Government calls for responses to drive down the costs and high number of low value Road Traffic Accident related whiplash claims
The volume of road traffic accidents (RTA) related personal injury claims in the United Kingdom is 50% higher than 10 years ago.
We previously reported on the Government's consultation paper (the consultation paper) which outlines proposals to bring forward a package of measures to drive down minor, exaggerated and fraudulent soft tissue injury (‘whiplash’) claims stemming from RTA. In addition to the call for responses regarding the personal injury claims process, Part 7 of the consultation paper seeks responses and evidence in relation to the following:
i. Credit Hire;
ii. Early Notification of Claims;
iv. Recoverability of disbursements; and
v. Introducing a Barème type system.
As the law currently stands, the insurer of the driver who is at-fault for the accident is responsible for the costs of reinstating the non-fault driver to the position they were in before the accident. This may include compensating the non-fault driver for the temporary loss of use of their vehicle.
Third parties who deal with credit hire costs, for example credit hire companies, have little obligation to limit and/or control cost liabilities. This has led to inflated charges and hire periods, which has contributed to an increase in insurance premiums.
In Stevens v Equity the Court of Appeal grappled with the issue of determining the basic hire rate under a credit hire agreement for a replacement car. Accordingly, the Court of Appeal held that the lowest reasonable rate quoted by a mainstream supplier for the hire of a vehicle, of the kind actually hired by the claimant, to a person such as the claimant, is the reasonable approximation of the basic hire rate.
Furthermore, in Jonathon Grice v Atos Origin IT Services (a case on appeal from Bradford County Court), Recorder Smith determined that the lowest reasonable quoted rate which the claimant is entitled to rely upon can extend to quotes as far as 40 miles away. In that case it was held that in an era when the internet is the first resort of researching anything, the claimant is not necessarily entitled to rely upon a rate of comparable hire on the grounds that that hire quote obtained was the closest to their home.
In an aim to control costs within the credit hire market the consultation paper seeks responses on the following four options:
i. First Party Model – regardless of who is at fault for the accident, the policy holder's own insurer would be responsible for providing a Temporary Replacement Vehicle (TRV), therefore requiring the policy holder to use their own insurance cover. This model would result in the separation of cost control and cost liability which may lead to an increase in premiums.
ii. Regulatory Model – the introduction of formal regulation of TRV providers, for example, by formally capping credit hire rates. Arguably this is already in practice following recent case law. However, codification of the case law would provide a more effective control of hire costs.
iii. Industry Code of Conduct – setting out values, ethics, objectives and responsibilities for the insurance sector. The code would enable businesses to be self-regulating via clearly defined guidance which could be used alongside the industry's own ethical guidelines. This option is good in theory; however, in practice, it is unclear how far it would control hire costs within the market. Whilst one party may be able to challenge costs on the basis that the other party had not conformed to the code, case law already provides for this. However, it is possible that the code may change perceptions within the industry.
iv. Competitive Offer Model – this is essentially the current position. The at-fault insurer obtains their own quote to challenge the cost of the TRV from the non-fault insurer. This model leads to a higher administrative burden on the defendant resulting in increased costs.
Broadly speaking, the options require higher disclosure between the parties with Claim Notification Forms (CNF) being amended to include the referral source. This would allow for greater scrutiny and fraud checks to be put in place which may deter opportunistic credit hire claims.
Early notification of injury/intention to claim
In order to address current problems with minor and exaggerated RTA injuries, the government is considering requiring the claimant to seek evidence of medical treatment within a short period of time. This system is currently operated in Sweden, Norway and Finland. In Sweden the claimant has 72 hours after the accident to obtain medical treatment for their injuries.
As it is generally agreed that the symptoms arising from a RTA soft tissue injury will arise within a week of the RTA, the consultation paper suggests a period of four weeks to obtain medical advice / treatment in England and Wales. It is anticipated that this would limit the number of claimants exaggerating the extent of their injuries as it requires reliance on contemporaneous medical evidence. However, it is noted that it will also place an additional unwanted burden on the National Health System (NHS).
Currently, rehabilitation (if required) is funded by the defendant's insurer, being available either through the NHS via pain and back clinics, or through the private sector. Whilst this can increase the initial disbursements incurred by the defendant's insurer it may ultimately result in a reduction in the overall general damages awarded as the claimant may recover quicker.
In order to minimise issues with costs layering (inflating disbursements for maximum recovery), and/or circumstances where solicitors are referring work to their own rehabilitation providers; the government is seeking the views of stakeholders on the following five options:
- Rehabilitation vouchers: vouchers could be redeemed for rehabilitation sessions actually attended by claimants, rather than for the number of scheduled sessions. (Administration of this system would result in payment to rehabilitation providers once the insurer has received proof that the rehabilitation has concluded and may be difficult to administer).
- Defendant to arrange and fund private rehabilitation: This would allow defendants to suggest a small number of rehabilitation providers which would enable greater independence and transparency. Although defendants would have the administrative burden, it does allow for a greater level of scrutiny which could reduce the overall costs of the claim.
- No compensation payment made towards rehabilitation in low value claims: the claimant funds any rehabilitation treatment they receive. It is unlikely this option will be welcomed as it goes against the tort principle to put the claimant in the position they would have been in if the tort had not been committed. Furthermore, the cost of rehabilitation treatment is currently recoverable under special damages and the government has stated they have no intention to restrict these damages.
- Expand MedCo to include rehabilitation providers: this option would be the easiest to implement as the system is already in place, therefore no further legislation would be required. MedCo have recently implemented a "qualifying criteria" which has resulted in 134 "shell" companies being removed from the system. Therefore a similar criterion could be introduced to prevent solicitors referring the entirety of their clients to their own rehabilitation providers.
- Introduction of fixed recoverable damages for rehabilitation treatment: it would be difficult to determine a fixed figure as each claimant will have varying rehabilitation needs. However, if option 4 was implemented, then individual treatment costs could be standardised.
Recoverability of disbursements
The consultation paper also proposes to place the onus on the claimant to fund the MedCo report upfront. The cost of a MedCo report is currently fixed at £180. This may act as a deterrent for claimants who are considering bringing a minor claim, as their likely compensation for pain, suffering and loss of amenity (PSLA) may be removed or reduced under the proposals in the consultation paper. It may also act as a deterrent for opportunistic claimants.
Introducing a Barème type system
The inclusion of this section in the consultation paper is to seek input from respondents on the Barème system which is currently being used in other jurisdictions such as France, Spain and Italy.
Under the Barème system claims are divided into three main categories: compensation for death, serious injuries and temporary injuries (including RTA related soft tissue injury claims). The system includes classification, description and assessment of the potential individual injuries including psychological and physical damages. The degree of disability is measured in points, with 100 representing the highest possible rating. A specific formula is then used to calculate damages.
Whilst a system of this nature has not been considered in England and Wales before, the government's intention to introduce a transparent fixed tariff system is likely to change this.
In the light of responses to the consultation paper, the government will refine the measures requiring primary legislation for inclusion in a bill to be considered by Parliament.
The reform package announcement in the consultation paper is estimated to save the industry around one billion pounds a year. This could ultimately be passed on to motor insurance consumers through reduced motor insurance premiums of approximately £40 per annum, per car insurance policy.
A full copy of the consultation on arrangements concerning personal injury claims in England and Wales can be found here.
The consultation period is from 17 November 2016 to 6 January 2017 and legislation is not expected to be implemented before 2018.
Should you wish to respond to the consultation paper, the consultation paper states that responses should be sent by 5:30pm on Friday 6 January 2017 to:
Scott Tubbritt Ministry of Justice
Post point 3.50, 3rd Floor, 102 Petty France London SW1H 9AJ
Tel: 020 3334 3157; Fax: 0870 739 4268
Email: [email protected]