Jackson, Mitchell and the impact on Professional Indemnity Insurers

1. Manchester Claims AssociationCivil Litigation Today…Jackson, Mitchell et alThe view from all sides – An Insurers Perspective Jackson, Mitchell and the impact on Professional Indemnity Insurers

2. The Jackson Reforms The Jackson reforms were brought in on 1st April 2013 and the changes were primarily implemented by the Legal Aid Sentencing and Punishment of Offenders Act (LASPO) 2012. The overriding objective “These rules are a new procedural code with the overriding objective of enabling the court to deal with cases justly and at proportionate cost” Proportionality defined as ( Part 44.35) Lord Justice Jackson specifically promised to build on Lord Woolf’s work promising to “control costs” whilst “promoting access to justice” In an article published in the Law Society Gazette Lord Justice Jackson commented “litigation is a process, not an Eleusinian mystery. It is amenable to sensible budgeting and such budgeting is very much in the public interest. It takes time for costs management to bed in. Both practitioners and judges need to become comfortable with the process. Once this has happened, the overall effect will be to bring down the costs of litigation.” http://www.judiciary.gov.uk/related-offices-and-bodies/advisory-bodies/cjc/

3. The Decision in Mitchell The initial decision in the case of Mr Andrew Mitchell MP v News Group Newspapers Limited [2013] EWCA was upheld by the Court of Appeal on 27thNovember 2013 Essentially the solicitors acting on behalf of Mr Mitchell failed to serve his schedule of costs on time and were debarred from recovering any costs at all bar pre issue costs and the court fee. The judgement of the Appeal Court drew heavily on statements in the Jackson report and hammered home the message that failure to comply with deadlines would no longer be tolerated, except for the most ‘trivial’ breaches. This decision has serious implications for the legal community although arguably all it is doing is emphasising the change in culture at the heart of the Jackson reforms. The Court of Appeal said “The defaults by the claimant’s solicitors were not minor or trivial and there was no good excuse for them. They resulted in an abortive costs budgeting hearing and an adjournment which had serious consequences for other litigants. Although it seems harsh in the individual case of Mr Mitchell’s claim, if we were to overturn the decision to refuse relief, it is inevitable that the attempt to achieve a change in culture would receive a major setback… we hope that our decision will send out a clear message. If it does, we are confident that, in time, legal representatives will become more efficient and will routinely comply with the rules.”

4. Impact of Jackson / Mitchell The Jackson reforms and the “hard line” taken in the Mitchell case have emphasised that the Courts are prepared to take charge of claims management process. The Jackson reforms are going to have an impact on both the professionals and the litigants involved in the litigation process. The Jackson reforms represent a “sea change” in the litigation process with the key being PROPORTIONALITY! There is potential for conflict issues to arise when the issue of relief from sanction comes up. (e.g. Mitchell loss of chance of £550K against his solicitors) It is anticipated that claims will arise from Solicitors, but also others such as Counsel and Experts Will this lead to fewer claims being litigated? If yes, what effect if any will this have on Professional Indemnity premiums?

5. Impact of Jackson / Mitchell continued The unintended affect of Jackson has been that both claimant and defendant have felt unable to agree extensions between themselves and felt compelled to make applications to court in anticipation of a breach of an order e.g. an expert is sick and cannot produce a report in time for the deadline. It is clear from the Courts stance that directions and orders are there to be complied with. Lawyers who fail to comply will no doubt face potentially significant loss of chance claims from angry clients including reputational issues and increased professional indemnity insurance premiums. Firms need to have a robust diary system in place to ensure that important deadlines are at the forefront of lawyers minds at all stages of litigation. If any work is outsourced extra time should be allowed and the management of staffing levels and workloads is a more important risk management consideration than ever. Good risk management will help firms ensure that the Courts work to achieve justice in the “majority of cases” will not come at the cost of too many professional negligence claims against litigators

6. The Insurers Perspective We have seen a spate of decisions where the Courts are enforcing the Jackson reforms quite rigidly and others where they are not, this has meant that in all but the most clear cut cases it is impossible to predict whether relief from sanction will be granted or not. Insurers look at claims in terms of frequency and severity and use rating models to price risk that are based on both of these rating factors. Insurers have seen an increase in professional negligence notifications since the Jackson reforms and more specifically the Mitchell decision, as firms are being cautious At them moment it is too early to say whether the Jackson reforms and the Mitchell decision will lead to more actual claims and / or whether those claims will be severe however it is noted that these changes have impacted on all areas of litigation not just personal injury. From a rating perspective areas that were considered to be relatively benign in terms of risk, i.e. defendant work for insurers, are now considered more risky.

7. The Insurers Perspective continued In order to cover off the increased exposure Insurers will increase rates for firms undertaking any form of litigation and therefore Professional Indemnity premiums will go up. Insurers are asking more questions in their proposal forms this year to understand what firms have done in response to the Mitchell decision. We want to know more than that they have a diary system in place e.g. have they provided additional training? Reviewed supervision procedures? Reviewed processes for litigation management etc. Firms undertaking litigation need to understand that they have any increased risk profile and need to show insurers how they are managing it. So far it appears that the Jackson reforms and the Mitchell decision have led to (a) greater front-loaded costs (b) less cooperation between defendant and claimant solicitors (c) more professional negligence notifications and potentially decreased access to justice. Is there any hope for the future?

8. The future Some comments from Lord Justice Jackson on his reforms. Some unpopularity is inevitable. “Reforms which are designed (a) to bring down the costs of litigation and (b) to change the way in which lawyers work are bound to be unpopular with practitioners” and on recent judicial decisions “Many of the comments made by respondents are directed to recent judicial decisions, on which it is not appropriate for me to comment. Case law is developed through argument in court, not by debate at conferences.” On 05th June 2014 a new 28 day buffer rule was introduced. This allows parties to agree up to 28 day time extensions without having to seek the Court’s permission and will provide considerable comfort to litigants concerned by the zero tolerance approach brought in by the Court of Appeal in Mitchell. While it appears that Lord Justice Jackson is seeking to absolve himself of the consequences associated with his reforms the second point is valid and appears to be borne out by the more pragmatic approach now being taken. We hope that the reforms bed in and have the desired effect of “controlling costs” whilst “promoting access to justice”