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The Arc Legal team regularly provides media comment on relevant issues. Below is an article published in the insurance trade publication, Post Magazine, on travel legal expenses.
THE CLAIMS GAME
In the UK, managing personal injury claims is a commodity business, but pursuing claims outside the country is a different matter. Complex legal regimes and lack of cost recovery systems create real issues for insurers and legal expenses providers alike, as Rebecca Conway explains:
“When travellers take out insurance for a trip, their key concerns often centre on the level of medical cover and lost baggage limits in the policy. Ask them about legal expenses insurance and they’ll look at you blankly; it is not even on the radar screen.
This is unfortunate as travel legal expenses claims have the potential to prove very costly – a fact which has important implications for both insurers and travellers. So what types of incident can give rise to claims and why are they such a challenge to handle?
Travel legal expenses claims have many causes. At one end of the scale, there have been tragic events such as the Bahrain ferry disaster in 2007 and the Ecuadorian bus crash in 2008, both of which caused death and serious injury to many. But claims resulting from accidents while abroad are more common – for example, from falls, food poisoning and road accidents – and claims flowing from clinical negligence and sexual assault also feature.
The management of these poses a series of challenges. First, it is important to remember that the extent to which legal costs can be recovered outside the UK varies according to the relevant jurisdiction. In fact, many other jurisdictions do not operate a costs recovery system. Where claims are brought in these areas, solicitor costs have to be paid in full by the legal expenses insurer, even if the claim is successful. In most cases, the cost of bringing a claim is never recovered in full and sometimes no costs at all are recovered. It is to be hoped that recent developments in the law in Europe through directives and regulations will enable cost recovery for some RTAs occurring within other EU states. This would help alleviate the situation, but it’s early days so time will tell.
Perhaps the most challenging factor is the cost of dealing with these claims. Each claim is subject to a specific supply chain, often involving the appointment of lawyers both in the UK and in the jurisdiction of the claim. This is where the costs start to rack up, particularly as these claims require ‘active management’ from lawyers and claims handlers. The role of legal agents ‘on the ground’ to obtain evidence can be hugely important to success, for instance, and in some countries a police report cannot even be obtained without their involvement. But the appointment of legal agents imposes a further layer of cost in addition to the legal fees.
Timescales are also an issue. Investigations in foreign jurisdictions can take months, even years, to complete because of the need to obtain police reports and other evidence from the authorities. Delays in resolving claims cause frustration to the claimant, as well as the insurer and legal expenses provider. They also add to the cost of the overall claim.
Finally, it is also important to consider the subject of damages. Claims brought in most foreign jurisdictions regularly result in lower compensation than those received from claims brought in the UK. In Spain, for example, settlements are based on tables of fixed amounts for damages, which results in significantly lower sums than we see awarded here. By way of illustration, a whiplash claim may be worth Â£2500 in England but less than Â£1000 in Spain. This should be understood at the outset before embarking on a claims process, which may ultimately end in disappointment for the claimant.
The picture painted by these points is a fairly grim one and travel legal expenses claims can certainly be difficult to handle. But, with the right processes in place, they can also be managed effectively and profitably for all concerned. The key to success is to set clear expectations at the outset with the claimant, insurer and solicitors involved.
The legal requirements set out in the UK Court Procedural Rules require proportionality between the costs paid and damages received. This means it is essential for insurers and providers to actively manage each stage of the claims process. The focus must be on ensuring there is an actual benefit to pursuing the claim, where the prospects of the claim’s success can be achieved while keeping the costs proportionate.
Experience suggests the most effective way to ensure costs remain proportionate is to adopt a stage-fee approach to claims management. This involves agreeing fee levels with each of the lawyers involved in a case at every stage of the process.
By its nature, the work of solicitors often pushes the associated costs up – in some cases to nearly double that of the actual claim. To help control legal costs, agreement on the level of fees at every stage of the claims process, starting with the initial assessment through to the investigation work and obtaining evidence until the claim is finalised, is crucial.
The expectations of the traveller making the claim must also be managed. There is a common misconception among most travellers that while they are abroad they are entitled to the same duty of care, and eligible for the same levels of compensation, they would receive in the UK. The fact is, aside from the UK and US, this is often not the case. Those in the market, therefore, must communicate this effectively and ensure the claimant understands that travel legal expenses claims take a complex route, which will likely not result in the same outcome as on our shores.”
Rebecca Conway is Claims Manager at Arc Legal Assistance.
The article can be found at www.postonline.co.uk