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27 JUN 2018


Practitioners in the construction sector are no strangers to aggressive claims behaviour

Practitioners in the Construction sector are no strangers to aggressive claims behaviour, and may  recall the “put up or shut up approach” to threats of a legal claim. 

This involved stonewalling or otherwise ignoring any communication regarding a claim, thereby pushing a claimant to put its money where its mouth is by litigating their claim. It forced a claimant to incur costs in pursuing a claim, and therefore made a claimant take a long hard look at their prospects of success and appetite for a legal battle. Whilst attractive in terms of spurious and opportunistic claims behaviour, it undoubtedly led to justified claims being litigated and costs incurred where they should have been settled early. It also had an unfortunate bias toward the party with the deepest pockets.

It’s now the best part of 2 decades since this was a permissible behaviour as in 2000, the pre-action protocols were introduced. These require the parties to clearly set out their arguments, and consider the possibilities of dealing with the matter outside of litigation (ie mediation, settlement offers and so on). Parties who do not follow the pre-action protocol process can be sanctioned by the courts – in particular if the claimant jumps straight to litigation, or if the defendant ignores the claim.
The relevant protocol for the Construction sector is the Pre-Action Protocol for Construction and Engineering Disputes (the Construction PAP), which is now in its 2nd edition.
The timescales under the Construction PAP are tight, and noticeably shorter than under other protocols (the main one for professional indemnity (PI) insurance claims being the Pre-Action Protocol for Professional Negligence).
The PAP process is launched by the claimant writing a letter of claim. Under the 2nd edition of the Construction PAP and in distinction to other protocols, the requirements of a claimant for a letter of claim are not particularly onerous in terms of the level of detail required. 
The defendant has 28 days from receipt of the letter of claim to respond with their letter of response. This deadline can be extended, but only to a maximum of 56 days from receipt of the letter of claim.
From the PI perspective, this is a very short time scale. The typical process to get to the letter of response is as follows:
  • Firm receives letter of claim
  • Member of staff transfers the letter to the senior concerned with dealing with PI matters
  • Senior looks into background to the matter, in order to place letter of claim into context (Some firms then further investigate the matter in order to assess the allegations, although properly PI should be notified straightaway, with further investigation paralleling the notification)
  • Firm notifies its insurance broker of the letter of claim
  • Insurance broker notifies relevant insurer(s) of the letter of claim
  • Insurer assesses the letter of claim and seriousness of the issues, and particularly whether appointment of a solicitor is required
  • Insurer contacts chosen solicitor
  • Solicitor makes conflict check (If the solicitor is conflicted then the process has to be repeated)
  • Solicitor contacts Firm in order to discuss matters and obtain file
  • Firm sends file to solicitor(Time for this very noticeably varies between different Firms, with a typical range of response times being next day to 4 weeks)
  • Solicitor assesses file
  • Solicitor determines the need for expert evidence 
    • (If expert evidence is needed, the solicitor has to identify a suitable expert. The expert must then be contacted to ask whether they are willing or able to participate. The file or relevant extracts must be sent to the expert. The expert must assess the areas needed and write their report)
    • (If the first expert’s report is unsatisfactory or disappointing, the process may be repeated with a second expert)
  • Solicitor assesses defence in the light of the file and expert(s) report 
  • Solicitor drafts letter of response
  • Solicitor discusses letter of response with Firm. Revisions to draft may be made.
  • Solicitor discusses letter of response with insurer(s). Revisions to draft may be made.
    • (There may be a number of rounds of revision in order to optimise the approach or bottom out unclear areas)
  • Final version of letter of response is issued to the claimant
As can be seen, the process is far from straightforward, and the clock is immediately running. With any level of complexity or issues which are finely balanced, and with sizeable financial exposure allegedly attached, the pressure can become acute.
It can also be seen that the process can be delayed at various points and time lost as a result. Two of the main avoidable delays are 1) a time lag in the letter of claim being notified, such that the process outlined above begins late in comparison to the date of receipt of the letter of claim, and 2) a delay in providing the file to the appointed solicitor.
It is understood that in these days of text, email and electronic drafting, the volume of material constituting the file has grown, and the contents are distributed over a variety of mediums, apps/programmes and archiving systems. Whilst acknowledging the challenges faced by the Firm, it underlines the desirability of the file being collated (or at least easily collatable) before the event. The deadlines under the Construction PAP are not altered by the individual circumstances of the Firm, or the logistical challenge they may face in providing the necessary information in a timely fashion.
However as observed above, if the issues are complex, and with a sizeable amount being claimed, the last thing the Firm or their insurers need is for their mutual defence to be compromised by an avoidable loss of time to consider and prepare the defence.
All of this may have left a sour taste in the mouth, and you may well be asking – why is a protocol aimed at reasonable behaviour between the parties placing such pressure on a defendant? This is a good question, and there is a sense in many quarters that the revision from the 1st edition to the 2nd edition has created an imbalance – even an inequitable position.
However it is the case that there is an opportunity to contract out of the Construction PAP, although it would be best to do this before the event, and to replace it with an alternative protocol. A suitable opportunity to do this is in the appointment/letter of engagement. 

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James  Burgoyne

James Burgoyne

Director - Claims & Technical

James joined Brunel in 2009 and heads up the Technical and Claims Department. As well as representing Brunel on the ACE PII panel, he writes occasional pieces for us on insurance, risk and associated topics.