Settlement Offers in Personal Injury Claims
The Civil Procedure Rules which govern the way personal injury claims are litigated allow the parties to a claim to put forward offers of settlement. The Rules allow a claimant or defendant to put forward an offer of settlement of a personal injury claim prior to a court hearing taking place. An offer to settle can be put forward at any stage during the course of the claim and could be put forward at a very early stage shortly after a claim has been notified to the defendant or at a much later stage after court proceedings have been issued before a trial takes place. The advantage of putting forward an offer is that it enables a claim to be brought to a conclusion without the need for a court hearing. If a claimant puts an offer of settlement to the defendant which is accepted by the defendant, the claimant will be entitled to a contribution towards their legal costs from the defendant. The advantage of settling a claim at an early stage is that costs are reduced and the contribution towards costs paid by the claimant will be lower than if the claim proceeded to a court hearing. It is important to remember that in personal injury compensation claims, the defendant does not pay all of the claimant’s costs, the contribution paid by the defendant is set out in Rule 45 of the Civil Procedure Rules in claims settling for up to £25,000 where fixed costs apply. In claims settling for over £25,000 a larger proportion of the claimant’s costs are paid by the defendant but the defendant is only required to pay those costs which a court would consider reasonable and proportionate in the circumstances. The vast majority of personal injury claims are carried out under a conditional fee agreement which will provide for a success fee to be paid to the claimant’s solicitors. The success fee effectively compensates the claimant’s solicitors for taking the risk of getting paid nothing if the claim was unsuccessful. The success fee payable by a claimant has to be deducted from the claimant’s damages as the success fee is not payable by the defendant, therefore settling a claim early will reduce the solicitors basic costs and the associated success fee. The success fees payable on claims that go to a contested trial are higher than those charged if the claim settles without a contested hearing.
The vast majority of personal injury claims settle without a contested trial taking place but if a trial does take place there are substantial advantages to a claimant who has previously made an offer of settlement which has been pitched at an appropriate level. If the claimant recovered an award at a court hearing which was more than the amount the claimant proposed accepting, the claimant would be entitled to a more generous costs contribution from the defendant known as indemnity costs where a valid Part 36 offer had been made. Further, where the claimant has made an offer to settle which the claimant beats at trial, a claimant is entitled to up to 10% interest above bank base rates on all damages awarded during the period more than twenty-one days after the offer was made until the date of trial. The claimant can also recover up to 10% interest on those costs. The award of interest can add many thousands of pounds to the amount recovered by the claimant at trial. The award of additional interest is capped at a maximum of £75,000. In the case of Hochtief (UK) Construction Ltd and Anorv Atkins Ltd  His Honour Justice O’Farrell made it clear that the Part 36 Rules applied even when the difference between the rejected offer and the final award made by the court was relatively small. In this case, the claimant had made an offer to settle of £875,000 and at trial was awarded £879,848. Since the claimant had been awarded more than the Part 36 offer, the judge allowed enhanced interest on the damages and costs from the date of expiry of the offer and also ordered costs on an indemnity basis. The affect of that decision was that the claimant recovered an additional £65,123 as a result of beating their own Part 36 offer.
Where a defendant makes a Part 36 Offer to the claimant, the claimant has to carefully consider the defendant’s offer. If the offer was rejected and the claim proceeded to a contested trial and the claimant was not awarded more than the defendant had previously offered, the claimant would be liable for the defendant’s costs during the period from more than twenty-one days after the offer was made to the date of trial. The costs could be very considerable and in low value claims, the costs could be more than the value of the claim. Settlement offers should always be carefully considered. If a defendant’s offer of settlement is accepted, the claimant is entitled to the same contribution towards costs as would have been received if the defendant had accepted an offer put forward by the claimant.
In all claims that I deal with, I always ensure that where a claimant doesn’t have a pre-existing policy of legal expenses insurance, I issue a policy of After the Event Insurance which covers the defendant’s costs. The policy of insurance will cover the defendant’s costs if the defendant’s offer is not beaten at trial, so the claimant does not suffer a costs penalty where the claimant was advised to reject the defendant’s offer.
It is possible for either party to withdraw an offer of settlement of the claim after the period for consideration of the offer has expired, typically a period of twenty-one days. The defendant could withdraw an offer where new evidence comes to light which reduces the value of the claim, for example, if the claimant dies before the claim has settled. A claimant who had made an offer to the defendant would want to withdraw the offer if the claim has increased in value since the offer was made, for example, if the claimant’s medical condition deteriorates and the value of the claim had increased. A personal injury claim can be valued after a medical report has been obtained by the claimant’s solicitor confirming the injuries sustained by the claimant. In some personal injury claims it may be necessary to obtain several medical reports because the claimant has sustained a number of distinct injuries, for example, a report from a neurological surgeon to confirm the extent of a brain injury, a report from a consultant ophthalmic surgeon to report on eye injuries and a consultant orthopaedic surgeon to report on other physical injuries, for example a fractured wrist. It may also be necessary to obtain more than one medical report from the same consultant where, for example, the claimant needs to be further assessed after undergoing an operation or recommended rehabilitation treatment.
In the conjoined cases of Gibbon v Manchester CC  and Bricklayer Ltd v Reeves  Court of Appeal EWCA Civ 726 the court noted that normal principles of contract law did not apply to Part 36 offers, therefore an offer which had previously been rejected, could subsequently be accepted at a later stage. The Court of Appeal concluded that Part 36 of the Civil Procedure Rules was a self-contained code that should be read according to its terms without importing other rules derived from general law, therefore an offer which had previously been rejected could be accepted or where a counter-offer was made, the original offer was still available for acceptance. In this case the claimant had put forward a Part 36 offer in the sum of £2,500 which was rejected by the defendant. The defendant made several counter-offers which were less than £2,500 which the claimant rejected. During the months after the original offer was made, the value of the claimant’s claim increased so that the original offer of £2,500 was no longer appropriate. The claimant’s solicitors did not withdraw their original offer and believed that because it had been rejected by the defendant’s solicitors the offer was no longer open for acceptance. The defendant’s solicitors subsequently accepted the offer of £2,500. The court rejected the claimant’s contention that the offer was no longer available for acceptance because it had previously been rejected or because it should be treated as having been withdrawn after twenty-one days. The claimant therefore had to accept the sum of £2,500 in settlement of the claim even though that amount was no longer considered appropriate at the time of settlement. I have dealt with several claims where the value of the claim has changed significantly during the period since the original offers of settlement were made. In one case the defendant put forward an offer of settlement which on the available evidence was too low. The claimant subsequently died and the defendant withdrew the offer of settlement even though it had previously been rejected and replaced it with a much lower offer. In another case, the claimant’s Part 36 offer of settlement was withdrawn by me because the claimant’s condition deteriorated and the value of the claimant’s claim was higher than when the original offer had been made, this prevented the defendant from accepting the original offer. The vast majority of personal injury claims I deal with are concluded on the basis of acceptance of a Part 36 offer to settle and only a small proportion of claims proceed to a contested court hearing where the court determines the level of compensation.