CPR committee asked to close foreign holiday sickness claim 'loophole'

The government has asked the Civil Procedure Rule committee to ‘urgently’ look into extending the fixed recovery costs regime to foreign holiday sickness claims.

The committee, which is responsible for maintaining the rules on legal costs, was tasked on Monday (10 July 2017) with bringing claims arising from incidents taking place abroad within the same regime as domestic personal injury claims, where fixed recoverable costs apply.

Under the proposals, the cost of defending a claim would be set by reference to its value, making litigation more predictable, the Ministry of Justice said in a statement. This would ‘close the loophole’ and ensure that ‘pay-outs for tour operators will be subject to stricter controls’.

Espousing a theme developed by his predecessors, justice secretary David Lidington said the government was ‘absolutely determined to tackle the compensation culture which has penalised the honest majority for too long’.

One recurrent issue, according to Julian Morris, a partner at Plexus Law, is the claimant’s failure to make early notification of the complaint, which need only be a visit to the local doctor or a letter of complaint. ‘Many allegations are only brought to a defendant’s notice two or three years after the holiday via a solicitor’s letter of claim,’ Morris wrote in Solicitors Journal last week.

‘Litigation, as a result of the approaching limitation period, follows shortly thereafter. The need for judicial guidance has led defendants to maintain robust defences and opt for a potentially more costly principled position over the, often cheaper, commercial settlement which might have been preferred six or 12 months ago.’

The Ministry of Justice also said it would ask the committee to come forward with additional proposals for changes to the costs rules in respect of low-value claims to ‘reduce the incentives to bring claims lacking merit’.

The suggested changes will come alongside existing proposals under the new Civil Liability Bill, which aims to tackle the cost of whiplash claims. The bill was introduced in the Queen’s speech and will take over the PI reform elements from the Prisons and Courts Bill, which ran out of time after the general election was called.

The new bill proposes to ‘crack down on fraudulent whiplash claims and is expected to reduce motor insurance premiums by about £35 per year.’ One key measure will be to ‘ban offers to settle claims without the support of medical evidence and introduce a new fixed tariff of compensation for whiplash injuries with a duration of up to two years.’

The travel industry estimates that holiday sickness claims have risen by 500 per cent since 2013. Other European countries have not experienced an increase on the same scale, suggesting a high number of claims are bogus, operators say.

The government said it will continue to work with the Association of British Travel Agents and other industry representatives to understand the underlying problem and identify the most appropriate response. A call for evidence involving the travel industry will aim to gather data on volume and costs of claims to help inform any further action.

The move comes as a couple who suffered from food poisoning while holidaying in Egypt have won a claim against TUI. Lavery and Lavery v TUI UK, in Bradford county court, is understood to be the first claimant win since the Wood v TUI decision earlier this year. The Court of Appeal in Wood found against the tour operator on a strict liability basis but made clear claimants still had to prove causation.

Meanwhile in separate case, on 10 July, a Liverpool judge found against another couple, saying they had not been ill and had been fundamentally dishonest. Julie Lavelle and her partner Michael McIntyre were ordered to pay £4,000 in costs. Sarah Hill, head of fraud and a partner at BLM, who acted for tour operator Thomas Cook in the case, said ‘given the recent surge in false holiday sickness claims, the industry has been anticipating a case of this significance for quite some time’. The ruling was ‘a satisfying outcome’ not just for her client but for the wider travel industry too, she said, and 'will hopefully set a precedent for the future treatment of false claims in UK courts'.  

In related news, the government has refused to ban cold calling for claims management companies. Cold calling is already banned for solicitors but during the second reading of the Financial Guidance and Claims Bill in the Lords last week, work and pensions minister Lady Buscombe said CMCs could be subject to Financial Conduct Authority regulations, which are suitably stricter.

Solicitors Journal

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