Producto interno bruto (PIB)

3.2.1 Introduction

As in section 2.3, our objective in this section is to explore the impact of CFAs and CCFAs on the nature and outcomes of claims – in this case, clinical negligence claims. Because the choice of fee arrangement may be correlated with other case characteristics such as case value and complexity, it is necessary to control for these characteristics through use of multivariate analysis, as reported in this section.

3.2.2 Funding of case in relation to case value and liability

In section 2.3.1, we used a multinomial logistic regression approach in order to capture the impact of case characteristics on the type of fee scheme used for personal injury cases. In the case of clinical negligence, our dataset is collected from a defendant organisation (the NHSLA) and for this reason the type of fee arrangement used by the claimant is typically only known if it is a CFA. The regression approach used here therefore is a simple probit regression in which the independent variables measuring case value and complexity are used to estimate their joint impact on the probability of a CFA arrangement. The results are shown in Table 3.10 below. Separate regressions were run depending on the date of the initial claim. For all claims begun after the introduction of recoverable CFAs in April 2000, the results are summarised in column (2); for claims started prior to April 2000, the results are summarised in column (3). Column (1) gives the results for the whole sample.

Table 3.10: Probit regressions for likelihood of CFA funding for CNST claims in relation to case value and liability

(1) (2) (3)

All CNST Post-April 2000 Pre-April 2000

Ln(case value) 0.127 0.097 0.171 (28.12)** (15.24)** (18.68)** Pr(liable) 0.535 0.725 0.588 (10.50)** (11.77)** (3.88)** Constant -3.236 -2.841 -4.201 (50.44)** (30.28)** (27.43)** Observations 33121 17576 15545

Robust z statistics in parentheses * significant at 5%; ** significant at 1%

The results show clear evidence that CFA funded claims are more likely to be high value and low risk (i.e. the hospital is more likely to be liable and therefore claimants are more likely to win). The effect of liability appears to be stronger since the introduction of recoverable CFAs. There are several possible explanations for these findings. Clinical negligence cases are notoriously difficult to win, given the often severe problems relating to both causation and liability. Given the cap of 100% on recoverable success fees, it is possible that a significant number of claims are not considered by claimant solicitors as being viable at the allowable success fee rates. Alternatively, it is possible that the decision over risk is taken out of the hands of the solicitor and determined instead by the refusal of ATE cover by insurers for cases deemed to be of high risk.

3.2.3 Funding of case in relation to duration of case and likelihood of settlement The technique of survival analysis is again used in this section (for a description of the estimating methodology see section 2.3.3 above). Specifically, the baseline settlement hazard is estimated as a Weibull function, with a Gamma distributed frailty term. The hazard is then estimated to shift in proportion to the case characteristics, including the presence of CFA funding. The results are summarised in table 3.11. Separate regressions were again run depending on the date of the initial claim. For all claims begun after the introduction of recoverable CFAs in April 2000, the results are summarised in column (2); for claims started prior to April 2000, the results are summarised in column (3). Column (1) gives the results for the whole sample.

Table 3.11: Weibull regressions (with gamma frailty) for hazard of settling CNST claims in relation to CFA funding, controlling for case value and liability

(1) (2) (3)

All CNST Post-April 2000 Pre-April 2000

Ln(case value) -0.378 -0.550 -0.309 (57.57)** (34.29)** (45.79)** Pr(liable) 1.317 2.757 0.644 (36.54)** (36.01)** (17.59)** CFA funding -0.249 -0.463 -0.269 (5.17)** (6.83)** (3.56)** Constant -11.561 -12.506 -11.722 (127.04)** (69.17)** (104.25)** Observations 33121 17576 15545

Absolute value of z statistics in parentheses * significant at 5%; ** significant at 1%

The table shows that cases which are of higher value tend to take longer to settle (lower settlement hazard) and cases where liability of the hospital is less problematic tend to settle more quickly (higher settlement hazard)15. After controlling for the differences in claim value and liability, CFA cases tend to take longer to settle than non-CFA cases (i.e. the hazard of settlement is lower in all three regressions). Moreover, this effect appears to be stronger after the introduction of recoverable CFAs, implying that, even after controlling for the fact that cases run as CFAs are relatively weak from the defendant’s perspective, they are also more likely to take longer to settle.

3.2.4 Conclusions

The overall picture that emerges from our multivariate analyses of the NHSLA data is one in which CFA funding is associated with relatively high value but relatively low risk clinical negligence claims. If anything this effect seems to have strengthened since the introduction of recoverable CFAs. After controlling for this selection effect, we find that CFA cases tend to settle later than cases funded by other means (typically legal aid in this context). While the NHSLA dataset does not have information on costs, there may be a presumption that longer cases of a given value will have higher costs given the effect of higher duration and, of course, the addition of a success fee.

15

These effects are consistent with results we have found elsewhere (see for example Fenn, Rickman and Gray, Economic Journal, 2000).

Chapter 4 – International experience