Kennedys warns of rising cost of injury claims following Scottish reforms

Changes to the way claims for personal injury are handled by the courts are set to significantly increase the bill for Scottish insurers and policyholders, global law firm Kennedys has warned.

The Civil Litigation (Expenses and Group Proceedings) (Scotland) Act received Royal Assent on 5 June 2018 – completing a process started by Lord Gill’s civil courts review in 2009 – and lawyers and insurers are now waiting to hear when its key provisions will be brought into force.

Among the key changes, success fee agreements – where the solicitor takes a portion of the successful pursuer’s compensation in return for having taken the risk of not being paid at all had the case failed – are made contractual and legally enforceable. This percentage will be capped at a figure yet to be decided, but likely to be around 25%.

Further, the Act introduces ‘qualified one-way costs shifting’ (QOCS), which will protect a pursuer from having to pay the defender’s legal expenses if they lose their case (except in exceptional circumstances).

Both of these changes will make it a good deal more expensive to defend litigation in Scotland.

Rory Jackson, an Edinburgh-based solicitor who is lead liability partner for Kennedys in Scotland, says: “Both of these changes will make it a good deal more expensive to defend litigation in Scotland.

“The cap for success fee agreements is likely to move quickly from being a ceiling to the standard figure charged, and as a result claims for compensation will increase in a bid to make up for what the pursuer is losing. This might take the form of claims for multiple injuries or increased damages as attempts are made to game the system.

“The problem with QOCS is that most pursuers will be able to carry on with litigation as they want without fear of having to pay the other side.

“This will both encourage weaker claims, and make it harder to settle cases before they reach court – this in turn will increase the cost of settlement and the overall cost of litigation by stretching out cases unnecessarily.”

Fellow Edinburgh partner Peter Demick, who was part of a Forum of Insurance Lawyers committee that gave evidence to the Scottish government on the reforms, says that similar changes made in England and Wales also came with fixed legal expenses, which levelled up the playing field.

“It is good news that the Act strengthens the position of auditors of court, who decide what expenses should be paid. That will drive some consistency, but avoiding a fixed-cost regime is perhaps a missed opportunity.”

He adds that much of the detail of the reforms is now being filled in by the Scottish Civil Justice Council, and calls on it to bear these risks in mind.

“In formulating the rules of court to implement the reforms, we hope the council looks at ways of mitigating the danger of claims inflation.”