Early settlement offers and costs consequences

It is not uncommon for insurers to make offers to entice claimants into early settlement, especially in cases of substantial value, where the stress of dealing with life changing trauma and litigation can be overwhelming, to say the least. And it is no bad thing to settle early, provided that there is sufficient evidence to quantify the claim. The problem, of course, arises when there is little such evidence or the prognosis is uncertain.  In those circumstances, such an offer can lead to a whole host of issues, as happened in one of my cases recently.

My client was injured in an accident at work in the autumn of 2016. The doctors initially thought his multiple lower limb fractures would unite and that he would make a full recovery.  However, unfortunately, my client developed necrosis in the left foot and when surgical debridement, further washouts and larval therapy failed to clear this, he had little option but to undergo a transtibial amputation in the spring of 2017.

My investigations on liability and rehabilitation following the below-knee amputation were still ongoing when the insurers made a time limited Calderbank offer for a six-figure sum. Relying on the case of Stokes Pension Fund v Western Power Distribution (South West) Plc [2005] EWCA Civ 854 they sought to seek costs protection under CPR r.44.2(4)(c) and costs on an indemnity basis, in the event, my client failed to achieve more than that at trial.  CPR r.44.2(4)(c), gives the court discretion to order a party to pay the other party costs in circumstances where costs consequences under the Part 36 rules do not apply.

We had very limited evidence on quantum. My client was now unable to work, with no chance of returning to his pre-accident occupation. He had more than 20 years until pension age and it was necessary to explore a different career path and vocational training once he was in a positon to do so. He also required various types of prosthetics to meet his needs and his accommodation required adaptations. Put simply it was too early to settle.

We were confident that my client would establish liability and beat the offer at trial. We were also confident that the costs consequences under CPR r.44 2(4)(c), would not apply to my client. After all, if the usual Part 36 costs consequences do not apply to a withdrawn Part 36 offer, we could not see how it could be justified in this instance; a pre-issue claim of substantial value with limited evidence on quantum.

Of course, in certain circumstances, a claimant may face costs consequences for a failure to beat a reasonable offer or for late acceptance of an offer, even if there are uncertainties relating to prognosis at the time the offer was made. This was demonstrated recently in the case of Briggs v CEF Holdings Ltd CA (Civ Div) (Gross LJ, Asplin J) 13/07/2017, where the Court of Appeal, on appeal by the defendant, overturned a district judge’s costs order allowing the claimant to recover some of his costs following the late acceptance of a Part 36 offer. It was held “the fact that there had been uncertainty regarding the claimant’s prognosis was part of the usual risks of litigation, and the purpose of Part 36 was to shift the risk to the offeree if he did not accept the offer. It was important not to undermine that purpose.” The usual costs consequences applied. However, each case is, of course, fact sensitive and in Briggs, there was some medical evidence available, though the prognosis was not clear at the time the Part 36 offer was made.

In another recent case of Jordan v MGN Ltd [2017] EWHC 1937 (Ch) the claimant was ordered to pay indemnity costs after late acceptance of Part 36, which he had previously rejected, without good reason, from the date of expiry of the offer. Conduct and failure to negotiate sensibly were two of the factors taken into consideration.

My client accepted this offer posed little or no costs risks to him, but he was dealing with life changing injuries, which had a profound effect on him and his family life. Understandably, despite the potential risk of being under-compensated, he was keen to settle the claim and to move forward. Following negotiations, we were able to secure a seven-figure settlement which he was happy to accept.

* Disclaimer: The information on the Anthony Gold website is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. It is provided without any representations or warranties, express or implied.*