This week I had cause to look at the Protocol for Low Value Personal Injury Claims in Road Traffic Accidents (2nd edition). What a curious set of provisions it is.
Starting with the most obvious point, claims worth up to £25,000 would not in the natural and ordinary meaning of the words, justify the descriptor “low value”.
The fees payable under the Protocol were apparently set based on Legal Aid rates and a notional number of hours, although government in other contexts has acknowledged the uneconomic nature of Legal Aid work.
Even more surprisingly to a lawyer trying to decipher what it means, though it has been around in two editions for several years now there is no binding authority on any part of the provisions.
The so-called authorities I was asked to look at, are nothing of the kind, being decisions of District Judges and Deputy District Judges, shoddily typed, copied multiple times and passed from hand to hand by lawyers practising in this field, like samizdat literature.
One of the issues that remains up in the air, is the nature of an admission made under the Protocol, through the MOJ Portal.
Many road traffic accident claims will involve both parties suffering both insured and uninsured losses: commonly negotiations between the parties, their respective solicitors and insurers will run in parallel, dealing with the various claims and counterclaims.
If proceedings are necessary, claim and counterclaim can be made, either settled in isolation in whole or in part and those elements which are left outstanding go to trial. Such a case is daily bread for the junior barrister in the first years of practice. However what happens when an insurer and insured fall out?
Or simply do not communicate with each other, so that an insurer wishing to make an economic settlement of a claim intimated through the MOJ Portal admits liability. Is such an admission binding on the insurer’s policy holder who may otherwise wish to pursue a claim for uninsured losses, eg personal injuries but who would be precluded from doing so by the admission?
Although this scenario concerns the consideration of the status of an admission made within the context of the RTA Protocol rather than a settlement, the issues raised are not new and have arisen in the past where either an insured or insurer has acted to prejudice the interests of the other through an ill-informed settlement. For a general survey see Foskett on The Law and Practice of Compromise 7th edition per chapter 22.
The scenario of an admission requires consideration of similar issues: namely what has actually been admitted/settled and did the maker of the admission, the insurance company, have actual/ostensible authority to make the admission in question?
The starting point is to note that a motorist is required by law to have third party liability insurance when using a motor vehicle on the road. The Road Traffic Act 1988 establishes the scheme of compulsory insurance. The motorist accordingly by law has to effect a contract of insurance with an insurance company.
Whatever the scope of the indemnity of such insurance as the motorist may carry, which might be third party, third party fire and theft, or comprehensive insurance such insurance will not provide an indemnity for all the losses the motorist might potentially suffer. A motorist might incur uninsured losses most obviously personal injury, special damages consequent on the personal injury, general damages for loss of use of his motor vehicle and if he mitigates his loss by hiring a replacement vehicle, damages for hire.
The insurance company is thus concerned to have rights of control of the proceedings under the contract of insurance in respect of it’s own liability it indemnify a third party. It has no interest in the uninsured losses, being neither required to pay for them, nor to pay for legal costs in pursing recovery of them.
The insurance company is also concerned, as is the insurance industry generally, to deal with those claims it is concerned with as cheaply and as efficiently as possible. It is also well known that insurance companies may settle cases for all sorts of reasons: on the merits, and for economic reasons.
The scheme set up under the MOJ Portal and encapsulated in the Pre-Action Protocol for Low Value Personal Injury Claims in Road Traffic Accidents, is thus primarily for Claimants to pursue their uninsured losses through a cheap and quick procedure, and for insurance companies to be able to settle their liabilities accordingly. The scheme is wholly different to an action in the civil courts, which might involve claim and counterclaim, issues of causation and quantum, evidence and fact finding.
Accordingly, it might be thought to be a surprising result if as a by blow of the Pre-Action Protocol an admission by an insurer concerned to agree and settle its liability could bind it’s insured in respect of his own personal injury claim, which is not insured by the insurer, not indemnified by the insurer, not of interest to the insurer, and which cannot be raised within the Portal by the insurer. Equally it would be surprising if, an insurer wanting to make an economic settlement of a low value claim, to preserve its’ insured position must deny liability and lose the benefits of a resolution within the Portal.
In fact some might argue that consideration of the Protocol indicates that this is not the case. Construction of the provisions of the Protocol, indicate that an admission made within the Portal is intended to bind the insurer’s interest, not the insured’s personal claim and any admission made must be construed to relate to only to the claim made against the insured and indemnified by his insurance company (a narrow construction) and not in respect of the insured’s own personal claim (a wide construction). It is noted that insurance companies often rely on the case of Ullah.v.Jon decided by a District Judge in the Croydon County Court to argue that an admission of liability made by a Claimant’s insurer binds the Claimant personally: but that decision is not binding and could be argued to be wrong in any event.
The Protocol is made under a Practice Direction. Practice Directions are made under the Civil Procedure Act 1997 and the Constitutional Reform Act 2005. Although not delegated legislation made by statutory instrument, it is likely that the general canons of statutory construction will apply to construction of the Protocol: namely that it must be construed in a purposive way and that the purpose is to be given effect by a literal construction.
The aims and thus the purpose of the Protocol are expressly set out in paragraph 3.1:
3.1 The aim of this Protocol is to ensure that—
(1) the defendant pays damages and costs using the process set out in the Protocol without the need for the claimant to start proceedings;
(2) damages are paid within a reasonable time; and
(3) the claimant’s legal representative receives the fixed costs at each appropriate stage.
Looking at the Protocol’s definitions:
1.1 In this Protocol—
(1) ‘admission of liability’ means the defendant admits that—
(a) the accident occurred;
(b) the accident was caused by the defendant’s breach of duty;
(c) the defendant caused some loss to the claimant, the nature and extent of which is not admitted; and
(d) the defendant has no accrued defence to the claim under the Limitation Act 1980;
However this has to be read with:
(10) ‘defendant’ means the insurer of the person who is subject to the claim under this Protocol, unless the context indicates that it means—
(a) the person who is subject to the claim;
(b) the defendant’s legal representative;
(c) the Motor Insurers’ Bureau (‘MIB’); or
(d) a person falling within the exceptions in section 144 of the Road Traffic Act 1988 (a “self-insurer”);
Thus according to the definition, the Protocol seems directed not at the insured personally, but at the insurance company standing behind him. The admission made by the defendant, is made by the insurance company which has to settle the claim accepted. It could be said that it has nothing to do with uninsured losses or the defendant’s personal claim (if any).
Secondly, this consideration is re-inforced by the forms used. Per paragraph 6.1
6.1 The claimant must complete and send—
(1) the CNF to the defendant’s insurer; and
(2) the ‘Defendant Only CNF’ to the defendant by first class post, except where the defendant is a self-insurer in which case the CNF must be sent to the defendant as insurer and no ‘Defendant Only CNF’ is required.
6.2 The ‘Defendant Only CNF’ must be sent at the same time or as soon as practicable after the CNF is sent.
Perusal of the forms reveal that the Defendant Only CNF has no box for a response. It is provided for information only. There is no scope for the Defendant to engage personally in the process, which might be thought to be a pointer to the Protocol having nothing to do with the Defendant’s personal claim, and any admission made within it, being limited to the Defendant’s insurer’s liability.
Thirdly, the response made is expressly enjoined to be by the insurer. The insurer has no facility to include within the response any intimation of a claim for its own insured’s personal claim, though for the reasons above it would have no interest in doing so:
6.10 The defendant must send to the claimant an electronic acknowledgment the next day after receipt of the CNF.
6.11 The defendant must complete the ‘Insurer Response’ section of the CNF (“the CNF response”) and send it to the claimant within 15 days.
Accordingly it is arguable that on a proper construction the admission made, is for the purposes of the Protocol only and limited to an admission in respect of the subject matter of the Protocol: the potential liability of the insurance company, which alone is bound by it.
Insurance companies stand behind the veil. They rely on the doctrine of subrogation, an ancient doctrine, being a fusion of legal and equitable concepts to preserve their interests when an insured event happens.
Subrogation is the right of an insurer to sue in an insured’s name when it has provided an indemnity under a policy of insurance, to recover the loss under the policy from a wrongdoer. Subrogation can also encompass the right to claim from an insured, the fruits of any litigation the insured has undertaken to repay to the insurer sums it may have paid out under the policy.
The law of agency, deals with the insurer’s rights to deal with third parties when negotiating settlements, and in particular the scope of their actual or ostensible authority to effect a settlement. Dealing with actual authority first, this has to be considered in a number of respects. First the contract of insurance in this scenario, will have given the insurance company authority to settle. But settle what? On general principles of contractual interpretation, the authority to deal with the subject matter of the contract (the right to an indemnity) must be dependent on what the insurer’s obligations are under the terms of the contract.
If the indemnity had a limit of say, £1 million, an insurer purportedly making a settlement of £2 million, would be acting without actual authority in so doing. Whether the settlement was binding vis a vis a third party would hinge on issues of ostensible authority.
Accordingly,in this scenario, where the claim is for uninsured losses, the insurance company can have full authority to dispose of its interest under the indemnity, but by definition it cannot have any actual authority, grounded in the contract of insurance, to deal with claims or losses it is not indemnifying and which fall outside the scope of the contract.
Secondly, implied within the contract of insurance, will be a contractual term that the insurer will not exercise rights of subrogation to his prejudice: see MacGillivray on Insurance Law 12th edition at paragraph 23-059: in circumstances where the insurers by admitting liability and precluding the insured from bringing a claim for his own losses, are in breach of implied term, they would plainly be acting without actual authority given to them by the contract.
In terms of ostensible authority, the general position is summarised in Chitty on Contracts 31st edition at 31-057. The court must consider all the circumstances to conclude whether ostensible authority can be found or not. This is inevitably a case specific, fact sensitive exercise.
All the above analysis, however, if rejected by a court, does not detract from a very simple point, that it is hard to see why in this scenario,the court should refuse permission to the Claimant to withdraw his admission. See generally the helpful checklist in the Practice Direction to part 14 set out below:
7.1 An admission made under Part 14 may be withdrawn with the court’s permission.
7.2 In deciding whether to give permission for an admission to be withdrawn, the court will have regard to all the circumstances of the case, including –
(a) the grounds upon which the applicant seeks to withdraw the admission including whether or not new evidence has come to light which was not available at the time the admission was made;
(b) the conduct of the parties, including any conduct which led the party making the admission to do so;
(c) the prejudice that may be caused to any person if the admission is withdrawn;
(d) the prejudice that may be caused to any person if the application is refused;
(e) the stage in the proceedings at which the application to withdraw is made, in particular in relation to the date or period fixed for trial;
(f) the prospects of success (if the admission is withdrawn) of the claim or part of the claim in relation to which the offer was made; and
(g) the interests of the administration of justice
In a case where an admission is sought to be withdrawn at an early stage, and where there is no evidential prejudice, the case for withdrawal of an admission made by an insurer without express assent from a client and in breach of an implied term might be more straightforward to argue than other cases.