Reading the Riot Act

The Association of British Insurers (“ABI”) has just published a tearful lament under the title £40 Million a Day - Counting the Financial Cost of the August 2011 Riots.

If as I did initially you read that and think “hang on, how could it possibly be that much?” don’t spend too long searching.  The simple arithmetic behind it is “insurers expect to pay out around £200m” against claims arising from five days of rioting.

So not quite what it seems at first glance. Surprise.

It’s a short article and worth a read but do have a freshly-peeled onion and a large bucket to hand before you begin.

We’re told not once but three times (in a seven-page article with wide margins, photographs and big spaces) about how “insurers expect to pay £200m in compensation”.

We read how marvellous insurers were in acting quickly despite “overly bureaucratic” and "slow and cumbersome” responses from police authorities to processing claims under the Riot (Damages) Act - “which some people wrongly thought was the fault of their insurance company” (surely not!).

But what is this piece of legislation you mention?  Well, that’s the point.

The Riot (Damages) Act 1886 provides that compensation must be paid by the police to individuals and businesses who suffer loss and damage following a riot.  There is no limit on the level of compensation. 

How does that fit with the much vaunted claim by insurers that they will be paying out as much as £200m for the costs?  Simple. Whilst they pay out in the first instance to their policyholders, they then recoup the money from the Government - or should I say the taxpayers, many of whom are, er, policyholders. 

The bottom line is that it’s all about cash flow. 

The article tells us piously that “insurers worked around the clock handling claims from their customers” - for which no doubt they will reap reward ultimately from the taxpayer.  “But”, the ABI tell us “a number of factors mean that a handful of claims await final settlement” (it’s worth reading the actual percentage stats on the preceding page.)

The pinnacle of this sickly sermon is: -

“Insurers are doing everything possible to ensure that any outstanding claims are fully settled as soon as possible.  Indeed there is no financial incentive on an insurer to delay the settlement of the claim.”

Except, that is, that where the Government is so slow to reimburse insurers out of the taxpayer’s money, insurers will be losing interest on the funds paid out in settlement of policyholders’ claims.  Whoops - gotcha!

The rest of what follows is a lecture about how the Act needs to be retained but updated, extending the period of time for claims but speeding up payment.  Since the majority of property owners probably hold property insurance, for whose benefit will that be?

For when my outward action doth demonstrate the native act and figure of my heart in compliment extern, ‘tis not long after but I will wear my heart upon my sleeve for daws to peck at:  I am not what I am.

The abominable Dr Botox

This is a must for anybody with an interest in the future of personal injury claims handling. That should be everyone. 

It’s a ripping yarn (but entirely true) set against the background of liability insurers and the Ministry of Justice (“MOJ”) trying to remove or reduce the ability of claimants to recover legal costs.

The aim – certainly the result – will be to keep solicitors out of the process and force claimants to deal direct, unrepresented, with insurers and their professional agents.  Here is a taste of what awaits them...

Our client was injured whilst on his motorcycle.  The van at the lights in front of him reversed unexpectedly.  He suffered serious injury (chronic labral damage) to both shoulders.  Corrective surgery was required.

This ex-navy (and ex-army) mechanic is a fit guy and has made a pretty good recovery over a period of two years.  Even so, he has a sound claim for compensation for the injuries he suffered, his medical expenses and the profit that his business lost whilst he was unable to function properly.

Liability is admitted.  Fellow claimant lawyers will know that is always the prelude to an insistence from defendants’ representatives – particularly when it comes to arguing about costs – that it was all “very straightforward”.

Those outside the industry – including a few prominent politicians – do not understand how much fun insurers can have denying the cause and severity of injuries and losses.

So, we have a respectable report from a consultant orthopaedic surgeon which deals with all necessary aspects of the injury for the purposes of the claim.It’s not clear why the insurers on the other side want to bother with an expert but the claim is of enough value for the court to give them permission to have their own report so we have not quibbled and our man has just been to see their chosen “expert”.

Pinch yourself now just to be sure that you’re not dreaming…

First, we’ll wind the clock back about three months.  At around that time our client received a letter from a medical reporting agency in Berkshire informing him that an appointment had been arranged for him to see a GP in Bristol.

The letter told him “we note that this expert is quite a distance from you, but [insurers] have specifically requested that he be instructed”.

It enclosed a long form to complete.  Almost all the enquiries invited him to supply information already contained in the particulars of claim and the consultant’s report that were served when we issued proceedings (interim payment, for those of you who are wondering).

We advised our man not to complete the questionnaire. It’s the duty according to court rules of the party instructing the expert to provide the information – which the insurers have been given.

We wrote to the defendant’s solicitors instructed after issue of proceedings to explain to them what we had done.  They said “our insurer clients deal with the instructions to experts.  We have sent your observations on to them.”

Meanwhile, we made some enquiries about the “expert”.  We found a short profile on the website of another organisation for which he works.

He is described as “a recognised specialist within the aesthetic industry”.  He is a “validated Botox injector”.  In fact he is “one of our advanced Botox tutors”. 

Our man described the appointment as “a joke”.

The building, “in a rough area of Bristol”, advertises as a chiropractor.  Reception was reportedly full of young kids with neck braces all filling out questionnaires.

Our man was asked four times to complete the questionnaire which we had written to the other side about weeks ago. Dr Botox then complained that he did not have any information.  Our client was able to tell him enough about the injury for him then to declare himself “confused” as to why the man had been sent to him as he was “only a GP”.

After asking the patient to touch his toes, move his head around and wave his arms up and down, the Doctor declared that he was not qualified to perform any assessment.

Apart from being a little irritated at wasting his morning, our client is fairly relaxed about the matter.  He has the reassurance of knowing that we are dealing with it and a clear idea of the game plan.  One aspect of that now will be that, no, he won’t volunteer to waste another half day going to see somebody else who hasn’t a clue.

But imagine this in the post-Clarke/Starling/Djanogly world.

That will be a world where this claimant might be forced to deal direct with insurers like this because no solicitor can reasonably do the work for the fees (if any) recoverable even on success of the claim.

Liability is admitted so it’s all straightforward, right?

What is the problem if insurers do not answer correspondence or do what the rules of court say they are supposed to?  What is the big deal if they insist that they need a report from somebody who is not qualified?

Surely the court is there to safeguard claimants – assuming they know how to issue proceedings and not get tripped up by insurers who can be hot enough on the rules when it means a chance to delay progress of a claim against them.

Even in a case such as this, if they had obtained a report and it came to court then any decent judge would see that the evidence was of no use ?  More likely the defendants will flag it up at a late stage and apply for an adjournment and more time.

By one means or another, one thing is guaranteed - delay.

Delay is the darling of insurers.  It always has been.  Why?

In better times delay was worth a lot more money in the form of the direct benefit of interest earned on funds retained for as long as possible.  Even now, with lower interest rates, it’s an earner.

On the other side of the table, claimants are usually struggling during the course of a claim because they have lost money as a result of an event that was not their fault.

Insurers like that too because it puts pressure on claimants to settle, so they can be low-balled.  This works in the early stages when people are desperate and it works in the later stages when people are jaded and fed-up.

Interim payments are a powerful weapon but even solicitors are often slow to use them.  How many claims handlers do I have telling me (incorrectly) that we must demonstrate need even in simple cases.  Some of them even instruct defendant solicitors who repeat it in opposition to a formal application - though it’s usually withdrawn by the time any self-respecting advocate gets hold of it.

This is the future of personal injury claims thanks to Ken Clarke and others bowing to the pressure of large companies threatening to take their massive profits to other jurisdictions (as if HMRC were competent enough to make them pay the right amount of tax whilst they are here).

The insurers’ promise of a lower premium seems to seduce the MOJ, presumably because it believes the populace is gullible enough to see this as a wonderful achievement.

What’s the best outcome? You might be told next year that you've saved tens of pounds on your insurance – though it will probably be “in real terms” and look much the same as before.

Pray you don’t have a claim. Pray it isn’t serious. Pray you don’t have to fight alone. 

The Pedlar's tale..

The report of a High Court decision caught my eye this morning with its quaint reference to the Pedlars Act of 1871. 

Bath and North East Somerset (BaNES) Council prosecuted Mr Jones for street trading contrary to the rather less memorable Local Government (Miscellaneous Provisions) Act 1982. It seems that Mr Jones had travelled to the scene of the crime with a large quantity of umbrellas on two consecutive days and set up his pitch for 55 minutes and 17 minutes respectively. 

The important point was that Jones produced a valid pedlar’s certificate and claimed that a statutory exception in Schedule 4 of the 1982 Act applied, making his activities lawful. The magistrates weren’t having it and so off he went to the administrative division of the High Court. 

His appeal was dismissed, substantially on this basis. Apparently the definition of “pedlar” in Section 3 of the 1871 Act requires that said person travels on foot. 

In the 19th century, the statutory definition of a pedlar excluded somebody who rolled into town on a horse and cart. The court held as a matter of interpretation that the 1871 Act was now to be read as if references to “horse” had been replaced with “motor van” or “car”. 

It makes me wonder of course, how far you have to walk to come within the definition. What if this bloke had driven, or caught a lift, to the edge of town with his umbrellas and walked the rest of the way? 

On a practical note, I was surprised that he could afford the petrol. Maybe I should get into umbrellas.

Junk mail

Heavy brown envelope in the post.Cost of postage? Not sure - I don’t use the post much.

Inside is a year’s supply of bank giro credit slips accompanied by no less than 12 pre-printed envelopes.  What is this clutter on my desk?

It turns out that it's an employer payment kit for the current tax year.  This is so that I can make my monthly payment to the Revenue of tax and national insurance deducted from employees' salaries.

Helpful?  No.

As HMRC will be well aware, we have been paying online for two years.  You have to register and set up an account, of course, to do that.

So, why has some idiot sent me a slab of paper in the post.

It is fair to presume that this happens mechanically, regardless of how you choose to pay, and that thousands of other employers are being sent these bundles of paper that will, like mine, go in the shredder.

How much does it all cost - not just the paper, ink and postage but the administrative expense of a system doomed to achieve, er, nothing.

Whatever it costs, you and I are paying it.  Ironically, my contribution will come out of the electronic payment next week.

Did somebody mention leaking pipes and drought?