodging of standard
forms but which has sufficient flexibility for the court to order additional evidence if it
considers necessary.
The claimant will file the following at court:
–
claim form
–
medical report
–
stage 3 settlement pack form (A) and (B)
–
receipts supporting claims for special damages and disbursements.
The stage 3 hearing


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
There is a presumption in favour of a paper hearing at stage 3 unless the judge
directs otherwise or either party requests an oral hearing (which would be in person,
not on the phone). No further new documents or evidence should be provided save
where ordered by the judge.
Stage 3 settlement pack offers are to have the effect of Part 36. How Part 36 impacts
on cases where only staged, fixed fees apply needs clarification.
This provision highlights the need to be making accurate counter and final offers at
stage 2. Offers made in negotiations subsequent to that offer will not be carried
forward to stage 3.
Where an award is made of a sum less than the sum already paid to the claimant,
there is a risk that the claimant has spent the money and is not good for the refund.
The stage 3 settlement pack (B) will be lodged in a sealed envelope which will be
seen by the judge only after a decision is made.
Page 12
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
Where there is a paper hearing the court will notify parties of its decision with written
reasons. The court will decide the interest to be awarded, if any.
An appeal may be made in the usual way (in accordance with the general CPR) from
the stage 3 determination.
Stage 3 fixed costs





For claimant’s solicitor (and same for defendant solicitor):
–
paper hearing - £250
–
oral hearing - £500
–
a fixed success fee of 100% (CFA only) may apply for these stage 3 costs only
(where the claimant has won after either variant of the hearing).
The sum of £500 for an oral hearing is split between £250 for the papers and £250 for
the advocacy. Of course, the solicitor may also be the advocate and if so, the
additional £250 may prove an attractive stream of additional revenue. Insurers and
their representatives should have arguments ready to uphold the presumption of a
paper only hearing.
It is to the stage 3 costs only that Part 36 will apply. The idea is to provide certainty
for the claimant’s solicitor advising their client on the merits of an offer and the risks of
proceeding to stage 3.
Where offers are made and settlement is reached between the issue of a claim and
before the stage 3 hearing commences then fixed recoverable costs of £250 will
apply plus fixed success fee at 12.5% (CFA only).
Stage 3 costs are to be paid within the general timescale set by CPR or as ordered
by the court.
Page 13
Credit hire - Flowchart
There is an opportunity to
intervene in credit hire
Stage 1
The CNF identifies credit hire.
Is it being handled separately
from the personal injury?
Yes
Yes
Credit hire elements fall
outside the process but will
need to be brought back in
if unresolved by stage 3
No
Insurer should consider a
mitigation questionnaire and
seek details of any alleged
impecuniosity of the claimant
The insurer fails to
respond on liability
The claim exits the process
The claimant sends invoices.
There is an opportunity to settle
or narrow the issues
Stage 2
A stage 2 settlement pack is
sent with evidence to support
credit hire
The insurer fails to make
an offer within 15 days
The claim exits the process
Stage 3
A stage 3 settlement pack
brings all credit hire into
process and sets out issues in
dispute
Insurers have 5 days to
respond or may lose
opportunity to argue hire
The court will direct additional
evidence
Stage 3 hearing
Technical arguments are
raised or oral evidence is
required
The claim exits the process
Page 14
Credit hire - Commentary
Value of the claim



The value of the claim for the purpose of deciding if it should fall into the new process
is based on the level of general damages (which includes PSLA) and injury-related
special damages.
Although vehicle damage and/or hire costs are excluded for the purposes of valuing
the claim, they can be recovered as an element of special damages within the
process. This provides scope for very large credit hire claims to be tagged onto
straightforward injury claims within the process.
The concern is the extent to which insurers will have the opportunity to assess the
credit hire claims within the timescales set out in the new process. There will be
limited time to chase up information and potentially limited scope to rely upon
evidence to dispute the hire charges.
Hire charges handled separately



Hire charges are typically handled separately from a claim for personal injuries.
If handled outside the process and the credit hire is not settled the hire claim will need
to be brought back into the process at stage 3.
If handled by a third party there could potentially be a situation where proceedings
are issued for a contested credit hire claim and concluded, whilst the claimant’s injury
claim runs through the process. If so, a claimant would lose their right of action to
make a claim for personal injury.
Early notification of claims at stage 1



Early notification should allow insurers to facilitate repairs if necessary and/or monitor
the period of the repair and hire. Every field on the CNF is mandatory (save for
referral source). The claimant is required to confirm:
–
whether he requires the use of an alternative vehicle and/or has been provided
with the use of an alternative vehicle
–
if the hire is ongoing
– the name of the credit hire organisation.
There is no time limit from the date of the accident for the claimant to start the
process. Claimants may be looking to push claims through the process, possibly so
they may exit if insurers fail to respond on liability.
It remains to be seen whether early notification may provide defendant insurers with
an opportunity to intervene in the credit hire, although where insurers subscribe to the
ABI GTA it is not possible to intervene. There is also the distinct possibility that a
claimant may not appreciate that they are actually in a hire vehicle because they are
under the misapprehension that it was a courtesy car/car provided by insurers.
Stage 1 and ABI GTA



If instructed to deal with credit hire the claimant’s solicitor should send invoices for the
credit hire with the CNF or alternatively as soon as possible and on the defendant’s
admission of liability.
The new process suggests that only invoices are sent at stage 1, not the payment
pack that would ordinarily by required under the ABI GTA. Will the claimant send all
the required information at this early stage?
The hire may be continuing. Defendant insurers should, upon notification, consider
serving a mitigation questionnaire and seeking details of any alleged impecuniosity.
However, if an insurer is a subscriber to the ABI GTA, it will be premature to make the
enquiries at this stage.
Page 15

The daily rate is not challengeable (unless the claimant hires a better car) until 90
days after receipt of the payment pack. At stage 1 under the ABI GTA the only
queries are proof of need, what car is hired and whether it is 'like for like'.
Impecuniosity questions are contrary to the terms of the ABI GTA and it is unlikely
that point can be investigated as the claimant will still be in hire.
Between stages 1 and 2



It may be some time before the medical evidence to commence stage 2 is obtained
and approved by the claimant. Insurers should be looking to narrow the credit hire
issues during this period. Otherwise at stage 2 there will be only a very limited 15 day
period for insurers to consider and respond.
Outside of the ABI GTA insurers should as soon as possible be requesting from the
hirer the Mitigation Questionnaire and Hire Validation Form as suggested under the
ABI GTA. They should be checking loss of use dates with the insurers/garage/CHO
and clarifying if the claimant is impecunious/requesting documents.
Under the ABI GTA once the hire has concluded insurers have 30 days from receipt
of the payment pack before penalty charges start accruing. Early enquiries remain a
priority. As soon as the hirer off hires enquiries can start into the period of hire. Once
the matter is outside the 90 day period after the receipt of the payment pack then
enquiries should commence as to the rate.
Stage 3 settlement pack


The insurer has 5 business days, from receipt of the stage 3 settlement pack form, to
provide brief comments, check the accuracy and return it. So if the credit hire is
brought into the process at stage 3, the insurer has only 5 days in which to comment
and if this is missed or is late, it will be assumed that they have nothing to add.
Insurers will need to have their systems set up so that if there is a continuing dispute,
they can anticipate and be in a position to properly put their case in response, or risk
losing the opportunity to argue the points. The draft rules will provide further
guidance, but defendants must be primed to set out their arguments disputing the hire
within their response.
Stage 3 evidence for paper hearing





It is suggested there will be a simple application process that will require the lodging
of standard forms which have sufficient flexibility for the court to order additional
evidence if it considers that necessary.
There is reference to evidence required such as invoices, engineer’s report/vehicle
report, rate and period of credit hire, and valuation evidence such as Glass’s Guide.
All will be subject to the judge’s directions.
The indication is that the insurer will have the opportunity to provide in response
evidence from an engineer or a rate surveyor, for example. However, there may well
be no opportunity to call evidence.
What weight will the judge attach to such evidence at a paper hearing? There may be
some benefits of a paper hearing in the right case in that insurers will have the
opportunity to put in spot rate evidence and the court will not have counsel for the
claimant raising the usual high expectations as to the quality of the evidence. This
may make the court more inclined to accept the rate evidence subject to the claimant
being allowed and the judge weighing in the balance rebuttal evidence.
For paper hearings, obviously the opportunity to cross examine will be lost. The
claimant’s solicitor will be able to present the claimant’s evidence as they wish. We
are therefore likely to see statements saying ‘I required a like-for-like vehicle because
I needed a sturdy, safe and reliable car’ when now on cross-examination a claimant
may accept on the stand that a lesser vehicle would have sufficed.
Stage 3 oral evidence?

There appears to be no provision for oral evidence within the process. Would the
Page 16

parties be able to apply?
If oral evidence is required is it likely that the claim will be deemed to be too complex
to remain within the process? There is no guarantee of an oral hearing, and the
claimant may be likely to oppose any request.
Stage 3 further offers


It may be that the stage 3 settlement pack is prepared before there is sufficient
evidence to fully assess the hire claim for the defendant to make a final offer. In stage
3 the judge may direct, or the parties may request further directions for further
evidence to be obtained/exchanged. At this stage there is no guidance regarding
what further offers may be made after stage 3 commences and particularly once you
have received and/or exchanged further evidence following directions.
There must be arguments with regard to any Part 36 cost consequences if there is
insufficient evidence to assess the reasonableness of the credit hire claim.
Stage 3 hearing and exiting



Where there is a quantum dispute over vehicle damage/hire charges it will be
resolved at a stage 3 hearing. This would include disputes over the rate and period of
credit hire, subject to the judge’s directions.
Disputes about issues other than the amount of damages to be paid will cause the
claim to exit the process. For example, a challenge to the validity of the hire
agreement, or a technical argument not relating to quantum.
There is no definition of an 'argument not relating to quantum'. It is assumed this will
include technical enforceability arguments. It is assumed that arguments with regard
to the need to hire, period of hire and rate disputes are not complex enough to be
removed from the process. There is a risk of satellite litigation regarding the definition
of what would be a complex enough dispute to remove the claim from the process.
Stage 3 tactical balance


Once at stage 3 and the hire claim has been brought within the process, insurers can
proceed to settle the personal injury element and may tie the credit hire claim into the
fixed costs process.
There will remain a balance to be found between certain hire disputes that insurers
would want to be dealt with under this system (given question marks over the
evidence that will be able to be put forward, and the fact that the hearing will be dealt
with by way of paper evidence only with no oral representation) and other extensive
hire disputes that insurers would want to be taken out of this process.
Page 17
Fraud - Flowchart
Stage 1
Details are completed in a
claim notification form
(referral source optional)
Fraud screening
Yes
Suspicions
raised
Fraud alleged
Claim exits process
No response or a
denial of liability
Claim exits process
No
Liability admitted within the 15 day period
Stage 2/3
Fraud identified
Claim exits process
Fraud alleged

Seek recovery of any stage 1
costs or interim payment
Or
Suspicions raised
Causation issues
Claim exits process

Claimant may issue
immediately
Liability issues,
but not enough
evidence to
allege fraud
Successful
Unsuccessful
Claim proceeds
in process
Application to
withdraw
admission
Claim exits
process
Page 18
Fraud - Commentary
On notification



An allegation of fraud is a general exit trigger at any stage. The claim will leave the
process and fixed recoverable costs will not be payable.
The onus is on the party alleging fraud to prove it and the standard of proof, whilst on
the balance of probabilities, is generally for fraud cases a high burden. No pleading of
fraud can be made and maintained without clear and cogent evidence for which,
ultimately, one is reliant upon witnesses and experts.
Whilst there may be circumstances where the parties are known fraudsters, or there
is clear evidence of fraud, or the claim is part of a wider fraud ring, it would be a rare
circumstance indeed where there would be sufficiently cogent evidence to found an
allegation of fraud within the notification timescales proposed under the reforms.
During the 15 period for admission






The timetable is such that it is very much in the fraudster’s interests to enter the
process at an early stage. With automatic costs provisions and payments of offers
and interims in full, the incentives are there for fraudsters to run low-value sham
litigation through the new streamlined process before the fraud is spotted.
Insurers (and defendants) will need to have their processes set up to screen cases
for fraud indicators within the initial 15 day period to remove suspicious claims from
the process. The timescales highlight the need for slick processes to cross reference
the claim details against a fraud indicator checklist and fraud databases such as
MIAFTR and CUE.
Insurers should be wary of raising allegations of fraud without cogent evidence. The
insurer does not have to put forward a substantive case of fraud and can put the
claimant to strict proof – Kearsley v Klarfield (2005).
If there are concerns or suspicions, insurers will want to remove the claim from the
process. Where the insurer does not respond or denies (with reasons) liability, the
claim will exit the process without stage 1 costs becoming due. Hence both are
options for insurers where there are some fraud indicators but the evidence is
relatively weak at this stage.
Remember, however, that once a claim has left the process it may not re-enter it,
which highlights the acute nature of the decision to be made as to whether there are
enough indicators or reasonable suspicions. If the claim leaves the process, the
insurer will have lost the benefit of the new fixed costs regime. The claim will be
handled – and costs will arise – in accordance with the relevant pre-action protocol
and/or the CPR at large.
There is the question of how binding the admission at stage 1 will be. The MoJ
envisages a form of words by which the insurer admits that their policyholder was
negligent and caused the accident and that some damage was caused, but that the
insurer does not admit the nature or extent of the damage. What effect will a
withdrawal have? It is likely that withdrawals remain governed by CPR part 14
generally. This area could potentially cause a procedural headache and is likely to
lead to satellite litigation.
Notification of referral source

This is an optional field on the CNF. Whilst it may help with management information
capture, it is more than likely that the claimant solicitors will omit this field, raising
concerns as to the benefit that may be derived from a non-mandatory field.
Medical records


The cost of obtaining medical records will be allowed as a disbursement only where
the medical expert has identified the need for them.
If there is an issue as to the accident circumstances and the nature of injury
sustained, the insurer should be looking to exit the process.
Page 19

If the insurer wishes to question or deny causation (giving reasons) the claim will also
exit the process. The insurer will need to be in an informed position via monitoring
their systems and processes of fraud screening to pick up on those cases where
there may be such causation issues.
Stage 2



There is a potential problem when suspicions arise after stage 1 and the matter has
progressed within the process. There may not be sufficiently cogent evidence to
found an allegation of fraud, but insurers have enough suspicions to want to
investigate further.
If there are liability concerns such as a staged accident, insurers may want to leave
the process and investigate further. There is no guidance within the process as to the
standard of evidence and basis of the allegation to be raised to exit the process.
Taking a general point on causation may not be enough.
It may be preferable simply not to respond at stage 2, to cause the claim to exit the
process. Once again, this highlights the acute nature of the decision to be made as to
whether there are enough indicators or reasonable suspicions. If the claim exits the
process, the insurer will have lost the benefit of the new fixed costs regime.
Recovery of sums paid during the process



The MoJ envisages that insurers will be able to take whatever steps they consider
appropriate to recover money paid to the claimant.
Therefore enforcement proceedings may need to be pursued. At this point, though,
there may well be complications with regard to the validity of the allegation of fraud. It
would have been tested or proven by this stage and what if a claimant has already
spent the money paid (eg by way of an interim payment)?
Note that there are potentially serious regulatory issues in paying over money where
there are suspicions of fraud.
Page 20
Exit points commentary
Claims outside scope
Criterion Test
Claim
Anything other than a road
type
traffic accident claim is
excluded
Location Accident outside England
& Wales1
Value
Injury PSLA under £1,000
Value
Injury and associated
specials over £10,000
Accident
date
At fault
driver
Procedure/law
–
Costs regime
–
Relevant local law
Relevant local law
Small claims track
CPR and pre-action
protocol
CPR 27.14
General costs rules –
'predictable' costs do not apply
Fast-track if total
claim under £25,000
Before implementation (30 CPR and pre-action General costs rules –
April 2010)2,3
protocol
‘predictable’ costs may apply if
under £10,000 and if not
Frast-track if total
litigated
claim under £25,000
Untraced
MIB untraced drivers MIB untraced drivers
agreement
agreement
1. The Rome II regulation means that claims arising from accidents outside England &
Wales but involving parties with a common habitual residence in England & Wales
are subject to English law. Hence such claims could be within the scope of the new
process.
2. Parties may agree to apply the new process to claims arising from accidents
occurring before implementation. If so, the new staged costs will apply.
3. Therefore – combining notes 1 and 2 – the new process may potentially apply to
claims arising from accidents which happen before 30 April 2010 either elsewhere in
the UK or abroad.
Fraud – a general exit point
Party(ies) defaulting

trigger event(s)
Insurer

Procedure / Costs regime and
law
comments/consequences
alleging fraud at any time
CPR and pre- General costs rules – ‘predictable’ costs
action
may apply if under £10,000 and if not
protocol
litigated
The claim will leave the process and the
staged costs will not be payable
Insurers may take 'appropriate' steps to
recover any money paid (eg an interim
payment or stage 1 or stage 2 costs)
Exiting on notice?
As a general principle, the MoJ envisages that when an exit point is triggered, the party not in
default must give notice, within 10 days, that the claim is exiting the process. It appears that if
no such notice is given then the claim stays in the process despite the default.
Page 21
Stage 1 exit points
Party(ies) defaulting

trigger event(s)
Claimant solicitor
Insurer

CPR and preaction protocol
denying liability
failing to respond
responding later than 15
business days (30 for
MIB claims)
Insurer

CPR and preaction protocol
mandatory CNF field
omitted, rendering insurer
unable to decide liability
Insurer



Procedure / law Costs regime and
comments/consequences
alleging contrib. (other
than seat belt)
General costs rules – ‘predictable’ costs
may apply if under £10,000 and if not
litigated
However, new three stage costs may
apply if the court subsequently considers
solicitor could have obtained omitted
information
General costs rules – ‘predictable’ costs
may apply if under £10,000 and if not
litigated
Stage 1 costs not due
Stage 1 new
process then
CPR and preaction protocol
The claim enters the pre-action protocol
at the start of the 3 month investigation
period
General costs rules – ‘predictable’ costs
may apply if under £10,000 and if not
litigated
Stage 1 costs of £400 will be payable
Insurer

failing to pay stage 1
costs, due within 10
business days after the
15 day admission period
Insurer

Stage 1 new
process then
CPR and preaction protocol
Stage 1 costs not due
Not specified
late payment of stage 1
costs
The claim enters the pre-action protocol
at the start of the 3 month investigation
period
General costs rules – ‘predictable’ costs
may apply if under £10,000 and if not
litigated
The claim enters the Pre-action Protocol
at the start of the 3 month investigation
period
Not specified
Assume late payment will be treated as
non-payment (above)?
If the claim exits at stage 1 the fixed success fee of 12.5% is not due because the claim has
not settled.
Page 22
Stage 2 exit points
Party(ies) defaulting

Insurer



Stage
1 and stage 2
refusing claimant’s new process
offer, within 15 days then CPR
of receiving
settlement pack
failing to make a
counter offer within
15 days of receiving
making a late
counter offer
(without having
agreed an
extension)
denies or takes a
causation point
having seen
medical report
Claimant
Insurer


Costs regime and comments/consequences
trigger event(s)
Insurer

Procedure /
law
seatbelt case
dispute of fact
requiring evidence
from lay defendant
and/or medical
expert
Stage 1 and
stage 2 new
process then
CPR
Stage 1 and
stage 2 new
process then
CPR
General costs rules – ‘predictable’ costs may
apply if under £10,000 and if not litigated
Stage 1 costs of £400 have already become
payable
Stage 2 costs of £800 are not payable
All Pre-action Protocol steps have been
completed. The claimant decides the next
action
The claimant may issue proceedings
immediately
General costs rules – ‘predictable’ costs may
apply if under £10,000 and if not litigated
Stage 1 costs of £400 have already become
payable (however, the MoJ states that 'fixed
recoverable costs will not apply' – which
presumably means the stage 2 costs of £800
are not payable)
All Pre-action Protocol steps have been
completed. The claimant decides the next
action.
The claimant may issue proceedings
immediately.
General costs rules – ‘predictable’ costs may
apply if under £10,000 and if not litigated
Stage 1 costs of £400 have already become
payable
Stage 2 costs of £800 are probably not payable
(this is not specified)
The Pre-action Protocol steps which may have
been completed are not specified (probably all)
Page 23
Claimant

pursuing, after the insurer’s
refusal, an interim payment
greater than £1,000
Stage 1 and
stage 2 new
process then
CPR
Claimant

Stage 1 and
stage 2 new
child applying for any interim process then
CPR
payment
Claimant solicitor will issue Part 7
proceedings
Stage 1 costs of £400 have already
become payable
Stage 2 costs of £800 are not payable
General costs rules – ‘predictable’
costs may apply if under £10,000 and
if not litigated
Stage 1 costs of £400 have already
become payable
Stage 2 costs of £800 are probably
not payable (this is not specified)
The new process does not provide for
interim payments for children. The
claimant must issue proceedings in
the usual way
If the claim exits at stage 2 the fixed success fee of 12.5% is not due because the claim has
not settled.
Stage 3 exit points
Party(ies) defaulting

trigger event(s)
Claimant
Insurer

non-quantum
dispute about credit
hire or vehicle
damage
Claimant

Procedure / law Costs regime and
comments/consequences
child case in which
judge requests
further evidence
Stage 1 and
stage 2 new
process then
CPR
Stage 1 and
stage 2 new
process then
CPR
Not specified
General costs rules apply – any sanction will
be through the court where the claim could
have remained in the process
Stage 1 costs of £400 have already become
payable
Not specified if stage 2 costs of £800 are
payable
Stage 1 costs of £400 have already become
payable
Stage 2 costs of £800 have already become
payable
Stage 3 oral hearing costs of £500 and
approval costs of £500 are not payable
If the claim exits at stage 3 the fixed success fee of 100% – which applies to this stage only –
is not due because the claim has not concluded.
Page 24
Late payment procedures (not strictly exit points)
Party(ies) defaulting

Procedure/law
trigger event(s)
Insurer

Stage 1 and stage 2 Claimant applies (detail not specified) to
the court for an order to pay
late payment of
agreed damages
The court will determine via a paper
hearing unless the judge directs otherwise
Any outstanding costs and disbursements
will be dealt with at the same time
Stage 1 and stage 2 Claimant applies for payment to be
new process
enforced under CPR 44.12A
Insurer

Costs regime and
comments/consequences
late payment of
stage 2 costs
Claims at the financial margins
Margins
Lower

PSLA
concluded
at under
£1,000
Upper

Claim
within the
process
exceeds
£10,000
PSLA
Test
Reasonable
prospects at
outset of
exceeding
£1,000 PSLA
Costs regime and comments/consequences
MoJ intends that:


stage 1 costs of £400 and stage 2 costs of £800
should be paid on all such claims
the claim will exit the process with the insurer
notifying the claimant that it is valued at less
than £1,000 PSLA
Note that these provisions could amount in practice to an
effective lowering of the Small Claims Track limit,
because all cases valued in a bracket of, say, from £800
– £1200 would be argued to be costs bearing
Later becomes MoJ intends that:
that claim
exceeds
 the claim exits the process with the claimant
£10,000 PSLA
notifying the insurer that it exceeds £10,000
 if the court later finds that it unreasonably exited
the process, costs may (not ’must’ or ‘will’) be
limited to the maximum of the staged costs in the
new process.
Note that the value used by the MoJ – ie exceeds
£10,000 PSLA – is different to that used to define the
scope of the process. There, the test is that the general
damages and associated specials (excluding hire and
repair/damage) should be under £10,000. It is not clear if
this difference is a mistake or deliberate
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