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Lessons from the low-value RTA process
Tuesday 24 July 2012 by Rachel Rothwell
Last week the Ministry of Justice finally revealed Professor Fenn’s independent report on the operation of the low-value road traffic accident process. And it was rather disappointing.
Fenn found that costs under the process, which uses an electronic portal, appeared to be 3-4% lower than previously, and claims were being settled quicker. That was the good news. But worryingly, damages had also fallen (by 6%), and an alarming number of claims - 50% - had actually exited the process, despite the fact that these tend to be straightforward claims where liability is normally clear cut.
The reason for the high fallout rate was pretty obvious; a difference in the rates payable outside the portal process meant that it was often cheaper for defendants to pull the case out and resolve it using the fixed recoverable costs scheme (FRCS) instead, particularly for low-value whiplash claims. Frankly, it seems pretty foolish to have introduced the RTA process with a disparity between fees under the portal process and the FRCS. The MoJ has now confirmed that this issue is on its 'to do' list, and it will reduce rates under the RTA protocol by next April.
But the biggest worry in my view is the finding that damages actually fell under the portal scheme. This was no part of the government’s plan. So why did it happen? Fenn suggests the fall in damages may stem from the way that claimant lawyers’ fees under the portal process are not linked to the settlement outcome, unlike in the FRCS. So it is no longer in the claimant lawyers’ own financial interests to spend more time pushing as hard as they can for the best possible outcome for their clients; and indeed they will probably achieve a higher profit margin if they don’t. It looks as though defendant insurers have ended up benefiting from this; while the claimant client is certainly the loser.
All in all, I found the report - which had been long awaited - rather disappointing; not least because it was based on such a small sample. Fenn heavily caveated the findings, pointing out that the research was based on data from just three claimant solicitors’ firms, and two defendant insurers, over a one-year observation period, which could be considered too short. This was an important analysis of the first year of operation of the portal, and crucially, it was independent of both defendant and claimant interests. So it seems a missed opportunity that it was not based on a larger data sample, which would have provided more concrete conclusions. The report said the reason for the small sample size was that only five firms met Fenn’s criteria for managing data consistently both before and after the RTA process was introduced.
Fenn recommends more research, suggesting that the portal should run for a further 12 months before the government reviews it again, together with the FRCS. He wants the MoJ to look at why so many claims exited the process, how RTA costs may be affected by changes such as the referral fee ban, and to consider the link between damages and solicitors’ costs and incentives.
But the MoJ has no intention of delaying its plans to extend the portal to higher-value claims, and to employers’ and public liability cases, so that further research can be carried out. The extension of the portal process is still planned for next April, and ‘the operation of the scheme will be kept under review following its expansion,’ it says. So full steam ahead, and it will address any problems as it goes along. Possibly not the most sensible approach, but one we have come to expect.
Rachel Rothwell is editor of Litigation Funding magazine, providing in-depth coverage on costs and the financing of litigation.
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