On 6 April 2010 the Ministry of Justice (MOJ) reforms for low value personal injury claims arising from Road Traffic Accidents (RTA) are due to come into effect. The aim of the reforms is to provide a simplified new process for such claims that delivers fair compensation to the claimant as soon as possible at a more proportionate cost.

The reforms only apply to injury claims from third parties arising out of RTAs that occur in England or Wales on or after 6 April 2010 with a value of £1000-£10,000. Among the cases that are excluded from the MOJ reforms are those where there is contributory negligence (other than not wearing a seat belt – but see below). The revised process is split into three stages, with each stage having a fixed fee payable to the claimant’s solicitor:

Stage 1

Claimant’s solicitor completes the standard Claim Notification Form and sends it to the insurers via a new electronic system. Insurers then have 15 business days to either;

• Admit liability
• Admit liability but allege contributory negligence
• Deny Liability

If the insurer fails to respond within the 15 days the claim falls out of the process and drops into the current pre-action protocol. A £400 fixed cost is payable to the claimant’s solicitor within 10 business days following expiry of the 15 days where liability is admitted.

Claims where the claimant has not used a seat belt remain in the process with the percentage of contributory negligence being assessed upon receipt of the medical evidence. Cases that exit the process due to potential fraud or other contributory negligence issues cannot re-enter at a later stage.

Stage 2

Where liability is admitted the claim moves into stage 2. The claimant solicitors obtain medical evidence and send to the insurer either an interim payment request or a settlement pack.

The claimant’s solicitor discloses the medical evidence together with the schedule of special damage and their offer of settlement. Insurers have 15 days to consider this offer. If it is rejected there is a further 20 days for the two parties to negotiate.

If the offer is accepted insurers have 10 days to pay the damages to the claimant and Stage 2 fixed costs of £800, plus allowed disbursements, to the claimant’s solicitor.

Stage 3

If settlement cannot be agreed on quantum then the claim moves to Stage 3 where application is made for the claim to be assessed by the court by way of either a written or oral hearing.

Costs for stage 3 are:

• £250 plus 12.5% success fee if the claim settles before the hearing.
• £250 plus 100% success fee if the case proceeds to a paper hearing
• £500 plus £100% success fee if the case proceeds to an oral hearing.

These costs are paid by the losing party.

What does this mean for policyholders?

The big challenge is to ensure claims are reported as early as possible after an accident. This will allow time for insurers to make any investigation pending receipt of the third party claim and the beginning of the 15 days time period.

In order to provide insurers with the opportunity to take advantage of the new regime, it is essential that policyholders report new RTA claims immediately.

The implementation of these reforms provides an opportunity to improve the speed at which insurers support their customers when they have unfortunately caused injury to someone. The new arrangements will enable insurers to provide injured parties with fair compensation but gain more control over the level of costs associated with the third party’s claim.