When settling civil claims involving children, insurers are often unaware the result must be rubber stamped by the courts. Alison Wright sheds light on the process, which ensures young claimants are protected
Although the courts have been very strict on the matter, many insurers and policyholders are still blissfully unaware that settlement of all civil claims involving children - or those who lack legal capacity - must be approved by the court. In addition, claimant solicitors will try and offer out-of-court settlements that can leave the insurer open to claims many years after the event.
This approval process was developed and put in place to protect those who the law considers vulnerable. The aim is not to take away parental rights but to ensure that all parties are on an equal footing and that vulnerable claimants are properly compensated.
If an insurer does not get such a settlement approved by a court and instead pays a sum to, for example, the parents directly, it leaves itself open to a further claim from the child at a later date. The law will simply not recognise any payment made outside of court as settlement of a claim. While the defendant may have a contractual claim against a parent, this is costly and easy to avoid by understanding and following the correct court procedure.
Race against time
Once a letter of claim is received, the defendants have three months to provide a decision on liability under the Personal Injury Protocol. If liability is admitted the defendant should inform the claimant immediately with the aim of achieving early settlement and saving costs.
On the other hand, if the investigation provides the defendant with a denial of liability, the firm should disclose relevant documents and set out the basis of the denial. It is then up to the claimant to choose whether or not to discontinue at this stage.
Should liability be admitted, the claimant's solicitors will wish to enter into negotiations to try and agree a settlement during which time they have to seek counsel's opinion on the likely settlement value. Once negotiations are complete and a figure agreed for damages, it is just a case of following the Part 8 Procedure of the Civil Procedure Rules.
This procedure should always be used when a claim involves a person under 18 or someone who lacks capacity to manage and administer their own affairs. In these circumstances a 'litigation friend' - usually a parent - will need to be appointed to represent the claimant's affairs.
A Part 8 claim form will be filed and served on the defendant. In support of the claim, the claimant's solicitors should enclose a medical report and any documents that evidence the negotiations and settlement reached between the parties. The defendant will simply be required to acknowledge the same and confirm that liability is not an issue. Thereafter, the court will list the matter for a brief 'approval hearing' at which the claimant will have to attend in the same way they would at a normal disposal hearing.
The purpose of the hearing is for a judge to read the papers and have the opportunity to speak directly with the claimant to ensure he or she has been properly compensated; given that the claimant in these circumstances is viewed as unable to conduct his/her affairs, the court acts as a guardian for them.
A recent case has demonstrated the important role of the judge in these hearings. An infant suffered an injury and was left with keloid scarring to her abdomen. After a settlement had been agreed between the claimant and the defendant, Part 8 proceedings were issued. However, at the approval hearing the judge found that the medical evidence had described the infant's scarring to be much less significant than it actually was on examination by the court and the judge refused to approve the settlement. A higher settlement was agreed and paid following a short adjournment.
Generally, once the judge is satisfied that the claimant has been compensated correctly, they will approve the settlement and 'rubber stamp' the agreement made by the parties. This process ensures there is a record that the claimant has been compensated and that no further claims can be brought.
Once the settlement is approved the court will order that a payment into court is made to ensure the claimant's settlement is properly protected until they either reach the age of eighteen or request for the payment to be released. For those adults that lack legal capacity the court will make alternative directions as to when and how the monies are to be used for their benefit.
In these types of cases, some solicitors have been known to suggest that the parties agree a parental indemnity rather than attend an approval hearing. Although tempting, making such an agreement means that the insurer or policyholder will not be protected from any future claim the minor may make up until the age of 21. Insurers should in such cases force the claimant to issue Part 8 proceedings. Not only does it ensure that the claimant's damages are safeguarded but it also protects the insurer and insured from any further claims.
- Alison Wright is a paralegal at Weightmans.
- Loss-making GRP spent £112.6m on acquisitions over its last financial year
- Hiscox names former claims boss as UK CEO
- Hiscox's James Brady on why cyber knowledge remains a barrier
- Mike Bruce promoted to GRP group managing director
- CBL shareholder in bid to save troubled firm from liquidation
- Top 100 Insurtech: Quarter four update
- Marsh boss joins GRP-backed Marshall Wooldridge