Alison McAteer and Megan Lafferty: The issues to watch for Scottish insurance lawyers
Alison McAteer, senior solicitor at Brodies LLP and president of Tomorrow’s FOIL (Forum of Insurance Lawyers), and Megan Lafferty, associate at Clyde & Co (Scotland LLP) and Scottish representative of Tomorrow’s FOIL, write on the issues facing insurance lawyers in Scotland.
In 2018, GDPR and Brexit dominated the headlines. At the time of writing, the final terms of the UK’s exit from the European Union are yet to be agreed, which will of course have a major impact across the UK. Data protection also remains a major focus for the insurance industry. But what other changes can we expect in Scotland over the next 12 months? Here are some of the key developments from 2018, and the “ones to watch” for the year ahead:
Limitation (Childhood Abuse) (Scotland) Act 2017
Although the Act came into force in October 2017, the past 12 months have allowed insurers to take an initial view on the practical impact of the legislation. Over the course of 2018, there has been an increase in the number of claims relating to historic abuse as a result of the Act, and this trend may continue over the year ahead.
Prescription (Scotland) Act 2018
The Prescription (Scotland) Act 2018 received Royal Assent on 18 December 2018 and amends the law relating to the extinction of rights and obligations by the passage of time. Notably, the Act amends the provisions in the 1973 Act for determining the knowledge which a creditor must have before the prescriptive period begins to run. The Act provides that the five-year period does not begin until the date when the creditor became aware, or could reasonably have been expected to become aware:
- “that loss, injury or damage has occurred;
- that the loss, injury or damage was caused by a person’s act or omission; and
- the identity of that person.”
Some general provisions of the Act came into force the day after Royal Assent, with the majority to come into force on a day to be appointed. This legislation could impact the timescale for court actions being raised in a variety of claims – and is likely to mean a greater focus on exactly what a claimant knew, and when.
Civil Litigation (Expenses and Group Proceedings) (Scotland) Act 2018
Although Royal Assent was granted on 5 June 2018, large parts of the Civil Litigation Act are not yet operational – and at present there is no indication on when they will come into force.
The pending provisions include authority for Scottish solicitors to enforce success fee (no win no fee, or damages-based) agreements; and Qualified One Way Costs Shifting (QOCS) to be allowed in Scotland for the first time. Similar provisions are already in force in England and Wales, however, secondary legislation is needed before these will be implemented in Scotland. Having seen how QOCS operate south of the border, insurers will be waiting with interest to see how these new arrangements will be applied here.
Ongoing developments in vicarious liability
The courts ruled on a number of key cases on vicarious liability in 2018. The English case of Armes v Nottinghamshire County Council formed the basis for liability for the actions of non-employees. This was swiftly followed in Scotland in Grubb v Shannon, confirming that Scottish judges would follow the same approach as their English colleagues.
However, every case must turn on its own facts, and the rise of the “gig” economy and more flexible or novel forms of employment contract will only add to the complexity of vicarious liability claims. We can expect this to be a fluid area of law in future, across the UK.
Damages (Investment Returns and Periodical Payments) (Scotland) Bill
Finally, over the next few months, the Damages Bill will continue to make its way through the Scottish Parliament. Introduced in June 2018, the Bill aims to reform the process for calculating the discount rate on damages in Scotland, and provide for periodical payment orders (PPOs) for future pecuniary loss.
Similar legislation is on course in England and Wales, with the proposal that the Lord Chancellor will set the rate, in consultation with the Government Actuary or an expert panel. In contrast, the Scottish proposals would see the Government Actuary fix the discount rate. In theory, this could result in different discount rates on each side of the border – with significant implications for the damages paid on claims.
It is easy to be distracted by the big headline news at the moment. However, insurers and businesses should be aware that in the background, it is business as usual in the Scottish courts and Holyrood, and changes that could impact claims and damages in the long-term are under way – watch this space!
- The Forum of Insurance Lawyers (FOIL) is a professional membership organisation representing those engaged in the defence of insurance-related claims. Tomorrow’s FOIL represents defendant insurance lawyers with less than 5 years post qualification experience, throughout the United Kingdom.