LEGAL UPDATE : CII REGIONAL FORUM
3 July 2014
Name: Alistair Kinley & Nikolas Stott
Position, Partners at BLM
T: 020 7865 3350 / 0151 471 5443
E: alistair.kinley@blmlaw.com and nikolas.stott@blmlaw.com
INTRODUCTION
‣
‣
‣
‣
Commercial Insurance Law Reform
LASPO / Jackson / MoJ update
Liability – narrowed: ERRA 2012
Liability – broadened: Woodland
MARINE INSURANCE ACT 1906
THIRD PARTIES (RIGHTS AGAINST INSURERS) 2010
CIDRA 2012 AND INSURANCE CONTRACTS 2015?
BUSINESS INSURANCE LAW REFORM
‣ where we are now & how we got here?
‣ 1906 Act (marine) & 2012 Act (consumer)
‣ where are we heading & why?
‣ a 2015 Act for business insurance?
‣ one size fits all
‣ two obvious critical phases
‣ before the policy starts
‣ and after it is in place
PRE-CONTRACT ISSUES (PLACEMENT)
“a fair presentation of the risk” and proportionate remedies
‣ retained duty of disclosure
responses on reform of
Other
disclosure in business
4%
insurance law
Disagree
(insured and agent)
16%
‣ effect of (mis)representations
(insured and agent)
‣ notice and questions
(underwriter)
Agree
80%
‣ knowledge of parties
(all concerned)
Other
18%
Disagree
9%
responses to “proportionate
remedies” as the default
legal regime
Agree
73%
ONCE COVER IS IN PLACE
(WARRANTIES & CLAIMS)
Draft Insurance Contracts Bill 2014 (s9)
warranties
‣ abolition of ‘basis’ clauses –
already there for consumers
“a representation is not capable of being converted into a
warranty by means of any provision of the non-consumer insurance
contract … or of any other contract (and whether by declaring the
representation to form the basis of the contract or otherwise).”
‣ breaches to suspend cover –
they can be rectified
‣ specified perils/types of loss –
Disagree
5%
support for warranty reforms
Other
7%
causation by the back door?
claims
‣ damages for late payment –
a statutory duty to pay valid claims
within a “reasonable time”
Agree
88%
Disagree
11%
Other
8%
‣ remedies for fraud
should damages be available for
late payment of claims?
Agree
81%
4. THE FUTURE
a new statutory default (ie opt out) regime for business insurance?
‣ indications reform will happen?
‣ likely processes and timing of change?
‣ effects, implications and reactions?
[what might we need to do differently and why?]
‣ market dynamics and tiered responses?
PROCEDURAL REFORMS UPDATEMOJ, LASPO AND JACKSON- EARLY LESSONS
TODAY’S AGENDA: REVIEW OF PROCEDURAL REFORMS
ONE YEAR ON
1. Key Components in the package of civil justice
reforms implemented from April 2013 by way of the
Legal Aid Sentencing & Punishment of Offenders Act
2012 (LASPO) include:
‣
‣
‣
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Abolition of Success Fees
Abolition of ATEs
Introduction of DBAs
Prohibition of Referral Fees
2. CHANGES BY WAY OF THE CIVIL PROCEDURE RULES
‣ Proportionality: Amendment to the Overriding
Objective
‣ Relief from Sanctions
‣ Case/Costs Management & Budgeting
‣ QOCS
‣ Part 36
OTHER CHANGES
‣ 10% increase in General Damages
‣ Extension of RTA Portal cases up to £25k and EL/PL
Cases
‣ The FRCS Regime
FUNDING: CFAS AND ATES
‣ CFAs- due to influx of claims pre April 2013 not yet seen
full impact
‣ Still a market for ATE
‣ 10% uplift in general damages
CASE MANAGEMENT:
‣ Active judicial case management
‣ Strict enforcement of the rules
‣ Lead case is Mitchell: non-compliance with the CPR will
no longer be tolerated
MITCHELL V NEW GROUP NEWSPAPERS LIMITED
(2013) EWCA CIV 1537:
“Justice Means Something Different Now” (Lord Dyson
MR)
‣ Relief from sanctions will rarely be granted when a
party fails to comply with court directions, rules and
orders
‣ Problem caused by two rule changes since 1 April 2013:
‣ New CPR 3.9- application for relief from sanctions: Court
will consider need for: (a) litigation to be conducted
efficiently and at proportionate cost and (b) to enforce
compliance with rules, practice directions and orders
‣ Amended Overriding Objective at CPR 1.1 dealing with
cases justly and at proportionate costs includes enforcing
compliance with rules, PDs and Orders
CONSEQUENCES OF MITCHELL- OPPOSITE EFFECT OF
INTENTIONS OF REFORMS?
‣ Satellite litigation and inconsistency by the courts- Durrant v Chief
Constable of Avon & Somerset Constabulary (2013) and Chartwell
Estate Agents Ltd v (1) Fergies Properties SA (2) Hyam Legrer (2014)
‣ To “Mitchell” someone
‣ “Parties still expected to conduct litigation in a reasonable and
realistic manner”- Lakatamia Shipping v Nobu Su & Others (2014)
‣ Males J: “parties are firmly discouraged from taking futile and time
wasting procedural points” (Rattan v UBS (2014)
‣ New “buffer orders”- 28 day extension without making an
application
PROPORTIONALITY
Definition of Proportionality:
“Costs are proportionate if they bear a reasonable
relationship to”:
(a) the sums in issue in any proceedings;
(b) the value of any non-monetary relief in issue in the
proceedings;
(c) the complexity of the litigation;
(d) the additional work generated by the conduct of
the paying party;
(e) any wider factors involved in the proceedings
COSTS BUDGETING
‣
‣
‣
‣
Front loading of costs
Inconsistent judicial application
Set, Share (file on time) and Agree
Amending budgets- get it right first time!
‣ Unless there is a significant change in the course of litigation
‣ Coulson J in Murray v Neil Dowlman Architecture Ltd (2013)
‣ Apply to revise as soon as you know that you will exceed:
Elanvite Full Circle Ltd v AMEC Earth & Environmental (UK)
Ltd (2013)
‣ Application not always necessary required but must bring it
to the court’s attention: National Museums & Galleries on
Merseyside (Trustees) v AEW Architects & Designers Ltd (2013)
QOCS
‣
Costs will not be payable by an unsuccessful claimant in certain
circumstances
‣
A defendant will be allowed to claim costs against an unsuccessful
claimant, with no permission being required to recover full costs
where a claim has failed because:
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(i) There was no reasonable grounds to bringing the proceedings;
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(ii) The claim was struck out for abuse of process;
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(iii) conduct of the claimant is likely to obstruct the just disposal of
proceedings
QOCS CONTINUED
‣ There are two further situations where defence costs are
recoverable without the limitation but the defendant
must seek permission to enforce:
‣ (i) where there is a finding on the balance of
probabilities of “fundamental dishonesty”
‣ (ii) in “mixed claims” where part of the claim is
brought for the benefits of a non-party or where part
falls outside the definition of PI
GOSLING V SCREWFIX DIRECT LTD AND ANOR (2014)
‣ BLM Case and first finding of “fundamental
dishonesty” under QOCS
‣ Claimant found to have significantly exaggerated his symptoms
‣ Eight weeks prior to trial C notified D2 (Screwfix) of BTE
Insurance and that QOCS applied
‣ One week prior to trial, C settled the claim with D1 and
served Notice of Discontinuance on D2
‣ Question for the court: Did the claimant deserve the costs protection
afforded to him by QOCS?
‣ Substantial exaggeration of 50%
‣ Claimant was order to pay D2’s costs of the action on an indemnity
basis
PART 36
‣ To encourage settlement offers a successful claimant
Part 36 offer will trigger an additional payment of 10%
of the damages awarded
‣ Claimant’s offer has to be made after 1 April 2013 to
qualify
‣ The additional payment is 10% of damages to £500,000
plus a tapered 5% of damages between £500,000 and
£1 million (capped at £75,000)
DBAs
‣ Limited evidence of use
‣ Hybrid DBAs being favoured
‣ Announcement due soon
PRE ACTION PROTOCOLS
‣ Value of PI claims under RTA Protocol extended to £25k
‣ Extended to EL & PL up to the same value
‣ FRCS- BLM Fixed Recoverable Costs Calculator
‣ New incentives for cost building
BLM FIXED RECOVERABLE COSTS CALCULATOR
CONCLUSIONS: THE AFTER SHOCKS
‣ Too early to tell
‣ Rules are here to stay
‣ Major review planned between 2016 and 2018
‣ MOJ extension and FRC regime- year of significance will
be 31/07/14
LIABILITY - LEGAL UPDATE 2014
1
VICARIOUS LIABILITY (VL)
2
NON-DELEGABLE DUTY OF CARE (NDDC)
3
H&S, (ERRA S69 AND NEGLIGENCE)
VICARIOUS LIABILITY
‣ This is the doctrine which holds an employer or principal
responsible for the acts of their employee or agent.
‣ The leading authority was Lister v Hesley Hall Ltd (HL) 2001.
‣ However, VL has undergone a step change by having its scope
dramatically extended in two recent cases.
‣ And in three directions!
1
JGE v The Trustees of the Portsmouth RC Diocesan Trust [2012] (CA)
(“JGE”)
2
Catholic Child Welfare Society v Various Claimants and Institute of the
Brothers of the Christian Schools [2012] (SC)
(“Various Claimants”)
VL - LIMITS SET BY LISTER (2001)
VL in 2001
Lister v Hesley Hall Ltd (HL) 2001
1
If not,
no VL
VL
Employment
2
New in
2001
House Master
Not Groundsman
“mere opportunity
not enough”
The position today is not so clear at all.
The house-parent was
caught because he was the
dormitory superintendent
and ‘the torts were so
closely connected with his
employment’ that VL would
apply.
The groundsman would
not be caught because the
work was not so closely
connected that VL would
apply – the groundsman
would only have ‘mere
opportunity’ and that would
not be enough.
VL – (UNCERTAIN) LIMITS AT 2014
VL in 2014
1
VL
Employ
ment
Now: ‘Akin’ to
employment
?
1
2
House
master
Groundsman?
“so closely connected”
reduced to
“strong connection”
?
Supply teacher,
agency staff,
groundsman?
2
Boundaries have
expanded but the
extent of expansion
is still unclear
Volunteers? Agency staff?
Now sufficient to show that
the relationship is one that is
‘akin to employment’
The court will look at the
“overall character and context
of the relationship between a
tortfeasor and the
organisation”
SC – ‘strong connection’ between ... (task) … and
wrongful act, so that … employer significantly increased
the risk of harm by putting the person in that position,
vicarious liability attaches.
THE THIRD DIRECTION? MORE THAN ONE EMPLOYER!
Additionally: the Supreme Court in Various Claimants
ruled that
VL can apply to more than one ‘principal’
for the same tortious act
(perhaps in an outsourcing situation or
agency workers/ volunteers?)
‣ Therefore, careful consideration should be given to the relationship
between the person and all potential defendants
‣ in order that consideration can be given to bringing contribution
proceedings against a second principal.
LIABILITY - LEGAL UPDATE 2014
2
NON- DELEGABLE DUTY OF CARE (NDDC)
Annie Woodland v Essex CC (SC) 2013
Supreme Court 23 October 2013
“The girl in the swimming pool” case
,
ANNIE WOODLAND V ESSEX CC
‣ A modern story of Outsourcing of Services
‣ And a tragedy.
‣ Annie was a ten year old schoolgirl (in 2000) attending a swimming
lesson as part of the national curriculum
‣ She got into difficulties and was seen ‘hanging in the water’. Lack
of oxygen caused brain damage.
‣ The swimming lessons had been outsourced by Essex County
Council to a private company, ‘Direct Swimming Services’ – and the
pool was run by the District Council, Basildon.
OUTSOURCING ARRANGEMENTS:
Sub-contractor
Essex CC
run the school
Outsource
swimming
lessons
Direct Swimming
Services
Burlinson
(not insured)
Beryl Stopford
(insured as sole
practitioner)
Lifeguard
Maxwell
(not insured)
Basildon DC
run the Baths
No problems,
not liable
A NON-DELEGABLE DUTY OF CARE?
Essex CC sought a strike out as a preliminary step as it said there was
no cause of action against it.
Annie’s solicitors claimed there was a non-delegable duty of care owed
by Essex CC to the child.
On 23 October 2013,
the Supreme Court agreed, unanimously, 5 – 0.
There is a non-delegable duty of care owed by Essex CC to Annie
Woodland, (and by extension, to all of its school children).
A duty not just to take care, but to ensure that care is taken by
whomsoever may be delivering that service.
FIVE CHARACTERISTICS MUST BE PRESENT:
1. [vulnerable group] The claimant is a patient or child or … “is especially
vulnerable or dependant on the protection of the defendant against the risk of
injury”;
2. [antecedent relationship] There is a pre-existing relationship between the
claimant and the defendant … “which puts the claimant in the actual custody,
charge or care of the defendant, and which puts the defendant under a positive
duty to protect the claimant from harm”;
3. [no choice or control] The claimant has no control over how the defendant
performs those obligations;
4. [core function] The defendant has delegated some function which is an
integral part of the duty;
5. [provider failure] The third party has been negligent in the performance of
the very function delegated by the defendant to him.
SCOPE AND BOUNDARIES …
‣ Lord Sumption, in his lead ruling, was careful to limit the scope of its
decision. The liability is not open ended, and will only cover
functions which meet the five criteria …
‣ However, Lady Hale comments, rather ominously:
"The boundaries of what the … school has undertaken to provide may
not always be as clear cut as in this case … but will have to be worked
out on a case by case basis as they arise.“
‣ It is the scope and boundaries in all areas of "vulnerable groups
who attract to themselves a non-delegable duty of care" that will
concentrate our minds in the future.
HOW FAR WILL IT REACH?
1
Foster Care?
Overruling Sergeant v Walsall, CA, 1985?
“Wait and See!” – the Foster Care point is in the courts as we speak!
2
Academy children … ?
Mr Gove will say categorically “NO!” But will he be right?
3
Will it reach all ‘Emanations of the State’ eventually?
4
And far more significantly, what implications does it have for
Outsourcing and procurement by public bodies with private
companies with respect to indemnities and insurance
arrangements?
Make no mistake, this is effectively NEW law and the extent
of its implications are yet to be seen.
LIABILITY - LEGAL UPDATE 2014
3
HEALTH AND SAFETY CLAIMS REFORM
ERRA (‘the enterprise act’) s69 and s47(2) HSWA 74
Strict liability v Negligence
Reasonable practicability v Negligence defences
And the EU directives …
1
H&S CIVIL LIABILITY REFORM
‣ THE CHANGE:
‣ Section 69 of the Enterprise and Regulatory Reform Act, 2013,
(ERRA 13)
‣ Reverses
‣ Section 47(2) of the Health and Safety at Work Act 1974
(HSWA 74)
‣ From 1st October 2013
THE CHANGE:
‣ Before:
‣ s47(2) Breach of a duty imposed by H&S regulations shall, so far as
it causes damage, be actionable except in so far as the regulations
provide otherwise.
‣ Now:
‣ Breach of a duty imposed by a statutory instrument containing …
H&S regulations shall not be actionable except to the extent that
regulations under this section so provide.
‣ i.e. the word ‘not’ has been added to the wording of the Act –
‣ (such a small word!)
POLICY PAPER (JUNE 2013) EXPLAINED THAT S69:
‣ “amends the law so that in future compensation claims
can only be made where negligence or fault on the part
of the employer can be proved.”
‣ “This change will help redress the balance of the civil
litigation system in respect of health and safety at work
legislation.
‣ It will help employers’ confidence, allowing them to focus
on a sensible and practical approach to health and safety
and keep costs down by avoiding over-compliance.”
SECTION 69 IS NOT RETROSPECTIVE:
‣ (i) for claims where the alleged breach of duty
occurred prior to 1 October 2013, the claimant will be
able to plead both breach of statutory duty in respect
of health and safety regulations and common law
negligence; but
‣ (ii) for claims where the alleged breach of duty
occurred after 1 October, the claimant will only be able
to plead common law negligence.
STRICT LIABILITY – GONE?
Stark v Post Office, CA 2000
The case where Mr Stark’s front brake snapped and threw him from the bicycle
- a fault which the rigorous maintenance systems the Post Office had in place
could not have discovered.
Strict liability was imposed on the Post Office on the CA’s interpretation of
the regulations. (It was a case arguing breach of regulation only.)
Above all, this is the case that the H&S changes are designed to
override as it is ‘disliked’, to say the least, by employers – and insurers!
(and government).
Stark does not succeed in the Common Law of negligence – Stark arguments
therefore become obsolete …
And this changes the civil law by removing strict liability.
NEGLIGENCE
‣ COMMON LAW TORT OF NEGLIGENCE
‣ Blyth v Birmingham Waterworks Co(1856)
‣ “Negligence is the omission to do something which a
reasonable man, guided upon those considerations which
ordinarily regulate the conduct of human affairs, would do,
or
‣ doing something which a prudent and reasonable man
would not do.”
THE ELEMENTS OF NEGLIGENCE:
1.
2.
3.
4.
5.
The defendant has a Duty of Care to the claimant
The defendant has Breached that duty
Where there is loss or injury
And the breach of the duty has caused the harm
a Which is reasonably foreseeable/
b not too remote
For there to be Liability in Negligence
all five elements must be made out.
And, crucially, there is a potential defence argument against liability at
each of the five stages …
HSWA 74 DEFENCE – REASONABLE PRACTICABILITY
‣ (CAME FROM) - EDWARDS V NCB (1949)
‣
whether it was "reasonably practicable" to prevent even the smallest
possibility of a rock fall in a coal mine
“... it is the risk that has to be weighed against the measures necessary to
eliminate the risk. The greater the risk ... the less will be the weight … given to
the … cost.
“… a computation must be made … in which risk is on one scale and the
sacrifice (whether in money, time or trouble) is on the other,
“… and that, if … there is a gross disproportion between them - the risk
being insignificant in relation to the sacrifice - the defendants discharge the
onus on them.”
‣ Cost v Duty …
NEGLIGENCE V ‘REASONABLE PRACTICABILITY’
‣ If we are rid of Stark and strict liability, the next question is:
‣ What is the difference between a defence in ‘negligence’ and a
HSWA defence of ‘reasonable practicability’ in law?
‣ They are clearly similar –
‣ the reasonable practicability standard may be lower, so employers may
have an increased chance of defending their position on a negligence
argument …
‣ and the reasonable practicability defence has resource implications - a
(Cost v Duty) aspect of which the courts tend to disapprove.
‣ In all probability it will need the Supreme Court to finally settle
this comparison argument; and therefore set the future standard.
THE EUROPEAN DIMENSION,
IS THERE ONE?
THE CONTENTION (BY SOME!)
‣ Some observers are contending that:
these H&S liability changes have resulted in the
European Union Directive on Health and Safety
no longer being properly implemented in the UK –
and can be challenged through the European Court of Justice (ECJ).
‣
The contention relies on ‘Francovich’* principles – a case where the member
state (Italy) had not brought a EU Directive into Italian law – so the claimants
relied on the original EU directive itself as the basis of their claim, sued and
won.
‣
This established the right of an individual to sue the State if it failed to
implement a directive (or improperly implement it).
‣ *Francovich & Bonifaci v Italy ECJ (1990)
EFFECT OF THIS CONTENTION
‣ European Union (EU) Law: a (very) short lesson!
‣ EU law can have ‘indirect’ and ‘direct’ effects.
Francovich claims need direct effect. And this EU Directive has ‘direct effect’.
BUT: there are two types of direct effect –
Horizontal (for individuals or private companies) and
Vertical (for individuals and ‘emanations of the state’
(which are ‘public bodies’ very widely defined).
Francovich claims can have vertical but they cannot have horizontal direct effect.
Therefore if a member state does not bring in a particular law, there is a two tier effect if
this is employment related – public sector workers are covered but private sector
workers are not.
‣ Some have contended that this s69 ERRA change in civil liability for HSWA
regulations will have this effect
THE THREE HURDLES …
‣ 1
The government thinks not!
VISCOUNT YOUNGER’S STATEMENT IN HL ...“However, to be clear and to avoid
any misunderstanding … the codified framework of requirements,
responsibilities and duties … are (sic) unchanged.”
‣ 2
The UK properly implemented the H&S Directive
In 2005 the EU took the UK to court (ECJ) - lawyers wanted strict liability for
all breaches. In 2007 they lost. Also in 2007 the Advocate General opinion
made it clear that none of the EU Directives impose strict liability
(which means that Stark was probably wrongly decided in 2000 !)
‣ 3
Francovich requirements to present a case are quite stringent: – and they
may not be met in the current circumstances:
‣ claimants must prove that the directive:
‣
“conferred specific rights on them; identifiable in its wording”
EUROPEAN DIMENSION – IS THERE ONE?
Finally - Gordon Exall, barrister – see his excellent blog
“I find it difficult to assert, as others have, that the answer to a claimant’s
problems lies in the Directives and an action based on vertical and horizontal
effect of European legislation.”
‣ Why?
1.
The Directives do not impose duties on government to impose civil
liability for breach.
2.
Nor any requirement to impose strict liability.
We agree and go further:
Critically, the Directives have been properly implemented into UK
law and so pleading a case in the Francovich manner using the
Directive should not alter the outcome.
Another one for the courts!