horwich farrelly

Horwich Farrelly takes on the ‘£400 Club’ and wins Round One

March, 10, 2016

Success in three conjoined hearings at Cardiff County Court potentially opens the door for further recoveries of fixed costs paid by insurers on motor third party personal injury claims that never progressed to Stage 2 of the Portal process. The significance of the decision has resulted in leave to appeal being granted and the matter being ‘leapfrogged’ to the Court of Appeal.   

In the initial period following the introduction of the RTA Claims Portal in 2010 motor insurers reported a trend for large numbers of PI claims to be submitted which never progressed beyond Stage 1. Under the rules applicable at the time Stage 1 fixed costs (£400 plus VAT) became payable on admission of liability, with no formal requirement for the claimant to progress the claim to Stage 2.

This phenomenon became known in the market as the ‘£400 Club’.

The loophole was closed in 2013, but not before significant amounts had been paid by some insurers.

Recognising the loophole in the process, the rules were subsequently changed in 2013 so that Stage 1 fixed costs only became payable on receipt of the Stage 2 payment pack and medical report.  Nevertheless in the intervening period significant amounts of Stage 1 costs were paid by most motor insurers on claims that never moved to Stage 2. There is no official figure available for the amount paid across the market on ‘£400 Club’ claims, but it is estimated to run into many millions of pounds.

To date, there has been a belief that this money was, on the basis of the rules applying at the time, probably irrecoverable. However, Horwich Farrelly’s specialist Recoveries Team has been working successfully to test and challenge that understanding via an initiative combining both debt recovery techniques and strategic litigation.

The result in these cases is significant in confirming that Stage 1 fees can potentially be recovered for ‘£400 Club’ claims.

In reaching his decision in these small claims hearings and allowing the claims for recovery DJ Phillips focused on the fundamental principles of the Portal. He made the point that, despite the wording of the Protocol at the time:

“The whole system [the Portal process] is based upon the premise that there will be a claim made for personal injury, and that any claim will proceed from Stage 1 to Stage 2. I also note that the Protocol has since been amended so that now Stage 1 costs are only paid when the settlement pack is submitted as part of Stage 2. This reinforces my conclusion that it was always the intention that Stage 1 costs would only be paid on the basis that the claim proceeded to Stage 2, the Claimant submitting his settlement pack including medical report and other documents as set out at paragraph 7.26.”

He went on to say that: “In a case where for whatever reason, the claim is not proceeded with, then in my judgment any Stage 1 fixed costs must be repaid.”

Commentary

If the Court of Appeal agrees with DJ Phillips, insurers will be able to pursue recovery of those Stage 1 costs paid where a claim was not subsequently pursued.

We will keep clients informed of the progress of any appeal. In the meantime, if you would like to discuss our ‘£400 Club’ initiative please contact Patrick McCarthy on 0161 413 1342 or email patrick.mccarthy@h-f.co.uk.

[1] Iqbal & EUI Ltd vs Leake & JC&A Solicitors; Smith & EUI Ltd  vs Naylor & JC&A Solicitors; Pitts & EUI Ltd vs Stock & JC&A Solicitors.

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