Extending Fixed Recoverable Costs in Civil Cases: The Government Response Impact on Noise Induced Hearing Loss claims

Background

In 2017 the CJC issued a report for the Government that included recommendations to improve the handling of Noise Induced Hearing Loss (NIHL) claims.  The report set out proposals to introduce a new pre litigation process to improve transparency, standard templates for post-litigation directions that discourage preliminary hearings, and extending the Fixed Costs Regime to include NIHL cases.

Consultation followed and the Government announced its response to the issues raised in consultation.

Outcome

Pre-litigation

The Government has determined to press ahead with implementing the new pre-litigation process exactly as set out in the consultation papers. Once the proposals come into law there will be:

• A new letter of claim
  • This is intended to provide more meaningful information to allow early decisions by defendants;
  • The letter of claim will be accompanied by an audiogram, HMRC history and an ELTO search.
• A new response letter
  • This is intended to focus decisions on liability and for early concessions to be made;
  • The response will require disclosure to be made to support any denials.

Post-litigation

The Government has accepted some of the concerns raised in the consultation process:

• They will not be setting standard directions, this being a matter for the judiciary. They have suggested the industry may wish to convene a working group in this regard;
• They have recognised that there is scope for preliminary trials, and where these will assist they should be encouraged. The Fixed Recoverable Costs will still apply to Preliminary Trials.

Fixed Recoverable Costs

These will be implemented for all NIHL claims valued under £25,000 using the Band 4 rates.

Considerations for Defendants

The extension of the FRC is welcome. It will provide greater certainty as to costs liability on NIHL claims. More claims will be resolved at low cost pre-litigation and with greater cooperation between parties. The decision not to outlaw preliminary trials will also benefit defendants with limitation often being a good defence.

However, defendants and their insurers need to consider the strategies likely to be adopted by claimant firms to maximise revenue from the FRC and the inevitable changes to the NIHL market and behaviours that will follow:

Fewer claimant firms in the noise market?

The FRC will require streamlined, process-driven handling to be profitable. Only those claimant firms able to resource and implement such processes are likely to be able to take advantage of the NIHL market. This may reduce the number of claimant firm to only those able to operate at volume.

Audiology issues?

There may be increased alignment between claims farmers/claimant solicitors and audiologists to effectively remove the need for screening audiology. Furthermore, the absence of any accreditation scheme increases the risk of poor quality claims being presented. It will be an expensive decision for defendants to challenge audiology and economics need to be considered carefully.

Rise in PAD applications?

PAD applications are not included in the fixed fee. Claimant firms could well pounce on any delay by defendants and take advantage of additional revenue from PAD applications.

More multi defendant/spurious claims?

If there are more than three defendants pursued the matter drops out of the FRC and standard costs apply. There is clear incentive for claimant firms to look to proceed against as many employers as possible, regardless of whether there is any real prospect against all the defendants. This could lead to claims being brought against businesses from industries not typically associated with NIHL claims.

For the same reasons there could be a rise in claims being pursued against multiple companies/subsidiaries of the same group where there have been transfers of business. Claimant firms will be reluctant to spend their fixed fee on investigating corporate history properly and lead to claims having more defendants and avoiding FRC.

Costs markers and strategies will be crucial.

Increase in ‘de minimis’ claims?

Likewise, if any defendant alleges de minimis the claim drops out of the FRC. This could lead to a greater number of claims that would not normally make the cut being advanced to test insurers’ resolve.

Defendant cooperation required

Co-defendants will need to work closely together from the outset of claims as one co-defendant’s actions in making allegations that lead to a claim falling out of the FRC will impact all defendants.

Implementation

It is unlikely we will see the new draft rules and any amendments to the Pre-Action Protocol before April 2022 with the rules expected to come into force in October 2022

 For more information, please contact Oliver Bingle.