Employment tribunals – an update

With cost-cutting high on the Government agenda another set of measures to reduce taxpayer costs have been tabled in the latest consultation on employment tribunals - Charging Fees in Employment Tribunals and the Employment Appeal Tribunal.

Currently costing around £84 million a year the consultation aims to lower this amount by proposing that those who use the “system make a financial contribution”. Two options are laid out in the consultation:

• Option 1: an initial fee of between £150-£250 for a claimant to begin a claim, with an additional fee of between £250-£1250 if the claim goes to a hearing, with no limit to the maximum award; or
• Option 2: a single fee of between £200-£600 – but this would limit the maximum award to £30,000 – with the option of an additional fee of £1,750 for those who seek awards above this amount

There are a number of benefits listed in the press release issued by the Ministry of Justice on 14 December, including:

• Access to justice for those on low incomes or limited means will be protected by fee waivers
• Discourage unmeritorious claims
• Encourage early settlement of claims
• Small businesses will be encouraged to recruit new staff without the fear of unnecessary actions
• Incentivise complainants to choose conciliation or mediation
• Reduce taxpayers costs

On the other hand, an article in the Law Society Gazette has comments from Victoria Phillips, head of employment rights at national firm Thompsons, who is concerned that “fees at any level will make it more difficult to pursue a claim against an employer.”

With the number of employment tribunals increasing every year and money spent by both parties unnecessarily on applications that often do not reach a full hearing, how well will these proposals tackle the problems going forward and who else will be affected by the changes? Your comments are of course very welcome.

Matrimonial bliss or matrimonial miss!

The latest statistics from the Office for National Statistics show that the number of divorces in England and Wales is unfortunately on the rise, with an increase of 4.9% from 2009 to 2010.

In real terms the figures have risen from 113,949 divorces in 2009 to 119,589 in 2010, this is equivalent to 11.1 divorcing people per thousand married population.

Alongside this dissolutions of civil partnerships are also increasing with provisional total of 509 in the UK in 2010, an increase of 44% from 2009.

The average age for couples to divorce is between 40 to 44 years old. The 2010 trend also shows that women are more likely to divorce at younger ages and men when they get older. With regards to the average duration of marriages in 2010 the statistics show that it remained steady at 11.4 years.

While no-one planning to get married or enter into a civil partnership wishes to think that things may not work out, nuptial agreements are becoming a popular way for individuals to protect their property and assets if the relationship does break down.

ARAG is now selling two new divorce insurance products – Pre-nuptial Legal Solutions and Divorce Legal Solutions – that are sold alongside nuptial agreements. These products provide a legal expenses insurance policy that starts from the date of a marriage or civil partnership and protects the policyholder against legal costs associated with matrimonial breakdown.

Both policies cover costs arising from a legal challenge to the nuptial agreement whilst Divorce Legal Solutions extends cover to include the cost of divorce proceedings.

Find out more about Pre-nuptial Legal Solutions and Divorce Legal Solutions from the ARAG website.

Fighting for access to justice

As a member of the Consumer Justice Alliance (CJA) we at ARAG were very interested in seeing the video that they have just produced and released on YouTube. Called ‘Fighting for access to justice’ it looks at how the CJA are campaigning against the Government’s proposals for changes to civil litigation as presented in the LASPO Bill.

More importantly victims of accidents and medical negligence are invited to discuss their experiences and how their lives have been transformed not only by their illnesses or injuries but how they managed to turn it around thanks to the compensation and support they received as a result of being able to claim through the current system.

As one victim of medical negligence describes in the film, “changing the funding regime will make it harder for people to have their claim properly investigated and also for the hospital to change the practices that allowed it to happen and deny them full compensation for the loss they have suffered.”

The risk of having to pay for legal fees should the decision go against you would have been too much of a barrier for the people speaking in the film and they all explain that this is not a risk that they could have taken.

Nigel Meurs-Raby, Chairman of the CJA concludes the film by saying, “These are real people who are real victims with injuries that are not their fault. We need to do everything that we can to make sure that this dreadful new legislation doesn’t end up on the statute book.”

Watch the video in full here: http://www.youtube.com/watch?v=gtvMdYOu3Ks&feature=related

ARAG shortlisted at the 2011 Personal Injury Awards

ARAG is pleased to announce that we have been shortlisted at this year’s Personal Injury Awards in the ‘Insurance Provider of the Year’ category. Having previously won this award in 2009 we are keeping our fingers crossed for 24 November when the awards will be held at The Riverbank Park Plaza in London.

ARAG’s existing After-the-Event (ATE) product is known for offering flexibility and quality to ensure that customers’ needs are met and hopefully exceeded. In addition to this, ARAG also look for and implement innovative ideas and in 2011 we created and launched a new product – Recourse Options.

Our original product Recourse provides a standard limit of indemnity covering third party costs and disbursements, whereas Recourse Options is tailored to the specific indemnity required to cover third party costs, disbursements and own sides costs in non-injury cases. Some of the key features include:

• Limits of indemnity to meet the specific risk


• Cover by an A-rated insurer


• Contingent premium – the premium is deferred until conclusion and only payable upon a successful conclusion


• Top-up cover to a Before-the-Event policy


• Cover for cases conducted under a partial or full CFA


• Premium shortfall cover


• Bespoke staged premiums

These are backed by a passionate team and a bespoke approach which allows them to be set up as scheme arrangements or one-off cases.

There is also an easy-to-use online policy application and administration system designed to make life easier for our solicitor partners. This is currently in the process of being developed to enable solicitors to update cases from their own system rather than having to log in to gATEway as well as increasing its scope to offer post-issue schedules for RTA cases.

If you would like more information on ARAG’s ATE products please visit: http://www.arag.co.uk/index.asp?m=93&s=159&t=After%2Dthe%2DEvent+Legal+Insurance

ARAG responds to ruling on insurers’ use of non-panel solicitors

Following the High Court’s Judgment in the case of Brown-Quinn & Webster Dixon -v- Equity Syndicate Management, ARAG Legal Services has issued its reaction to the decision.

The Bristol-based legal expenses specialist warned that the court’s decision was not a positive one and, without any evidence to suggest that non-panel law firms offer higher standards of representation, the main beneficiary of the ruling would be the non-panel law firms themselves. The court’s decision could also result in higher legal expenses premiums.

ARAG’s Managing Director Tony Buss commented: “With no evidence to suggest non-panel firms deliver a heightened level of service to the policyholder, those firms may well be the only long-term beneficiaries from the Judgment. At a time when, the take-up of BTE is being encouraged, this cannot be a positive development overall.”

Many legal insurance providers will now consider their policy wordings and whether they are consistent with the judgment, especially where they have chosen to expressly limit the costs payable to those which their panel lawyers charge.

ARAG’s policies fully comply with the decision. In addition, legal insurance providers will need to be sure that their approach in practice complies with what their wordings actually say. It seems in this case that the defendants' approach was at odds with the policy wording and also perhaps the result of too ambitious an interpretation of The Insurance Companies (Legal Expenses Insurance) Regulations 1990.

Even with cases handled by its panel, ARAG does not take a "one size fits all" approach, and has arrangements for higher remuneration rates for more senior lawyers when circumstances demand it. This also extends to how we contract with non-panel solicitors, where again, we will, where appropriate, agree a higher rate, be that an aggregate hourly rate, or a variety of rates.

That is not to say that ARAG embrace the appointment of non-panel firms. Unless the complexities of the case warrant the appointment of a non-panel firm, we are confident that our policyholders receive at least as high a level of service from our panel firms as they would their chosen lawyer, but at a fraction of the cost. That cost, as the Judgment recognises, is reflected in the very modest premiums policyholders currently pay for before-the-event (BTE) legal insurance. The obvious danger therefore arising from this Judgment is that policyholders wanting to use their own solicitor will see their financial position strengthened when looking to insist on their own solicitor acting. The consequence of this is increased exposure to the insurer which is likely to be passed on to policyholders in the form of higher premiums.

ARAG celebrate their fifth anniversary in style

This year ARAG celebrate their fifth anniversary and all of the accompanying successes that have been achieved. To mark the occasion we held a celebratory evening for staff and guests at the magnificent Roman Baths in Bath.

In 2006, with just a handful of employees, ARAG started trading in the UK. Fast-forward to today where our 50th employee has just started, our product portfolio has doubled and we are successfully running at a profitable level and you start to see why we felt the need to celebrate in style.

On Thursday 29 September, guests and staff enjoyed a champagne drinks reception around the famous Roman Baths, followed by a four-course dinner in the adjoining Pump Room. After dinner, ARAG’s Managing Director, Tony Buss and Head of Group International, Dr Johannes Kathan stood up to say a few words. We were also treated to a surprise rendition of Happy Birthday on the piano by Dr Kathan.

To close the evening, after-dinner speaker John Simonett entertained us by memorising details about everyone in the room and then went around surprising people with snippets and stories about their interests, work and achievements.

After carriages at midnight, most went back to the hotel to continue the fun at the hotel bar, it is safe to say that it was definitely an eventful evening!

A new addition to your wedding checklist, get divorce insurance

I find myself in a strange predicament at the moment as I am getting married next month, yet at work I am charged with marketing ARAG’s latest offering, divorce insurance. This is not something that I imagined adding to my ever growing checklist when I got engaged however it has definitely given me some food for thought!

Launched to the market on Monday 6 September, the two products – Pre-nuptial Legal Solutions and Divorce Legal Solutions – will be sold alongside nuptial agreements and provide the policyholder with a legal expenses insurance policy that starts from the date of a marriage or civil partnership. Both policies cover costs arising from a legal challenge to the nuptial agreement whilst Divorce Legal Solutions extends cover to include the cost of divorce proceedings.

The Government has perhaps unwittingly paved the way for the development of such products with its plans to restrict the provision of legal aid in most divorce cases. As pointed out in an article by the Daily Mail (November 2010) these changes, “mean anyone who wants to protect their share of the fallout from a broken marriage will have to pay for their own courtroom advice... The proposal raises the spectre of hundreds of thousands of husbands and wives taking out ‘before-the-event’ policies against the cost of divorce.”

Further to this the landmark case of £100m pound heiress Katrin Radmacher highlights the huge potential for an insurance policy that covers costs arising from a legal challenge to the nuptial agreement. In the case, Radmacher’s pre-nuptial agreement was upheld by the Supreme Court, reducing her ex-husband’s settlement from £5.8m to around £1m. Following this, the Law Commission is considering a statutory framework for pre-nuptial agreements.

It therefore seems likely that interest in divorce insurance will grow considerably in the coming years. This trend is backed by figures in the 2011 Matrimonial Survey by Grant Thornton where it shows that 58% of their respondents (family solicitors) reported that their level of pre-nuptial advisory work has increased [in comparison to 2010], and the Office for National Statistics Bulletin showing the number Civil Partnership dissolutions in the UK in 2010 increasing by 44%.

Add to this the precedence set in some European countries where there is already an established market for divorce insurance and the potential for development in the UK is clear to see.

Two law firms who draft relatively high numbers of nuptial agreements – Mishcon de Reya and Prolegal - have already made these products available to potential clients. The press coverage received so far, including a feature on Radio 4 show PM, has also on the whole been positive:

The Guardian: "Getting married? Top legal tips for couples-to-be…1. Have a prenuptial agreement.

The Economist: “With half of all marriages doomed to fail, even the moderately hard-headed may be interested in ways of mitigating the danger.”

Financial Times: “So, you’ve just got married, what do you do? A) Go on honeymoon, B) Celebrate with your family, or C) Take out divorce insurance.

If you answered C then, (somewhat surprisingly), you are not alone... while divorce insurance is unlikely to take off for the mass market any time soon, it could work for individuals who have already taken the time to craft a pre-or-post nuptial agreement.”

Financial News: “For the high net worth individual for whom a pre-nup just isn’t enough protection from the one they love, Mishcon de Reya is offering additional new armour for their clients’ personal fortunes: pre-nup insurance.”

Moneyhighstreet: “Savvy investment”

I will leave it to ARAG’s MD, Tony Buss to sum up, “While some may see the very idea of ‘divorce insurance’ as unromantic, the realities of modern life and the government’s legal aid and costs reforms will make it harder for ordinary people to access justice before the courts, meaning this is the right time to launch such a product.”

Find out more about the products: Pre-nuptial Legal Solutions Divorce Legal Solutions

Keep up-to-date with legal services online

An ARAG Before-the-Event insurance policy comes with a host of additional benefits to sit alongside the core legal expenses cover. One of these extras is the legal document service that allows a policyholder to tailor and download a variety of legal documents as well as access the comprehensive law guide.

The documents, letters and law guide are all written by top solicitors and barristers. To ensure peace of mind for policyholders, all of the documents are frequently reviewed and updated.

One of the most recent updates to the law guide is a policy on the Bribery Act 2010. Providing an overview, the new policy will help ensure that a policyholder knows how to comply with the requirements of the Act and includes:

• Information and examples of unacceptable conduct for staff and stakeholders


• Guidance on the conduct expected of staff and stakeholders


• Guidance on how a business can prevent bribery and corruption


• Help with training staff and communicating the policy to staff and stakeholders

The downloadable documents themselves are split into topical sections depending on the type of ARAG policy you have. For example, with ARAG’s commercial LEI products the policyholder is able to access templates for legal documents relating to business-matters in the following areas:

• Business start-up


• Debts and debt recovery


• Ecommerce


• Employment


• Health and safety


• Intellectual property


• Property


• Purchase and sales agreements

Within each area is a list of legal document templates which are tailored to each client’s specific circumstances through a series of straightforward questions. The majority of the documents are available completely free-of-charge, with examples ranging from debt collection letters for unpaid invoices and a privacy policy for a website, to trademark licence agreements and employee discipline and dismissal packs.

Policyholders also have the choice to pay to have their documents reviewed either online or by a solicitor allowing for that extra security and an even more bespoke service.

To find out more about ARAG legal expenses insurance products and legal services online, either visit www.arag.co.uk or email enquiries@arag.com

Identity theft is on the rise

Imagine you’re in another country at a conference on your own. Halfway through the week you fancy a nice meal out after a long day networking. You go to use your card to pay and find that it has been declined. A quick (premium rate) call to the bank confirms that someone else has been spending your money with a cloned card in yet another country.

Fortunately the bank had picked up quickly that I couldn’t be in two places at one time so had put a halt on all transactions. After another round of security questions to confirm that I was the real McCoy and they instructed me to go to a cash machine at which point they briefly lifted the ban on transactions and I was able to get enough cash out to see me through. However, although a solution was found, this event changed the way I thought about my personal data and security for good.

The worrying thing is that fraudsters can obtain personal and financial data in many ways, the most common of these include:

• Sifting – rifling through post and rubbish, taking bank/credit card statements


• Lifting – stealing personal information such as identification, credit or bank cards


• Falsifying – completing change of address forms to redirect mail


• Spying – obtaining personal information from insecure websites


• Skimming - capturing details of credit cards


• Copying - accessing postal records

With the data collected, fraudsters can access bank accounts; obtain credit, goods or services; duplicate or apply for passports; and even claim state benefits all without the victim’s knowledge.

In a recent article the Financial Times (1) reported that fraud in the UK increased by 10% in the first half of this year compared to the previous six months, according to new figures from fraud prevention service CIFAS. Of the 111,504 cases reported, identity fraud made up almost half of the crimes, with a further 10% of cases involving the illegal hijacking of a victim’s bank account. Such cases involving the misuse of an account or facility have risen to their highest levels since 2009 and now account for a quarter of all fraud crimes.

Latest figures provided by the Experian Fraud Index (2) also show that incidences of identity theft are becoming increasingly frequent. In the first three months of 2011:

• 20 in every 10,000 applications for financial products were found to be fraudulent, representing an increase of 24% on the fourth quarter of 2010


• 35 in every 10,000 applications to open UK current accounts were detected as being fraudulent, representing a 58% increase than in the fourth quarter of 2010


• 12 in every 10,000 insurance applications and claims were fraudulent, this represents an increase of almost 4% from the fourth quarter of 2010 and 43% from the first quarter of 2010


• 34 in every 10,000 mortgage applications were also uncovered as fraudulent, which is the second busiest period for mortgage fraud ever recorded by the fraud index.

There are many ways to help prevent the likelihood of being a victim of identity theft and websites like http://www.identitytheft.org.uk/ offer practical tips and advice. However, if the worst does happen then an ARAG Family Legal Solutions Policy can be there to help.

Firstly with the Family Legal policy, your clients have access to Legal Services Online where they can download documents such as credit repair letters; they will also have access to the Legal Advice Helpline where they get advice from legal experts 24/7. In the worst case the policy covers your client for a dispute arising from the use of personal information without their permission to commit fraud or other crimes.*

If you would like to find out more about ARAG’s Family Legal Solutions policy and how it can help your clients please contact one of our sales team via email at enquiries@arag.co.uk

* Exclusions, terms and conditions apply; see the Family Legal Solutions Policy Wording for full details.

1. http://www.ft.com/cms/s/2/056ed486-b78d-11e0-b95d-00144feabdc0.html#axzz1TUQbbJsZ (26 07 11)
2. http://press.experian.com/United-Kingdom/Press-Release/uk%20current%20account%20fraud%20surges%20in%20first%20quarter%20of%202011.aspx

The second reading

On 29 June 2011, the Legal Aid, Sentencing and Punishment of Offenders Bill went through, and passed, its second reading in Parliament. The Bill, which seems to have divided opinion in government, proposes changes in legal aid, civil litigation and the sentencing and punishment of offenders.

With regards to legal aid, the Bill proposes cuts in funding of £350 million meaning that people will be unable to obtain legal aid for most cases in private family law (except domestic violence), clinical negligence, employment (except those brought under the Equality Act) and debt and welfare issues amongst others.

As announced by Ken Clarke in the reading, legal aid will also continue for cases where, “people‘s life or liberty is at stake, where they are at risk of serious physical harm or immediate loss of their home or where their children may be taken into care.”

Clarke defended the legal aid cuts by stating that, “The scope of legal aid has expanded too far”, giving the example of taxpayers who are “forced to pay for legal advice to foreign students whose visa applications are turned down.”

Mr Elfyn Llwyd argued back that, “these provisions will disproportionately affect the most vulnerable in society, particularly people from ethnic minorities.”

Joan Ruddock also identified that her constituents “are people who need advice on immigration, on welfare and on housing” and asked “Where am I to send them? How are they to get justice with the provisions in [the] Bill on legal aid and on no win, no fee?”

The second section of the Bill aims to reform civil litigation and implement many of the proposals laid out by Lord Justice Jackson. The changes include removing the recoverability of success fees and After-the-Event (ATE) insurance premiums, increasing general damages by 10% and capping success fees at 25%.

The Labour response to the proposed changes was strong. Sadiq Khan, the Shadow Justice Minister, described the Bill as “incoherent, inconsistent and obsessed with cutting costs.” He went on to attack the proposals, explaining how the government’s motivation is driven by “their zeal to fix the so-called compensation culture.”

Khan’s deputy, Andy Slaughter continued:

“Turning to the Government’s meddling with civil litigation, they justify the need to upend no-win, no-fee by reference to the compensation culture.

“The Government are legislating to fit false perceptions. A system that allows people on moderate incomes to access justice is being overturned to please the insurance industry and large corporations.

“While the justification for reform may be imagined, the victims are all too real: children brain-damaged by medical negligence, workers injured by unsafe machinery or suffering industrial disease.”

With specific regard to the small concession of keeping recoverability for disbursement-only ATE insurance premiums in clinical negligence cases, Sir Alan Beith noted that “it is not clear to those who understand the system that there would be a viable market in after-the-event insurance in such a narrow field, when it has been abolished in other areas.” An important point, as legal insurers do not see a feasible way to provide this type of cover.

A large portion of the debate was taken up by referral fees, which was odd as they are not covered by the Bill. Several MP’s called them a “scandal” and Jack Straw quoted a solicitor who described them as a “form of legalised bribery.” He went on to say that they drove up costs and premiums and brought into question the “integrity of the whole of the motor insurance industry.”

So all in all, many of the concerns raised were for the victims who either through the legal aid cuts or civil litigation reforms will be worse off and have limited access to justice. As Baroness Hale stated in the run-up to the second reading, the Bill will have “disproportionate effect upon the poorest and most vulnerable in society".

The (un)Justice Bill

It is with regret that I am writing this blog as it means that the government has chosen to ignore the negative response that it received to both the Jackson reforms and legal aid cuts and instead implement them in the Legal Aid, Sentencing and Punishment of Offenders Bill.

Despite recent support from three cost judges and non-stop campaigning from groups like the Consumer Justice Alliance (CJA) and Access to Justice Group (AJAG) as well as consumers themselves, the Bill was first presented to Parliament on 21 June.

With only a few concessions, the Bill lays out plans to implement the legal aid and civil litigation changes in full. This will mean massive funding cuts in legal aid, removing provision to pursue cases in areas such as clinical negligence, debt issues and divorce cases and will leave some of the most vulnerable without suitable access to justice. In a recent Law Society Gazette article, Linda Lee, President of the Law Society, said how the Bill, “amounted to an attack on the vulnerable and was fundamentally wrong”.

On the civil litigation side, the much-criticised Jackson reforms will remove the recoverability of success fees and After-the-Event (ATE) insurance premiums, therefore shifting legal costs on to the victim.

The AJAG response to the Bill highlights in its summary the reasons why these changes will “result in a major denial of access to justice for claimants”; a few of these are detailed below:

• No win, no fee claims are not the preserve of the wealthy - 53% of claimants earn less than £25,000 per year and only 18% over £40,000


• Almost 3 million people benefitted from this form of funding over the last 5 years


• Currently, success fees and ATE insurance provide important checks and balances, acting as a brake on unmeritorious cases


• Without recoverable ATE, risk aversion by claimants will mean many perfectly good but problematical cases will fall by the wayside


• The proposed 10% uplift in general damages would not compensate claimants for losing up to 25% by way of success fee

Similarly, the CJA in its response describes how the “government’s proposals would ultimately mean that many victims, entitled to rightful compensation, would be unable to obtain proper legal representation due to the financial constraints that the new system would create.”

The Bill’s fast-tracked nature is another cause for concern. The consultation paper closed in February this year, just six weeks later Ken Clarke stood in the House of Commons to announce that the civil litigation reforms would be implemented in full. Now, just two months further down the line, the Bill has been presented to Parliament and rushed through to its second reading in just 9 days.

The worry is that the mainly negative reactions to the proposed changes have been ignored and the impact on the public has not been properly assessed. Some have expressed ‘outrage’ at the speed and Nigel Muers-Raby, CJA Chairman, comments how the government is, “pushing through sweeping and dangerous reforms with alarming speed.”

He explains further that, “by publishing such a wide-ranging Bill, it is the controversial sentencing aspects that will grab the headlines. However, buried in the Bill, you can see that thousands of injured people will suffer as a result of what is being proposed – the door to justice is effectively being slammed in their faces.”

Now that the second reading has been completed and debates have opened up on referral fees and market viability for ATE insurance in clinical negligence cases, a more in-depth analysis is required. Check back soon for our next blog - The second reading.

(Down) Time is Money

How about a new and worthwhile added value product for package business that will generate income and build client loyalty?

Welcome to ARAG’s Business Emergency Solutions.

In a previous life, I ran an insurance broker which operated from a high street shop unit for 18 years. One of the things that kept me awake at night was worrying about things that could stop me from trading. For example, if the boiler broke down my staff might well have to go home and the business would start losing trade immediately. However it was not just that, my credibility with clients was on the line. I stress easily, so something like that would be a real problem.

This is where the Business Emergency product comes in. It will pay for an emergency contractor to come out urgently and fix the problem. The policy has a range of events that are covered such as loss of power and lost keys as well as heating failure.

There are also a couple of new covers; fallen trees and fly tipping.

The policy would suit small businesses like shops and surgeries or other package business.

It is often difficult getting a contractor during normal weekday hours but what if your client runs a business that operates out of normal contractor hours? I used to open on a Saturday. Can you imagine being able to get a contractor out and then the cost if you can? However, with this new policy, we will have someone out quickly to get businesses trading again.

So how much does it cost? Price depends (as always) on volume and how the product is sold. One effective way of selling is by offering it as an opt-out. Anyway, I think you will find the price cheaper than you thought.

In these competitive days, we are all looking to create a difference and build customer loyalty and this product, newly launched by ARAG, could do the job.

If you would like to find out more about ARAG’s Business Emergency Policy contact the sales team either by email or call on 0117 917 1685.

Article by John Gray, Business Development Executive

A boost for the campaign against the Jackson reforms?

The campaign against the civil litigation reforms proposed by LJ Jackson received a boost recently after the response by three cost judges to the Green Paper was revealed by the Access to Justice Action Group (AJAG).

According to the Law Society Gazette the judges, “have broken ranks to object to radical reform of civil litigation” and were “unable to agree with the majority view of the costs judges”.

Backed by the Ministry of Justice (MoJ), the reforms include proposals to end the recoverability of success fees and After-the-Event (ATE) premiums, cap success fees at 25% of compensation awarded and increase general damages by just 10%. ARAG, AJAG, the Consumer Justice Alliance (CJA) and many others believe that such changes will significantly reduce access to justice and it seems the cost judges agree.

Describing many of the proposals as “inappropriate”, the judges have said in their response, “claimants who have suffered serious medical injuries could lose thousands of pounds intended to pay for their care”. They go onto say that it is often the conduct of the defendant that increases costs, so shifting the payment of success fees and ATE premiums to the claimant will cause “injustice”.

For ARAG and other legal expenses insurers who believe that ATE insurance helps access to justice as well as reduce costs by rooting out unmeritorious claims, a further comment describing the reforms on ATE as having “gone much too far” is a welcome one.

As pointed out in a Legal Futures article “the fact that important voices in the judiciary have such serious doubts about the reforms will give campaigners heart.” The fight continues!

The importance of Before-the-Event Legal Expenses Insurance

The publication of the In Case of Emergency Report by Consumer Focus caused a few ripples in the ARAG office when it was released last month, due primarily to its negative and often inaccurate account of Before-the-Event Legal Expenses Insurance (BTE LEI). Now, a couple of weeks later, we have had time to read through it and digest the findings only to discover that our initial concerns were confirmed.

As you may know ARAG is fighting the proposed civil litigation reforms as we believe that removing the recoverability of After-the-Event (ATE) insurance premiums will significantly reduce access to justice. The Consumer Focus Report also mentions the reforms but points to BTE LEI as a contender to fill the gap left behind. Yet, the Report itself is likely to cause more damage to access to justice by focusing on the negative aspects of their findings into the BTE LEI market and describing it as an “unnecessarily complex and shadowy market”.

These are the kind of statements that create the headlines, not the fact that 64% of respondents were able to give an explanation of BTE LEI (showing relatively high product knowledge) and 48% and 16% respectively were either satisfied or very satisfied.

Below are just a few examples where we have spotted some inaccuracies in the Report:

• Accepting that knowledge of any product or service is likely to be low amongst those that do not purchase it, the fact that overall 64% of respondents were able to give an explanation of LEI is testimony that it is well understood.


• Some favourable findings concerning BTE LEI policy information were excluded from the Report. The Report states that just 4% of respondents claim they received nothing when purchasing LEI. This along with an impressive response of 70% finding their policy information reasonably clear or very clear illustrates that considerable effort is made to treating customers fairly.


• It confirms that just 15% of respondents would not know what to do to make a claim. We would contest that this compares favourably to any other form of insurance product. Furthermore, excluded from the Research are details of those groups who have a greater than average 64% response on knowing what to do to claim.


• The Research comments that most people find the process of claiming straightforward, yet the Report fails to mention this preferring to highlight the fact that it is concerning that less than half of those surveyed (who had a successful claim) were satisfied with the process for making a claim.

ARAG is not afraid to accept criticism where it is due but the findings in this report seem to have been unnecessarily skewed in order to paint an unbalanced picture.

In principle we are not against such a Report and in fact commend the objectives set out. Some of the findings as they stand are very useful and will inform some of our decision making in the future, for instance improving product information and understanding. However, the Report as it stands does more damage than good.

Our worst fears confirmed?

As mentioned in previous posts here, ARAG have not hidden their opposition to Jackson’s proposed civil litigation reforms. In fact we have actively campaigned against them due mainly to our belief that they will reduce access to justice for the most vulnerable in our society.

It was then with some trepidation that ARAG’s managers sat to watch Justice Secretary, Kenneth Clarke announce to the House of Commons on the 29th March that he planned to implement the proposals in full.

I say with trepidation as it was only six weeks previously that ARAG along with 800 other interested parties submitted responses to the consultation paper Proposals for reform of civil litigation funding and costs in England and Wales. The first question for me would be how the Ministry of Justice could read and properly digest over 800 responses in 6 weeks, and ignore the overwhelming negative reponses to the Jackson Report.

• 71% disagreed that a success fees should no longer be recoverable
• 69% disagreed that ATE insurance premiums should no longer be recoverable from the losing party across all categories of civil litigation
• 64% disagreed that Qualified One-way Cost Shifting (QOCS) should be introduced

The reforms that Clarke wants to introduce include:

• removal of recoverability for lawyer’s success fees and after the event insurance premiums
• increasing general damages by 10%
• capping success fees at 25%
• one-way cost shifting

So is this our worst fears confirmed? Putting aside the impact on the Legal Expenses market, claimants will need to contemplate funding their disbursements which for the vast majority of society is virtually impossible, still face the prospects of paying costs if they fall to beat a Part 36 Offer and should they be successful in their action, damages will be reduced following the possible reduction of a success fee and ATE premium.

All in all it was a bad day for claimants. It is clear the government merely paid ‘lip service’ to the consultation process, not only ignoring the overall majority who responded, but concluded by being intent on wanting to implement a report that will damage the very cornerstone of access to justice.

ARAG will continue to campaign against the reforms both independently and via the Consumer Justice Alliance (CJA), Legal Expenses Insurance Group (LEIG) and Access to Justice Group (AJAG). We urge all those who really care about access to justice to contact their MP to voice their concerns and to also join the CJA and/or AJAG.

Are you always open for business?

Building on the success of the Home Emergency Solutions product that provides immediate assistance in the event of a domestic emergency, ARAG have launched a new product specifically designed to serve the needs of small businesses.

Filling a gap in the market, Business Emergency Solutions provides cover that protects business premises against situations such as vermin infestation, loss of keys, breakdown of the main heating system and many others emergencies that can halt a small business in its tracks. Health and safety regulations are such that emergencies can shut a business down until the problem has been resolved, often at a significant cost, causing stress and loss of earnings. This product aims to tackle these problems by ensuring that the insured receives prompt assistance from trained professionals. It’s distinctiveness in the marketplace is demonstrated by the comprehensive coverage of potential emergency situations (listed below) and its packaging within one convenient product.

• Breakdown of the main heating system


• Plumbing and drainage problems


• Damage to or failure of the premise’s locks and windows


• Breakage or failure of the customer toilet facility


• Loss of the power supply


• Lost keys


• Vermin infestation within the premises


• Removal of a fallen tree or large branch that blocks access to the premises


• Removal of fly-tipping waste

Find out more about Business Legal Solutions, including information about limitations and exclusions, on the ARAG website.

A round-up of responses to the Jackson Review Consultation

Valentine’s Day 2011, normally a day of romance but for ARAG and many other organisations and companies it signalled the end of the consultation period for the Ministry of Justice’s Proposals for reform of civil litigation funding and costs in England and Wales.

The proposals are based on recommendations from Lord Justice Jackson’s Review of Civil Litigation Costs (December 2009), in which he puts forward “a coherent package of interlocking reforms, designed to control costs and promote access to justice”. Some of the recommendations contained in the consultation paper include:

• Introduction of qualified one way cost shifting
• Abolishing the recoverability of after-the-event insurance (ATE) premiums and success fees
• Increasing general damages by 10%

The responses from across the industry have been submitted and it is now a waiting game to see how the government proceeds. In the meantime, this blog summarises a selection of the responses.

• Consumer Justice Alliance (CJA): The CJA describe the proposals as “misguided and ill-considered”, as they feel that they will “ultimately hinder the ability of injured victims to seek fair and reasonable access to justice”. More specifically, the CJA believe that it would be unfair to shift costs onto the injured victim and worry that capping success fees will mean it is not “commercially viable” for law firms to take cases with lower prospects of success. They also add that “there is no alternative that provides the certainty for claimants or defendants that a robustly regulated ATE market does”. Read more...


• Legal Expenses Insurance Group (LEIG): As laid out by Tony Baker, LEIG’s director, "the LEIG response will to preserve access to justice by putting forward practical alternatives to Government proposals while delivering significant and proportionate cost savings." Reiterating that there is only a ‘perceived’ compensation culture; the group propose a revised ATE system that will “control claimants’ and defendants' costs, maintaining access to justice, reducing unmeritorious claims, solving the disbursement conundrum, and preserving the ATE market”. Read more...
  
• Independent panel of law academics: Reported on the Law Society Gazette website, an independent panel of law academics described the proposals as ‘”misleading and inconsistent with a fundamental principle of civil justice.” They point out that they “would reduce the availability of legal services to injured persons, and benefit defendants at the expense of the injured.” Ultimately, the panel recommend that the “government should reject Jackson’s key proposal to allow lawyers to recover success fees from an injured person’s damages.” Read more...


• Medical Defence Union (MDU): According to Post Online the MDU are backing the Ministry of Justice proposals to reform civil litigation costs, claiming that they will “make the civil justice system fairer but will not impact a patient's access to justice.” Representing medical professionals, the MDU state that they “wholeheartedly” support the proposals that tackle “excessive and disproportionate costs, without affecting the ability of patients to seek compensation when they have been negligently harmed.” Read more...
  
• Association of British Insurers (ABI): The ABI is backing Jackson’s proposals stating that it is “time to put the brakes on the legal costs gravy train that is costing UK consumers £2.7 million every day.” They describe how, in their opinion, “high legal costs are at the heart of a compensation system that is too slow, too complex and fails too many genuine claimants.” The ABI believe that Jackson’s proposals will “deliver faster, fairer, more cost-effective compensation and care to those who need it.” Read more...
  
• Access to Justice Action Group (AJAG): “Access to justice for ordinary people will be severely curtailed by the proposals” reports AJAG’s press release which outlines its response. Citing their consumer survey, the AJAG Co-ordinator notes that “the biggest fear people have when enforcing their rights is the risk of legal costs.” Therefore they present a “comprehensive package that both maintains access to justice and helps keep costs down.” Read more...

As a member of the LEIG and CJA, ARAG of course support their responses to the consultation. However, with the view that the proposals will negatively impact access to justice ARAG also submitted their own response.

• ARAG maintain abolishing success fee recoverability would “have a catastrophic effect on injured victims” as “any deduction of damages would result in a victim receiving an unfair settlement”.


• As an ATE insurer ARAG know first-hand how valuable this cover is to claimants and have serious doubts that qualified one way cost shifting will “be sufficient to remove the other side’s costs risk.” They point out that insurance will still be needed to plug the gap but that few insurers could “respond to providing such limited forms of cover.” Additionally, the premium may have to increase and it will still be taken from the claimant’s damages producing “a significant barrier to taking legal action.”


• On unmeritorious claims, ARAG note that “ATE insurance acts as a significant filter on unmeritorious claims”, with ARAG declining “approximately 2/3rds of all individual quotes”.


• In response to the proposal to increase general damages by 10% to balance out the costs deducted, ARAG cite the 1999 Law Commission report that describes general damages as “already too low”. They therefore back plans for an increase but not at the expense of abolishing recoverability of success fees and ATE premiums.


• Regarding qualified one way cost shifting, ARAG state that it “would create a significant element of uncertainty and the likely prospect of satellite litigation.” Furthermore, ATE insurance would not be “available to protect those risks that would remain by virtue of the qualified rules” and will therefore deter genuine claimants from bringing valid claims and encourage more unmeritorious claims.

Personal Injury Advertising – Consultation Response from the CJA

The consultation period has now closed on the Claims management regulation proposal to amend rule 6(B) of the conduct rules paper, issued by the Ministry of Justice. Following recommendations in Lord Young’s Common Sense, Common Safety report, the consultation paper proposes a change to Rule 6(b) so that inducements of any kind are banned in personal injury advertising. You can read more about this in the Personal Injury Advertising blog.

Lord Young’s report was commissioned by the government to review UK health and safety, as well as the growth of a 'compensation culture'. However, a recent survey conducted by Norton Rose found that this ‘compensation culture’ “does not have the impact that many believe” and is based on perceptions by the public and media.

In response to question one of the consultation paper – do you have any comments on the proposal to prohibit the offering of financial or similar benefits as an inducement for making a claim by amending Client Specific Rule 6(b) of the Conduct of Authorised Persons Rules 2007? – the Consumer Justice Alliance (CJA):

• “Fully supports the prohibition of inducements subject to a corresponding ban on third party capture.”
• Agrees that “any advertising that represents a personal injury compensation award as some kind of lucky prize draw is inappropriate and misleading.”
• “Believe that prohibiting the offering of financial benefits as an inducement for making a claim constitutes the sort of sensible, measured reform that will reduce costs in the current system without dismantling it altogether.

As a member of the CJA, ARAG fully endorses this response. The full response is available to read on CJA website: http://www.consumerjusticealliance.co.uk/index.html.

Will it be a Carroll of joy?

In the January football transfer window, Andy Carroll made the record books as the most expensive Englishman to be signed by an English club. Liverpool FC paid a massive £35million for the 22 year old who at present is out with a thigh injury and unable to play for his new club.

Paying such big money for an injured player, ‘what if’ Carroll was unable to take to field and was forced to retire without even kicking a ball for his side? It must take a brave person to say “pay the £35m because his injury will heal”, but what if it doesn’t? From a purely hypothetical perspective the football club could have a case against the doctor who made the diagnosis. If the doctor had said that the injury would heal and his future play would not be affected and it turned out to be incorrect they could be liable for misdiagnosis. The club could possibly pursue the doctor for the money paid for the player and even wages paid to the player whilst his injury prevented him from playing.

A similar case that demonstrates this type of legal claim is that of former West-Ham player Dean Ashton who was injured during an England training session in 2006. Ashton was unable to fully recover from the injury to his ankle cutting his football career short. Ashton has just received an undisclosed settlement from the Football Association to compensate him for his forced early retirement following advice from the doctor that if he continued to play he may be unable to walk in the future.

According to a recent article in Insurance Times it also looks like West Ham want to get their share and are “set to issue a writ against the Football Association for £10.5m in compensation for retired England international Dean Ashton.”

ARAG’s After-the-Event legal expenses product Recourse is designed for just such incidences. An ARAG policy will pay disbursements, regardless of whether a case is won or lost, providing they are not recoverable from an opponent, and the opponent’s costs should the claim for damages be lost*. Working in conjunction with a full or discounted conditional fee agreement, the cover applies to various legal issues, including personal injury claims and contractual disputes. Find out more about Recourse.

* Subject to the Terms & Conditions of the policy.

Employment Tribunal System Part II

Following from the last blog post on the Employment Tribunal System a consultation paper was released on 27th January which seeks views on a number of proposals which if successfully implemented are intended to address concerns raised by the British Chamber of Commerce by reducing costs and making workplace disputes easier to resolve.

Citing the government’s aim to review employment law in order to make “the UK to be the best place to start and grow a business” the paper set outs a number of proposals that it hopes will “encourage parties to use early dispute resolution”, and if the dispute does go through an employment tribunal to make “cases move more swiftly to conclusion, so as to contain costs for employers, employees and the taxpayer”. (i)

With proposals ranging from “increased awareness of mediation”, to putting forward “legislative proposals to simplify the employment tribunal process” and amending the qualifying period for employees from one year to two before they can bring a claim for unfair dismissal to an employment tribunal, the consultation paper is bound to attract many responses before its April deadline. You can read all of the proposals and background information in the consultation paper online. (ii)

If implemented the proposals could benefit both the employee and employer with improved efficiencies, early resolution and a reduction in cases escalating to employment tribunals. Although there may also be some negative financial implications for unfair dismissal claimants in the form of introducing a fee and for employers in the form of introducing fines if the employer is found to have treated their employee unfairly. Moreover, some proposals could have unforeseen consequences which add costs to the system.

ARAG policyholders will be well-placed to welcome these proposals with 24/7 legal advice, updated downloadable legal documents and the assurance that policy coverage will reflect any future changes to the law.

(i) & (ii): Department for Business, Skills & Innovation and Tribunals Service (2011); Resolving workplace disputes: A consultation January 2011

Divorce and the proposed Legal Aid cuts

The UK Government, as part of its ongoing cost-cutting measures, is recommending some significant changes to the legal aid system, including a £350m reduction in funding. In November 2010 Justice Secretary Kenneth Clarke presented a proposal in which legal aid (with some exceptions) will be cut for cases such as divorce, welfare benefits, clinical negligence and personal injury.

Speaking to the BBC about these proposals Clarke described how they planned to “introduce a more targeted civil and family scheme which will discourage people from resorting to lawyers whenever they face a problem, and instead encourage them to consider more suitable methods of dispute resolution." (i)

However, others have concerns that the changes and cuts to legal aid may reduce access to justice and affect those who can least afford it.

In the case of divorce, couples may be required to go through mediation, represent themselves or find the money to fund their own divorce under the new proposals. This will obviously cause additional stress in an already upsetting situation.

One solution, should the proposals go through, would be to introduce insurance that covers the cost of divorce. In an interview on the BBC Radio 4 show Moneybox, Tony Buss, ARAG’s Managing Director describes how in Germany divorce insurance is well-established and taken out by people alongside their other legal protection insurances. A married couple will pay a premium of approximately €100 a year which if they decide to divorce (after at least 3 years of marriage) will pay out around €30,000 towards the legal costs involved. (ii)

Another avenue to consider is that of pre- and post-nuptial agreements. These are not yet enforceable by law but with the recent publication of the Law Commission’s consultation on marital property agreements (iii) this may change in the future. Therefore it would surely make sense to introduce an accompanying insurance that would cover the cost of litigation for both spouses in the event of divorce.

So is there a place for this type of cover in the UK? As Buss points out, so far insurance companies have “shied away from providing it because it is not yet socially acceptable.” But with the potential removal of legal aid, prospect of either funding or fighting your own divorce and the possibility of legally-binding pre-nuptial agreements, this cover would certainly provide a good alternative.

You can ‘listen again’ to discussions on this topic and interviews with Tony Buss on Moneybox, Radio 5 Lives’ Breakfast Show (2 hrs 50 mins) and Ted Robbin’s show on BBC Radio Lancashire (52 mins 33 secs).

(i) 15/11/2010 BBC, Legal aid reforms are unveiled by Kenneth Clarke: http://www.bbc.co.uk/news/uk-11741289
(ii) 15/01/2010 BBC Radio 4, Moneybox: http://www.bbc.co.uk/iplayer/console/b00xgr11/Money_Box_15_01_2011
(iii) Law Commission, Marital Property Agreements: A Consultation Paper (2011) http://www.lawcom.gov.uk/marital_property.htm

Employment Tribunal System

Following a research paper on Business and the Employment Tribunal System (i) the British Chamber of Commerce issued a press release calling for reforms to the employment tribunal system. According to the press release “the average cost for an employer to defend themselves at tribunal is £8,500”, as compared to an average payout of £5,400 if the employer settles. The problem that this highlights is that employers will be persuaded to settle “even if faced with a spurious claim” because it keeps costs down and is “more convenient to do so”.(ii)

As Dr Adam Marshall, Director of Policy and External Affairs at the BCC, points out in the press release:

“The employment tribunal system is in dire need of reform. Currently, tribunals are too slow and overwhelmingly weighted in favour of the employee - whereas they should be fair for employers and employees alike.”

ARAG’s range of commercial legal expenses insurances provides vital protection which will help to level the playing field so that the employer feels confident fighting unfounded claims at employment tribunals. For instance, Absolute Business Legal responds to a generous range of legal disputes that can arise from your day-to-day business activities, including:

• employment disputes and compensation awards


• defence of prosecutions


• representation for compliance and regulatory matters


• pursuing claims for property damage nuisance and trespass


• license appeals


• representation for full and aspect tax enquiries


• VAT appeals

Find out more about Absolute and ARAG’s other commercial legal insurance products on the ARAG website.

(i) British Chamber of Commerce (2011) Business and the Employment Tribunal System, Abigail Morris
(ii) British Chamber of Commerce (05/01/2011) Press release: BCC calls for reform to employment tribunal system

Personal Injury Advertising

Lord Young’s recent report Common Sense, Common Safety explored the perceived ‘compensation culture’ in Britain, which encourages a ‘if there’s a blame, there’s a claim’ mentality in which people are led to believe that they can get financial compensation for even the most minor accident. The report suggests that this places unnecessary burdens on businesses and the voluntary sector, making them take ‘an overzealous approach to applying the health and safety regulations’.

The report identifies the advertising conducted by the claims management companies as one of the major contributing factors to this problem. These advertising campaigns often promote the reward of non-refundable inducements, for example:

“We'll pay you £200 immediately after our solicitors approve your claim”
“As soon as we accept your claim, we promise to give you a £150 cash advance”

Under the current regulations of Client Specific Rule 6(b) of the Conduct of Authorised Persons Rules 2007 these inducements are allowed as they are not offered as an ‘immediate cash payment'. Following recommendations in Lord Young’s report, the Ministry of Justice (MoJ) is proposing to change this rule so that inducements of any kind are banned from all stages of the process. The MoJ has issued the Claims Management Regulation Consultation Paper outlining its plans to all claims management companies with all responses due by 10 February 2011.

So do the problems in the current system as laid out in the Common Sense, Common Safety report exist? As with anything they will to an extent but as the Consultation Paper points out “the majority of claims management businesses are not likely to be particularly affected.” Therefore is it right to limit the competitive edge that advertising and incentive strategies bring to the industry? In addition, as the money for inducements is not added to the claims cost but instead paid by the solicitors is there really that much of a problem to be solved?

You can read more in Lord Young’s Report and the MoJ’s Consultation Paper. To find out about legal insurance, visit ARAG’s website.