A fixed recoverable costs regime which has been extended to gastric illness claims made abroad will not be applied to all personal injury claims relating to package holidays, a government report has concluded.
The Ministry of Justice today published the findings of a call for evidence into how to handle personal injury claims related to package holidays launched after Abta reported a 500% rise in holiday sickness claims between 2013 and 2016.
Operators had argued that uncontrollable costs incentivise claims management companies to encourage false and exaggerated claims, while claims firms said fixing costs would discourage genuine victims from making claims.
On May 7, fixed costs on holiday sickness claims were introduced, before which legal firms could rack up costs which in some cases were multiple times more than the value of the claim in a move commentators said was to force operators to pay out rather than challenge bogus claims.
The report had responses from 43 companies and organisations, including tour operators such as Tui, Thomas Cook and Jet2holidays as well as Abta, the Civil Aviation Authority, legal firms for both defendants and claimants and claims management companies.
It found that there is no evidence of a serious problem with other package personal illness claims, and that “at present the problem clearly lies with gastric illness claims,” but added: “That said, we stand ready to take further action to extend the scope of this provision should there be evidence of an unfounded increase in other types of package travel personal injury claims” which could include cruise or aviation claims that could be more expensive for law firms to handle.
Submitting its evidence, the Association of Personal Injury Lawyers said an extension to include all types of package holiday personal injury claims represented a “cure that goes much further than the identified malaise”.
The MoJ’s report said fixed costs “provide certainty to both parties as to what the legal costs of a claim will be and make the costs of claims more proportionate”.
This, it concluded, means defendants can challenge claims believed to be unmeritorious without fear of litigation being too costly. It noted that there was “some concern” that introducing fixed costs would prevent access to justice for genuine claimants if extended to other package travel personal injury claims.
Claimants’ lawyers also argued that the need to translate evidence owed to higher costs when arguing they shouldn’t be fixed.
Those defending claims had argued for linked claims to be processed together, rather than individually, so as to reduce court costs and time, but the report said claims will continue to be treated separately.
A suggested ‘claims portal’ will not go ahead as both defendants and claimants agreed it was not suitable.
Claimants had asked for earlier settlement of claims, while defendants said the nature of claims being made abroad with hotels that often only work seasonally meant delays were inevitable.
The report said claims should from now on be acknowledged within 14 days and responded to within 42 days. It agreed hotels may not be in operation out of season but said there was no excuse for delayed responses when they are.
With the majority of cases settled out of court, the MoJ said fixed costs should not have a significant impact on the court system. It acknowledged there could be an impact on fees courts collect but said it expects the number of lawyers opting not to take on cases to be mitigated by other firms taking them on with fixed costs to meet demand.
It added that lawyers can claim fixed costs even if the case doesn’t make it to court.
The report concluded: “It is clear that defendant tour operators have taken a robust stance in bringing fraudulent claims to justice. They need to continue to do so, taking proactive action in order to: discourage claims arising; challenge unmeritorious claims: and to keep detailed data. We stand ready to consider the case for extension, should a clear case be made out.
“Fixed recoverable costs will bring certainty and control the costs of gastric illness claims, which will enable defendants to defend unmeritorious claims robustly whilst not preventing genuine claims from being pursued.”
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