Insurance firms face cash penalty

Insurance companies that delay compensation cases coming to court face punitive interest payments on top of awards made by courts, under proposals for changing the law being considered by Lord Justice Woolf, writes Stephen Ward.

Lord Woolf, who is halfway through a review of civil justice for the Lord Chancellor, welcomed yesterday's guidelines from Lord Taylor, but said his proposals would go further. Lord Taylor's guidelines use existing rules and laws, while Lord Woolf will recommend reforms which need new legislation.

During consultations with the profession, he has suggested that it would be fair for a defendant in a damages action who has unreasonably refused to settle to have to pay interest from that time. "We want to encourage people to settle," he said. "I wouldsuggest the rate of interest should be 6 per cent above the rate in force.''

It would be for a judge to decide what was unreasonable. He has also proposed giving judges the power to award costs of up to 100 per cent extra against either side where they have unduly prolonged a case.

Lord Woolf is due to write his preliminary report in the spring, and a final report next year.

Like Lord Taylor, he believes the ethos of the courts has to change. He is expected to recommend changes to the role of judges, to give them greater involvement in planning and managing cases. He has visited France and concluded the inquisitorial system there is cheaper and quicker, although no better in producing justice.

Specifically he thinks a single expert witness could answer to the court, rather than having two competing. He is also considering recommending making it mandatory for some cases to be referred to arbitration or some other non-judicial process before using the more expensive machinery of a court.