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November

It’s a fix – the new fixed costs regime for clinical negligence cases – what it is and why it’s important

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It’s a fix – the new fixed costs regime for clinical negligence cases – what it is and why it’s important

The latest drive to control legal costs in clinical negligence litigation

The Government is committed to addressing rising legal costs in clinical negligence cases in England and Wales. In its recent response to a consultation held from January 31 to April 22, 2022, the Government confirmed its intention to proceed with the contentious Lower Damages Clinical Negligence Claim Fixed Recoverable Costs scheme (LDFRC scheme). Government response: fixed recoverable costs in lower damages clinical negligence claims (publishing.service.gov.uk)

The LDFRC scheme will apply to all non-excluded clinical negligence claims in England and Wales, including NHS and non-NHS claims, where the damages value is between £1,501 and £25,000, based on a final value at settlement or following a Court judgment.

The LDFRC proposals currently only address lawyers’ fees (known as “profit costs”) and will only apply to pre-action costs. A further very controversial and, as yet, unresolved question relates to whether the scheme will also apply to legal disbursements (principally expert witness and barristers’ fees). Disbursements are a particularly important aspect of clinical negligence costs, which relies very heavily on expert evidence. A separate consultation on this issue is currently ongoing.

The scheme is currently intended to come into effect from April 2024 but it would not be surprising if this date is pushed back by several months given the extent of opposition from the claimant lobby. Nevertheless, the consensus is now that this overdue change is going to happen, and it is very much a question of “when” rather than “if”.

The application of fixed costs to clinical negligence cases has polarised opinions. The Government's proposals have faced strong criticism from claimant representatives but received broad support from healthcare providers and insurers, although some of the latter argue for extending the cap to higher-value cases, seeing it as a missed opportunity to address an escalating issue.

This is a substantial 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 fields result in damages below £25,000. The new scheme should considerably lower the overall cost of these claims for providers and insurers, as claimant legal costs often exceed the total claim 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.

Background to change - 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 article. 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 cost can significantly inflate the overall expense for the Defendant and 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 have now been extended with effect from 1 October, raising the damages limit to £100,000 for many categories of cases. Again, the reforms are controversial and deeply unpopular with the Claimant’s representatives.

The Department of Health and Social Care has considered implementing a cost limit for clinical negligence claims for a very long time. In 2017, it sought input on introducing FRCs for lower damages clinical negligence claims. About us - Civil Procedure Rule Committee - GOV.UK (www.gov.uk). Respondents emphasised the need for an efficient process to resolve claims promptly and fairly for any FRC scheme to succeed. This led the Government to reevaluate its approach, resulting in the development of the LDFRC scheme, accompanied by a new Pre-Action Protocol for the Resolution of (low value) Clinical Disputes (the LVCD Protocol), which sets out a streamlined pre-action timetable that encourages early settlement.

The issue with claimant costs in lower value cases

Disproportionate legal costs in lower-value clinical negligence cases (valued at £1,501 to £25,000) are a 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. Furthermore, claimant legal costs often exceeded compensation amounts, with claimant costs for the £1,501 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 the risk of not getting paid if they lose justifies 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 LDFRC scheme aims to address both these issues by introducing a fixed fee system and a new, streamlined protocol that aims to facilitate early resolution.

The new protocol

The LVCD Protocol sets expectations for pre-action behaviour in court proceedings. Key features 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.

Details of the protocol's implementation will be eagerly awaited for a clearer understanding of its impact.

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 at the stocktake stage. If, for example, the damages are agreed at £20,000, the total cost would be £11,750.

For Light track cases, the proposed figure is up to £2,750 plus up to 20.5% of damages agreed.

Exclusions

Excluded categories under the LDFRC 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.

Claims for protected parties or children remain in the fixed costs scheme with an additional £1,800.

Excluded claims are not subject to the LVCD Protocol or fixed costs. If the court finds a claim does not meet specified exclusion criteria and falls within the LDFRC Scheme value range, it becomes subject to fixed costs for the pre-issue period.

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 to the claimant's letter of claim in the standard track, the case exits the LDFRC scheme, including fixed costs and LVCD protocol requirements.

Conclusions

The practical implementation of the LDFRC scheme and LVCD Protocol remains uncertain, and we anticipate numerous challenges and disputes as it comes into force. The key issue of disbursements is yet to be decided and there is significant risk that the start date of the new Scheme will be delayed beyond April 2024. Nevertheless, the momentum is now firmly behind this change finally going ahead. Despite any potential shortcomings, the scheme is a very positive step forward in managing escalating costs in lower-value clinical negligence cases and encouraging early resolutions. This development is to be welcomed as it will have a positive impact in reducing the overall cost of these claims for numerous stakeholders within the healthcare and insurance sectors. It will particularly benefit non-surgical and allied health practitioners where the value of claims tends to be more modest.

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.

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