In recent years, gastric illness holiday claims have been steadily on the rise with a reported 500% increase since 2013. Given the numbers involved, the insurance industry is rightly concerned that a large proportion of these claims are fraudulent, especially given the absence of a corresponding rise in reported sickness levels in holiday resorts.
It has also been noted that the vast majority of these claims are lodged by British holidaymakers. As reported in The Guardian, from July to August 2016, an unnamed tour operator took 1,925,000 British, German and Scandinavian customers to Europe. 96% of the gastric illness holiday claims were made by British holidaymakers, despite them making up just 39% of the travellers.
Spanish hotel and apartment trade body, CETAH, estimated that over the last three years British holidaymakers have cost its members around €100 million. As a result, resorts are now threatening sharp price increases for British holidaymakers and the withdrawal of all-inclusive packages from the UK market all together.
Clearly, tackling fraudulent claims is of the utmost priority to the insurance industry
Issues facing the Insurance Industry
The sharp rise in these claims appears to be driven by certain claims management companies targeting holidaymakers with advertising and cold calling. Identifying and preventing these unscrupulous companies from encouraging fraudulent claims is an ongoing battle.
On a practical level, investigations outside the jurisdiction may prove challenging whilst limited evidence can make it difficult to build a defence.
However, one of the most significant issues is the potential level of costs these claims attract. Claims arising in the UK which are worth less than £25,000 fall within the low value claims portal regime. Under this regime, legal costs are controlled with a fixed matrix. However, the Protocol for Low Value EL and PL claims does not impose that regime on claims for personal injury occurring outside England and Wales. These cases, therefore, provide an inviting opportunity for claimant representatives to recover higher costs on (typically) lower value cases.
The Industry Fightback
Additional steps to target the excessive rise in holiday sickness claims began in April 2017 and the Ministry of Justice has been in discussions with the Association of British Travel Agents to identify the underlying problems and consider the most effective response.
The Solicitors’ Regulation Authority (SRA) is involved with an investigation into law firms with potential links to the claims management companies that target these claims. Further consideration is being given as to how claims are sourced, how many are settled and what fees are received. The SRA has also issued a warning to any solicitors handling holiday sickness claims that they must carry out proper due diligence, ensure that clients are being advised properly and that the case they are dealing with is genuine.
The insurance industry is taking up its own the fight against fraudulent gastric illness claims by pursuing fundamental dishonesty findings where possible. In Lavelle & McIntyre v Thomas Cook Tour Operators (2017), District Judge Herzog sitting in Liverpool County Court made a number of findings of fact, concluding that the evidence given by the claimants was not correct in terms of the claim for there being sickness, diarrhoea and vomiting during the holiday. The defendant had pleaded fundamental dishonesty and the District Judge agreed, dismissing the claims and ordering the claimants to pay the defendant’s costs.
Tour operators are taking an increasingly hard line on fraudulent claims, most notably in the recent action brought by Thomas Cook against Paul Roberts and Deborah Briton. The holidaymakers originally alleged that they had fallen ill during holidays to Majorca in 2015 and 2016 and brought personal injury claims in August 2016. After their claims failed, Thomas Cook brought a private prosecution against them in Liverpool Crown Court. Custodial sentences were passed down of 15 months and 9 months respectively.
Claims management companies are also being disciplined where they are responsible for pressuring individuals into making gastric illness holiday claims. The Claims Management Regulator has recently revoked the licence of a claims management company, in addition to shutting down several unauthorised websites. Regulators have been pro-active in recent months in an attempt to preclude the abuse of holiday sickness claims, by auditing around 40 claims management companies and starting investigations where necessary. The Claims Management Regulator is working with the Association of British Travel Agents, which has set up a free service to resolve gastric illness holiday claims.
There have been requests from the travel sector for a reform of the Civil Procedure Rules for some time and the Government is currently considering proposals.
Crucially, the Ministry of Justice has announced that it hopes to bring into force a fixed recoverable costs regime for these claims in early 2018. This should close the loophole allowing disproportionately high costs to be recovered and significantly reduce the incentive for unscrupulous claims management companies and solicitors to encourage potentially fraudulent claims.
Nevertheless, insurers and their solicitors must remain vigilant and consider seeking a finding of fundamental dishonesty where appropriate, the consequences of which should be a deterrent to any would-be fraudster.
FOIL (the Forum of Insurance Lawyers) is continuing to play a key role in consultation about the proposed reforms. As an active member of FOIL and its sector focus teams, Langleys will continue to monitor developments.