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McLaspo update: QOCS one step closer in Scotland

The Scottish Government is taking forward its plans to introduce QOCS and Damages-Based Agreements with The Expenses and Funding of Civil Litigation (Scotland) Bill expected to be published in May 2017.  DWF are participating in the Business and Regulatory Impact Assessment for the Bill and we anticipate giving evidence at the Committee Stage of the Bill later this year.  We are concerned about the unintended consequences of the Bill and the impact it will have in the Scottish jurisdiction.  We have already identified insurers' concerns to the Scottish Government team leading on the Bill and have presented our data to them. We will continue to argue for a more balanced to approach to costs and funding in Scotland.  

The genesis of the proposal on QOCS was Sheriff Taylor's 2013 report on the funding of personal injury litigation in Scotland.  Although that report stated there was no compensation culture in Scotland, in recent years increased levels of fraud have been detected in Scotland, along with a significant rise in injury claims.  In part this is thought to be due to the effect of LASPO in England pushing claims management companies into Scotland, where their activities are not regulated and referral fees are allowed.  Anticipated whiplash reforms south of the border are likely to increase this effect.

The current proposal is for QOCS to be limited when fraud is established (akin to fundamental dishonesty) but at this stage there is no intention to cap claimant costs.  There are clearly real risks for what this will mean in terms of fraud and overall claim volumes in Scotland, and beyond that the knock-on effect on premiums and uninsured driving.  The political reality of the Scottish Parliament, where no party enjoys an absolute majority, means that QOCS is almost inevitable – if the SNP Government does not include QOCS in the Bill it will almost certainly be reinstated at Stage 2 by one of the other parties.  We suspect the real battleground will be on the limitations on QOCS, regulation of claims management companies and, potentially, on claimant costs.

For Damages-Based Agreements the current proposal is that a solicitor will be entitled to charge up to 20% of the damages recovered (on a sliding scale) plus litigated costs.  The Government's view is that the market will regulate the percentage deduction from damages: we have serious concerns about the true extent of competition in a small market, with only a few dominant players, and significant barriers to entry.

The regulation of claims management companies in Scotland is to be considered as part of a wider review of the regulation of the legal profession, expected to be announced imminently.

DWF is participating in the Business and Regulatory Impact Assessment for the Bill and will seek to give evidence at the Committee Stage of the Bill later this year.  We are concerned about the unintended consequences of the Bill and the impact it will have in this jurisdiction.  We have already presented some of our data to the team leading on the Bill and will continue to argue for a more balanced to approach to costs and funding.  Any insurer writing casualty or motor business in Scotland needs to understand the proposed changes and the effect they will have on their business.  We are working hard to engage and raise awareness on this – please let us know if we can help you.

Contact

For further information please contact Andrew Lothian, Head of General Insurance (Scotland) on 0131 474 2305 or Caroline Coyle, Associate on 0141 228 8132.

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

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