The Government has finally confirmed that fixed recoverable costs (FRC) for low-value clinical negligence claims that settle pre-action will be coming into force in October 2024. This start date is six months later than had originally been intended but is nevertheless welcome news to health and care providers and their insurers. The new scheme will introduce fixed costs for clinical negligence claims valued between £1,500 and £25,000. Recently published minutes of March’s Civil Procedure Rule Committee (CPRC) meeting confirmed that the draft rules required to implement the scheme still needed to be finalised and approved. However the firm intention is for this to be done over the summer ahead of an autumn launch.
In a further key development, the Department of Health & Social Care (DHSC) published the outcome of the supplementary consultation it issued in September on disbursements. Fixed recoverable costs in lower damages clinical negligence claims – a supplementary consultation on disbursements: government response - GOV.UK (www.gov.uk) In essence, the DHSC confirmed that it will be implementing the proposals in the supplementary consultation. This means that medical expert fees and after-the-event (ATE) insurance premiums covering the cost of those reports will continue to be recoverable, in addition to the fixed legal costs. However, barristers’ fees for pre-action advice in applicable cases will not be recoverable unless the claim relates to a child or protected party. The DHSC has also confirmed that the new regime will not extend to inquest costs and disbursements which have been incurred in claims which are subject to FRC. These costs will be recoverable ’to the extent that they would be in clinical negligence claims not subject to this FRC scheme’.
Background to change
These changes have been a long time coming. There has been increasing background noise about extending a fixed costs regime to clinical negligence cases for the best part of a decade. It is a subject that has long polarised opinions. When they were eventually published last September, the Government's proposals received strong criticism from claimant representatives (indeed they were initially the subject of threatened judicial review proceedings – now withdrawn - brought against the government by APIL, the Association of Personal Injury Lawyers). Unsurprisingly, on the other side of the divide, the proposals met with broad approval and support from healthcare providers and insurers, although some of the latter group argued for extending the cap to higher-value cases, seeing it as a missed opportunity to address an escalating issue.
So why does this matter? The reforms are important because liability for legal costs amounts to such a large proportion of the overall cost of clinical negligence litigation to health and care providers and their insurers. The new regime therefore represents a significant change in the law, particularly impacting non-surgical independent sector practitioners such as dentists, pharmacists, non-surgical aesthetic practitioners, and allied health professionals. A significant proportion of negligence claims in these sectors result in damages below the proposed £25,000 threshold. The new scheme should considerably reduce the overall cost of these claims for providers and insurers, as claimant legal costs often exceed the total damages value. It will also provide much greater clarity about the level of costs that will need to be paid, helping providers and their insurers to set accurate costs reserves.
Claimant Legal costs - the ‘hidden cost’ of litigation
As is well known, in English litigation law the loser typically covers the winner's legal costs, albeit with some very notable exceptions which are beyond the scope of this blog. This means an unsuccessful Defendant in a clinical negligence case must pay both compensatory damages to the successful Claimant and the Claimant's legal costs, alongside their own defence costs. This additional liability to legal costs often very significantly inflates the overall expense for the Defendant and its insurers. For lower-value cases, Claimant legal costs regularly surpass the damages received. In 2022, the Medical Defence Union reported average claimant legal costs of over £24,000 for cases settling up to £10,000 in damages, and around £46,000 for cases settling between £10,000 and £25,000. Cap to control disproportionate legal costs in clinical negligence claims is an important first step, says MDU - The MDU
To address this issue, the Ministry of Justice has introduced various other fixed recoverable costs (FRC) schemes for most other classes of litigation, including personal injury and road traffic cases, with a limit of £25,000. These schemes were extended with effect from 1 October 2023, raising the damages limit to £100,000 for many categories of cases. Again, the reforms have been controversial and deeply unpopular with the Claimant’s representatives.
Disproportionate legal costs in lower-value clinical negligence cases (valued at £1,500 to £25,000) are a particularly pressing concern. Average claimant legal costs per case surged from around £10,100 in 2007 to approximately £23,200 in 2022. In 2022, these costs were over four times higher than average defendant legal costs. Claimant legal costs often exceeded compensation amounts, with claimant costs for the £1,500 to £25,000 bracket being double the average damages awarded.
Two main factors contribute to this situation. Firstly, historical disparities between claimant and defendant legal costs widened when legal aid became scarce in civil litigation, leading to Conditional Fee Agreements ("no win, no fee") becoming the primary funding method for clinical negligence cases. Claimant lawyers argue that they are providing a societal benefit in enabling universal access to justice, as well as incurring the risk of not getting paid if they lose. They claim that this justifies them recovering higher hourly rates compared to their defendant counterparts, who are usually paid regardless of case outcome.
Secondly, prolonged case durations have inflated costs. Over the past decade, the average duration of lower-value clinical negligence claims increased by 46% to 1.3 years.
The FRC scheme aims to address both these issues by introducing a fixed fee system and a new, streamlined claims handling protocol that aims to facilitate early resolution.
A new claims handling protocol
The detail of the new claims handling protocol will be set out in amended Civil Procedure Rules (CPR) to be published later this summer. We will report further once these rules are in place. The Protocol is intended to set expectations for lawyers’ pre-action behaviour in clinical negligence litigation, to keep costs to a minimum. It is expected that some of the key features will include:
- Two tracks: standard and light, with most cases falling under the standard track.
- Early evidence disclosure: Claimants provide an evidence bundle, including medical expert reports, with their letter of claim.
- Mandatory stocktake and settlement discussion if the claim remains unsettled after the defendant's response.
- Neutral (non-binding) evaluation if the claim isn't resolved at the mandatory stocktake.
The fixed costs framework
The Government’s proposal for ‘standard’ track cases is that claimant costs should be fixed at £5,750 plus 30% of damages agreed, assuming the claim settles pre-action. On this basis, if, for example, the damages are agreed at £20,000, the total figure for Claimant legal costs would be £11,750. As above, disbursements (expert fees) will not form part of this capped figure and will be payable in addition. For ‘light’ track cases, the proposed figure is up to £2,750 plus up to 20.5% of damages agreed.
Exclusions
The regime will only apply to applicable cases and there will be many exclusions (we anticipate that this is an area that is likely to result in a considerable amount of satellite litigation as the scheme beds in). Again, the devil will be in the detail, however, under the Government’s proposals excluded categories under the scheme include
(a) Claims requiring more than three medical expert opinions on negligence and causation.
(b) Claims against two or more defendants with materially different negligence allegations.
(c) Cases involving stillbirth or neonatal death, including claims by secondary victims.
(d) Cases where the defendant raises the issue of limitation. Claims filed by litigants in person are not part of the LDFRC scheme.
Sanctions
The new scheme will enforce strict deadlines and compliance through financial penalties, including:
- If the claimant doesn't provide detailed evidence initially, it may lead to a 50% reduction in recoverable costs.
- If the defendant doesn't respond, or fails to respond in time, to the claimant's letter of claim, the case will exit the scheme.
Conclusions
Whilst it is disappointing that the start date of the new regime has been pushed back to October, and that the proposals relating to disbursements have been watered down, the Government’s confirmation that it is pressing ahead is nevertheless to be welcomed. The detail still needs to be thrashed out but these reforms should significantly reduce the financial burden on health and care providers and their insurers for clinical negligence claims valued between £1,500 and £25,000. This is likely to be particularly good news for many non-surgical sectors including dentistry, pharmacy, aesthetics, care and allied health, which typically experience lower value claims. It is hoped that by controlling and capping claimant legal costs, the reforms will lead to a notable decrease in the overall cost of claims and provide clearer guidelines for costs reserves, benefiting providers and insurers alike.
"The information contained in this article does not represent a complete analysis of the topics presented and is provided for information purposes only. It is not intended as legal advice and no responsibility can be accepted by Altea Insurance for any reliance placed upon it. Legal advice should always be obtained before applying any information to particular circumstances."
