The cost of litigation could fall in the civil justice system following reforms which will bring welcome to relief to professionals and their insurers in negligence cases.

The new rules, known as the Jackson reforms, introduced on 1 April 2013, are primarily aimed at reducing the cost of personal injury cases, but will impact all commercial litigation.Following the reforms, After the Event (ATE) insurance premiums and success fees are no longer recoverable from defendants.  Other changes aim to control the rising cost of electronic document disclosure and some cases will be subject to court-determined budgets.  Claimants will also be encouraged to make settlement offers.

In recent years many negligence claims against professional firms have been funded using ATE insurance and Conditional Fee Agreements (CFA).  These allowed claimants to bring cases against professional firms at very low cost and then recover the cost of the premium and success fees if they won the case.  This led to defendants and their professional indemnity insurers facing costs bills which were massively disproportionate to the damages claimed.  The new rules will encourage far greater proportionality in costs.

Anything that reduces the cost of litigation has to be good news for professional firms and their insurers,” said James Burgoyne, Director Brunel Professional Risks.  “ATE and CFA arrangements were originally intended to provide access to justice to low income claimants, but they have been abused by large corporate entities in order to make speculative claims.  Closing the door on these practices and reducing costs will make professional firms a more attractive risk for insurers and could help to control the cost of premiums.”

The new rules have been summarised by law firms Clifford Chance and Norton Rose.

Whatever the changes to Court procedures, the key to securing competitive professional indemnity insurance is to avoid negligence claims in the first place,” said James Burgoyne.  “That is why we offer risk management advice to all our clients.”