Claims Handling: Exiting Claims Early

When it comes to effective claims handling, resolution strategies should be considered from the outset. In our first claims handling article of 2025, we delve into the potential strategies you could use at various stages of a claim, with particular focus on exiting claims early.

In most litigation, the objective will vary from case to case depending upon the type of claim, the type of claimant, the relationship between the parties, the merits and the value. However, on the whole, early consideration should always be given to the economics of any dispute and whether “the fight is worth the candle”.  

As a result, when managing a claim it is important to try to reach an early view on the merits, risks and likely outcome, in order best to determine strategy. This can be refined as the matter progresses, which might change specific strategy considerations, but an early view is crucial so economic and tactical decisions can be taken at each stage.

For example, if breach of duty seems a forgone conclusion, one can consider whether early admissions are likely to be sensible to minimise costs.  Equally, attention can be focused on whether the claim remains defensible on other fundamental elements, or strategy needs to be directed towards mitigation and an interrogation of quantum. This in turn will guide decisions about where it is reasonable to allow costs to be incurred – both own and the claimant’s – as well as where any pressure points might be and how and when those can be best exploited as part of an exit strategy.  

Alternatively, if a claim looks weak, spurious and/or exaggerated, different decisions are likely in order best to manage the pre-action stage; possibly to make it as unattractive as possible for a claimant to issue formal proceedings or to protect a defendant’s position if, despite the risks, a claimant ploughs on anyway. This is not an uncommon scenario when dealing with some litigants in person or poorly advised claimants.

Pre-action strategies

It’s hard to say “sorry”, but sometimes that can be the right thing to do (with indemnity insurer’s approval!). Policyholders might understandably feel aggrieved by a complaint, but ought to avoid the temptation to allow the matter to escalate unnecessarily. Good claims handling can take an objective view and see where nipping an issue in the bud might be possible.  However, this should also include ensuring that the policyholder complies with or does not breach any regulatory obligations as a part of any resolution. In solicitor’s cases one needs carefully to consider the risks of own interest conflicts when trying to “do the right thing” and making sure clients are told to seek independent legal advice.

Requests for client files are usually a precursor or first warning of a claim and decisions need to be made about how or how far to engage with them. Regulatory obligations might determine a client’s right to papers held by a policyholder, but consideration should be given precisely to what and how much should be volunteered. With speculative claims sometimes the provision of information will assist a claimant determine there is no viable cause of action, whereas in other cases one might be careful not to release more information to a claimant than that to which they are entitled. For example, consideration might be given to whether there is a lien or what parts of a file do not represent the client’s documents and therefore can be retained. There are, of course, also incidents where a party requesting a file may not even be the client, but a related or third party, in which case it would be crucial to identify this at the first instance to avoid breaching client confidentiality and in certain cases privilege.

Limitation standstills can be another first indication of a claim and the timing of these is obviously fundamental. Careful consideration needs to be given to requests for urgent standstills, where it is often a balance between refusing and forcing a claimant to issue a protective claim form, which might ultimately not be necessary if a claim can be resolved pre-action, versus agreeing a standstill where a claimant might not otherwise have incurred the costs of issuing and/or could have failed to issue properly within the remaining time, thereby avoiding the claim altogether.  

The former might result in adverse costs consequences if the refusal is later deemed unreasonable, while the latter could get a claimant out of a predicament and provide time for it to get its claim together.  However, if an agreement is entered into, carefully check the definition of the dispute to ensure it reflects the claim(s) being intimated. Also, that the agreement does not waive any existing limitation defence and depending on whether there is a long-stop date and how far in the future it is, that there is adequate provision to terminate on notice (usually for a period no more generous than the remaining limitation period at the time of the claimant’s request). 

Where claimants request extensions to existing standstills consider whether agreement to those should be made conditional on further information or steps being taken by a claimant, particularly if the reason for the extension is a claimant’s delay or to provide time for a claimant to do something.  We have come across a number of cases where claimants have failed to comply with the condition and as a result abandoned the claim.  

Opponents. Policyholders in some professional contexts will have been obliged to follow Know Your Client procedures, but when disputes arise it is also paramount to KYO – Know Your Opponent. Early due diligence on a claimant can be very useful in understanding possible drivers for the claim, including financial pressures, competition and other commercial matters that might reveal leavers to pull. For example, can the claimant fund litigation? Has it lost litigation before? If the opponent is a company, are its annual accounts pending or overdue? What do they say about anticipated litigation? Will it be good for an adverse costs order? Are there risks of insolvency? Detailed due diligence can identify new information about a party not known during the underlying retainer, which a claimant might be keen not to reveal.  For example, knowledge of the claimant’s level of sophistication, honesty and known associates could all have a material bearing on liability and quantum.

Protocols. If the Pre-action protocols are going to be followed then a number of strategies can be deployed to best position a policyholder.

In the PAP for Negligence claims, you have up to 21 days to acknowledge a LOC and the 3 month period for investigation runs from the date of the acknowledgement, not the LOC, so you don’t need to acknowledge immediately and can bank up to an additional 21 days to investigate. This might be particularly important in complex or historic claims or those where expert evidence might be needed.

While it might be argued that pressing claimants for more information could incur more costs and time, we think claimants should not be allowed off the hook in terms of compliance with the protocol if the LOC is poorly drafted, vague or light on points of difficulty. However, although demanding transparency is important and should probably be pressed if a claimant is reticent, be wary of being too pedantic as the touch stone is “substantial compliance” rather than the letter.  Also, better results are often achieved by picking up the phone to the other side to build early cooperation or via early WP correspondence.

The Letter of Response is an opportunity to persuade solicitors instructed for a claimant of the risks and reasons not to bring formal proceedings. It is also a good opportunity to convey a message to a claimant; less legal responses can sometimes be more effective or ones which highlight the costs incurred and liability if proceedings are commenced. We have seen many claims not progress after sending a robust and well-argued LOR, but in cases where there are weak defences, consider sending a Letter of Settlement instead of an open LOR to direct attention towards negotiation and resolution within the protocol, without proceedings.

Litigation considerations

Litigation is an adversarial process. If despite a robust LOR a claimant still brings proceedings, there are various procedural traps to be aware of, which might be fatal to a claim and result in disposal at an early stage. For example, defendants should double check the claimant has issued within time. The date of the claim form should be considered and checked with the Court the date the claimant asked the Court to issue it, which could be earlier. 

A further, often encountered point, is whether the claimant has issued against the correct defendant entity. Claimants frequently make a mistake about the name of a defendant, which can in some circumstances lead to the claim being struck out, particularly if the error was of a type the Courts will generally not correct. Challenges are particularly worth considering if limitation expired shortly after proceedings were commenced. #

Similarly, a claimant may also fail to commence proceedings in the right name. For example, if a defendant was engaged by a company, the claimant should be the company and not say a director. Also, consideration should be given to whether the individual representing the company has authority from the company to make the claim.  This is especially important to check if the company is acting in person.

Other procedural traps worth checking are whether the claimant served proceedings within the 4-month validity period of the claim form, including Particulars of Claim?  Also whether the claimant has served the proceedings on the correct party? Solicitors may have been instructed to accept service instead and the Claimant may not have complied with any limitations expressed on service by any particular method which might make service defective?

In the current, uncertain economic climate, it is also important to look out for procedural errors if any of the parties are insolvent e.g. to check what limitation period applies and whether a claimant has obtained any necessary permission prior to commencing proceedings (s.130 Insolvency Act 1986) or whether it needs to restore a company to the register first and remains in time to do so (6 years from date of dissolution).

Finally, once in proceedings, there are various strategies that can be considered and deployed effectively as a part of a litigation toolkit at relatively early stages:

When defending claims by company claimants, actively review company accounts and keep under consideration whether security for costs should be sought. If a claimant is non-trading, a shell company or has poor financial statements - possibly delayed or subject to extended accounting periods - enquiries should be raised as soon as possible to ascertain the latest financial position and how the Claimant proposes to satisfy any adverse costs order.

In appropriate cases, early consideration should be given to applications to strike out/ for summary judgment to avoid the costs of a defence and before irrecoverable costs increase. Alternatively, with a defence, policyholders should consider serving probing Part 18 requests to address any vague or uncertain claims.

Early Part 36 offers should also be made in appropriate cases to put a claimant under early costs pressure, before substantive costs are incurred in the claim e.g. in dealing with disclosure and witness and/or expert evidence. Often making early offers is not felt tactically prudent as it may indicate to a claimant that settlement is preferred because a defence is weak. However, in cases where liability is likely to attach and the question is the extent of the loss to which a claimant might be entitled, a well-pitched, early Part 36 offer can put claimants at significant costs risk. In particular, an exposure to all of the defendant’s costs since expiry of an offer, plus their own costs over that same period, which combined could seriously erode any damages offered.  Policyholders should therefore ensure that offers are well timed to be made at least 21 days before the next step in litigation and preferably some time well before that to minimise the costs a claimant incurs in the meantime. 

Parties can become easily entrenched in correspondence when there is often greater (and surprising) progress to be made through WP discussions between lawyers by telephone. As unfashionable as this might have become, it is frequently a good opportunity to learn more about an opponent, whether through candid or inadvertent comment about expectations, which might assist in identifying an opportunity to resolve a claim early.

Constant review of the quantum of a case is also increasingly important to ensure the strategy to conclusion remains appropriate. Given the introduction of the Fixed Recoverable Costs regime for claims under £100,000, the same claim with pre-action damages alleged at over £100,000, may be dealt with very differently to a litigated claim for damages limited to less than that sum.  

Finaly, ADR remains a key tool to consider throughout the lifetime of a claim. Just because mediation may have been unattractive in the pre-action stage, does not mean it remains unsuitable shortly after proceedings are issued or after certain stages of the litigation have been completed. Picking the right moment to agree a stay for mediation could provide a strategically sound exit and save considerable costs.