The use and abuse of the Rehabilitation Code in liability disputed cases

January 12, 2023

By Chris Barnes KC

The benefits of rehabilitation are well known. Numerous academic studies have demonstrated its importance and the net economic benefit (to both society and insurers) from its early introduction and funding. Despite that, many insurers continue to take a hostile and unsupportive attitude driven, perhaps, by a suspicion that a claimant will seek to introduce care, therapies, equipment or accommodation that might somehow increase the value of any eventual claim. I don’t believe that to be the case. In fact, my own experience is strongly that those insurers and defendant solicitors who actively support and fund early rehabilitation (and it is right to highlight that many do), even when liability is disputed, invariably end up achieving an earlier settlement with a costs saving and, on occasions, a saving in damages arising from the better recovery enjoyed by the claimant.

How can a claimant encourage and promote rehabilitation in cases where an insurer is not supportive?

In liability admitted cases, the position should be straightforward. Proceedings can be issued, an interim payment sought and the rehabilitation funded privately in the usual way. Even those cases, however, encounter problems. Tactically the early issuing of proceedings may not always be appropriate. It may be thought that expert evidence is required to do so (albeit see Mark v Universal Coatings & Services Ltd. [2019] 1 WLR 2376 as to whether that is necessarily the case), resulting in further delay.

In liability denied cases, a hostile insurer is even more problematic. While an admission of liability is not a requirement for the court to order an interim payment, it will be reluctant to carry out a “mini trial” where issues of liability remain (see, e.g. Stephen v Stephen [2021] 10 WLUK). With the current backlog within the court system, seeking an early split trial on the issue of liability can still involve significant delay.

The introduction of the Rehabilitation Code in 2007 was intended to regularise the approach of parties to issues of rehabilitation. Despite that Code now being 15 years old, many insurers still regularly ignore it or seek to abuse it, most commonly by agreeing to an Initial Needs Assessment then refusing to fund any of the recommendations. In doing so they obtain as much information about the injured claimant as possible, with which to formulate a Part 36 Offer, while never intending to follow through with the rehabilitation on which the claimant is relying. It leads to huge distress on the part of injured claimants and their families and is a cynical and callous manipulation of the system that should be called out and highlighted in correspondence, at trial and when addressing issues of costs.

In the case of Andrew Evans v R&V Allgemeine Verischerung AG [2022] EWHC 2688 (KB) the claimant sought to persuade HHJ Howells, sitting in the High Court, to make an award of indemnity costs on grounds including the Defendant’s failure to engage with the Rehabilitation Code. The application was refused, with the judge holding that “all insurers, foreign or based in England Wales, might be well advised to try and work in a collaborative fashion as per the terms of the code. However, refusing to do so is not in itself in my judgement sufficient to say that indemnity costs follow. That is particularly the case where the insurer is an overseas one and therefore not, as far as I am aware bound in any way by the code.” While the application failed in that case, I would suggest that this is a point ripe to be revisited in due course. Claimants are routinely attacked for failing to mitigate their losses. If a defendant fails to fund or support a step that could and likely would (on appropriate evidence) have led to a more rapid recovery or, potentially, a saving in costs then it seems to me that some form of penalty would undoubtedly be warranted.

It is worth highlighting that the Rehabilitation Code itself envisages the funding of rehabilitation in liability denied cases, recognising that “the health and economic benefits of proceeding with rehabilitation at an early stage, regardless of agreement on liability, may be especially strong in catastrophic and other severe cases.” Although dealing mainly with the INA, it “encourages all parties to adopt the same principles and collaborative approach right up until the case is concluded.” Per para. 9.1, “the compensator has a duty to consider the recommendations and the extent to which funds are made available to implement them. The compensator is not required to pay for treatment that is unreasonable in nature, content or cost.” (N.B. it might be thought that this wording would suggest that a compensator is required to pay for treatment that is reasonable in nature, content and cost). Per. Para. 9.3, where there is disagreement, general interim payments are recommended to provide continuity of services with an understanding that recovery of such sums is not guaranteed and will be a matter for negotiation or determination by a court.

I would suggest that rehabilitation, like so many aspects of more serious claims, invariably benefits from an early and sensible discussion with the Defendant’s insurers or lawyers. If the insurer can be persuaded to fund it then so much the better. If it will not, or if there is any hint of abuse of the Code, objections should be made loudly and often and recorded in correspondence, with specific reference to noncompliance with the Code, if appropriate. That correspondence may be of huge importance when subsequently addressing budgeting, directions and timetabling, and costs. Even if the court cannot be persuaded to impose formal sanctions, it is hoped that a dim view would be taken of such a refusal where the evidence can show that it would have led to or promoted a more rapid recovery.