I came across a webinar a few days ago. It was a presentation hosted by Validus and it comprised a chat between Olly Savage of Validus and Stuart McCulloch of Claimspace. The title was “Containing Claims Costs with Automated Alternative Dispute Resolution (ADR) during COVID 19”. It was about the constipated legal system and the benefits of Alternative Dispute Resolution (“ADR”). It focused upon the ability of Validus to help determine the issue of liability in an unresolved claim and the services offered by Claimspace, which appear to extend to a panel of arbitrators who will determine the outcome from a disputed claim for a fixed fee.
You can access the presentation at the link below. It requires you to register your name and email address first, but it then takes you straight to the webinar which includes the voice over to the slides.
If you can’t do that, then I have created a pdf of the presentation slides which you can access here. Contact details for both Mr Savage and Mr McCulloch are on the final slide.
Primarily, I must declare an interest. I do think there is a role for ADR moving forward and many of you may already know that I have a mediation consultancy having qualified as an accredited civil and commercial mediator in January.
Mediation is beneficial; it allows both parties to retain their ability to walk away without resolution, it is inexpensive and, more importantly, it is fast, and it often works with both parties achieving a result without waiting for the court to allocate a date or the risk of a judge getting it wrong. However, to correct something that Mr McCulloch said in the webinar, a mediator never makes a decision. His role is entirely about facilitating a decision, avoiding conflict and by encouraging the parties to work through the various options. In mediation, any decision is entirely reserved to those in dispute. Arbitration, however, is an entirely different matter.
Having spent 37 years in credit hire, I am not sure that, having paid a referral fee and accepted a claim in the first instance and then incurred the expense of hire, I would want settlement to be conditional on software developed by Validus telling me whether they consider liability to be the fault of my client in circumstances where the claim failed to settle in the GTA. More significantly, and knowing the relationship Validus has with insurers, I might be concerned that insurers would prefer that approach to resolving liability to be a component part of the GTA moving forward i.e. no claim would be settled unless Validus ran it through their Verify module as a means of saving insurers the cost of claim handing.
As regards ADR, I do think there are some operational and financial challenges that will emerge after the court system re-opens for business. Those challenges will be driven by a variety of features including the need for the CHO to settle more claims to preserve cash flow, the need for claimant and defendant solicitors to do the same, and to do so for broadly the same reason. The harsh reality is that, apart from the person referring the claim, nobody in the credit hire supply chain gets paid until there is finality and, where claims do not settle in the GTA, that finality is quite an important trigger. However, I am not convinced that arbitration is an appropriate route for delivering that finality unless you are an insurer, or a shareholder of Validus or Claimspace.
Extending the thought that insurers might get used to settling claims only when Validus opine on liability does sound to be a step too far - unless you are Validus and know the effect that will have on your objective of supporting the commercial interests of the insurance industry. But to then hand the claim to Claimspace, for them to instruct an arbitrator to decide the whole issue of need, enforceability, duration and rate, and to do so on the papers, really does sound extreme. The idea of counsel from Temple Gardens, or any other chambers which argues credit hire cases daily on behalf of insurers, is hardly likely to appeal to the credit hire industry. Equally, the idea of counsel, supportive of the credit hire industry, being attractive arbitrators to insurers is equally unrealistic. Indeed, the composition of any such panel requires absolute and complete independence, something I will refer to again.
I wrote at the start of the Covid pandemic that I was uncertain about which direction the CHO trade body were headed with regard to their relationship with insurers and specifically with regard to the potential evolution of the GTA at a time when insurers might decide to play hard-ball on settling claims. Having been involved in that GTA mechanism for resolving hire claims from 2005 to 2016, I do understand the benefits of collaboration with insurers over confrontation. However, I also recognise that the GTA only benefits the credit hire industry whilst there is an alternative settlement mechanism that carries greater risk and more cost for insurers. That alternative is litigation. Without it, the credit hire industry would become the body repair industry with Audatex and other software platforms determining how much a supplier can charge.
Whilst nobody embraces litigation as the preferred option (solicitors excluded), it is important in that it creates a mechanism to sustain the tension between the insurance industry and the credit hire industry. Whilst there is an argument that tension creates friction and that prevents harmony, there is an equally compelling argument that tension also creates the ability to test legal principles, to bring recalcitrant insurers to book, to call-out inappropriate behaviour and, ironically perhaps, to strengthen the GTA by making the alternative settlement routes a less attractive proposition for insurers.
I am not sure if this is the medium to long-term plan, but if the general aim, or even loose idea, is to extend the basis of operation of the GTA by allowing Validus to be pivotal to the determinant of matters relating to liability and for Claimspace to provide an unappealable mechanism where other issues are determined and assessed, that does sound to be a really odd path to follow and ignores the lessons from 40 years of credit hire history.
The CHO trade body have been quiet on these ADR initiatives. In fact, they are usually quiet until I publish something and they issue a release, so fingers crossed on this one. It may be that their silence is because they are not aware of the Validus webinar that I listened to and so do not appreciate the intended direction of travel by Validus and Claimspace. Alternatively, it may be that they do not have an opinion or do not see the evolution of the credit hire market in that direction as in any way unremarkable. Interestingly, if you listen to the webinar, at around 18 minutes and 15 seconds into the presentation, Mr. McCulloch says that the credit hire industry is “very, very interested in taking this on” and continues “at the end of the day, what the software does is it decides how much money is going to change hands when the dispute is resolved”. He is referring to the product developed by Validus and Claimspace.
I am not sure who he has spoken with in the credit hire industry, but it was clearly someone. That aside, I saw an announcement last week that Mr McCulloch, who is the business development director of Claimspace and chief executive of Auto Resolutions Ltd, was also recently appointed as the “Independent Secretary” of the ABI GTA Technical Committee.
That appointment must have been made with the support and blessing of the CHO Executive Committee, and I wonder what their view is, and also what the view of those GTA subscribers that are not members of the trade body, on the independence of his role. Reflecting on the word independent, the AACA provide a reasonable definition that:
“independence is a quality that can be possessed by individuals and is an essential component of professionalism and professional behaviour. It refers to the avoidance of being unduly influenced by a vested interest and to being free from any constraints that would prevent a correct course of action being taken.”
I assume that the aspirations of Claimspace and Validus in respect of their combined initiative for automating claims settlement (or not, as the case may be), an initiative that is clearly attractive to insurers, is excluded from consideration by the Technical Committee unless such consideration had the support of all credit hire companies that subscribe to the GTA, many of who are not represented by the CHO trade body. I make this point because the Claimspace website reports that their services are developed so that "insurance companies can resolve the public outcry against the perceived unfairness of the claims process" and that they do that, "by changing the way claims are handled, insurance companies can improve customer satisfaction and address regulatory concerns." I am not quite sure how that squares with independence or the impact on the credit hire industry who are routinely chastised for their involvement in claims, but there you go.
The last occasion that I can recall an independent party introducing themselves to the credit hire supply chain was when Colin McLean of Autofocus appeared in 2005. He purported to be an expert and gave evidence in countless number of cases where the gathering of that evidence was the product of systematic dishonesty. Autofocus were the poster boys of their time because they had the aim of reducing costs incurred by the insurance industry and lowering the GTA rate. Mr McLean made promises and supplied data reliant on the use of technology which we were never allowed to examine, and we all know how that ended. The key deficiencies then were that the insurance industry and Mr McLean had determined their objective and Autofocus delivered a solution to enable that objective to be achieved. It polluted the credit hire market for at least five years and possibly still continues to do so today. It also polluted the minds of the judiciary.
I said earlier that I do see a role for ADR, specifically mediation, in the future. It’s a personal perspective but, if there is anything to take from this article, it must be that if, as Mr. McCulloch states in the webinar, the credit hire industry are “very, very interested in taking on” this automated approach to resolving hire claims, then visibility of the entirety of the ground rules developed by Claimspace and Validus must be made public.
Equally, there must be disclosure of the commercial interests of the respective parties, specifically in terms of their relationships with each other, with insurers and, in respect of Mr McCulloch, his appointment as Independent Secretary to the GTA Technical Committee. In addition, some objective scrutiny, for example, understanding how much of the development of the automated portal, which “decides how much money is going to change hands when the dispute is resolved”, has been sponsored by insurer partners with which Claimspace or Validus have relationships.
And finally, I would have thought that there must be a need for the CHO to communicate a coherent explanation, to all GTA credit hire subscribers, of what these automated schemes offer in terms of benefits, consequences and risks so that the impact of these initiatives is clear to all GTA credit hire subscribers and not just to members of the CHO. In addition, the CHO must disclose how far they have been involved in discussions with Validus and Claimspace thus far and how they perceive Mr. McCulloch to be independent in light of the commercial relationship that Claimspace has with Validus and insurers.