The Government has published the first part of its proposals to further reform the personal injury sector. These proposals are being taken forward as part of the Prisons and Courts Bill, with as yet unpublished regulations adding further detail.
The reforms will be introduced as a package from 1 October 2018. Insurers can expect an increase in claims volumes until then, as claimant lawyers take advantage of entitlements under the existing rules.
The proposals will cover RTA-related whiplash claims and minor psychological claims, with either claim as the primary injury.
Currently the Bill notes 'whiplash injury' means "an injury, or set of injuries, of the neck or the neck and upper torso", however this will be further specified in regulations. The definition is expected to be wide to satisfy the Government's stated aim of reducing the scope for affected claims being displaced into other categories of claim and thus falling outside of the proposals.
The definition will not cover serious psychological illnesses, for example, post-traumatic stress disorder and depression. The scope will be limited to minor psychological injuries, such as ‘travel anxiety’ and ‘shock’.
It is hoped that by including minor psychological injury within the definition this will prevent exaggeration, to bring the claims outside the definition, which could have resulted in psychological injury claims becoming the new whiplash. Interestingly, the JC Guidelines do not currently allow for compensation for solely minor psychological claims lasting less than three months, meaning some claimants will receive more than is currently the case.
It is clear the 'RTA related' aspect requires the involvement of two motor vehicles. Motorcyclists, cyclists and pedestrians are not caught by the definition. Such claims comprise a small proportion of all motor claims and injuries are commonly more significant, bringing them outside the scope of the proposals in any event. However, the potential for fraud is high given that damages entitlement will remain at current levels for these claims. As with psychological claims, claims numbers will need to be monitored.
The Government supports the continued use of the ‘prognosis’ approach, utilising the Medco system. This allows claimants to seek any rehabilitation / treatment in a timely manner so as to be as effective as possible. MedCo will continue to police the system and take the necessary robust enforcement action if required.
Consideration should also be given to requiring claimants to obtain medical evidence in a shorter period (e.g. 1 year) as a prerequisite for bringing a claim. Indeed a rebuttable presumption that a claimant is not injured if they do not claim in this period (unless they have sought contemporaneous medical attention or had time off) would be a useful addition. This will allow genuine claims to be brought, whilst reducing the possibility of opportunism and claims being farmed later or close to limitation.
The MoJ has advised it will not remove compensation for pain, suffering and loss of amenity for 'minor' claims as proposed in the consultation. Instead, the Government intends to implement a tariff for claims with an injury duration of between 0 and 24 months, which will replace the JC Guidelines.
This is the correct approach. It will avoid claims inflation to bring claims above any 'minor' threshold, whilst not offending the central tortious principle of placing the victim back in the position they were in before the accident.
As can be seen from the table below this will result in a significant reduction in compensation entitlement and aims to make awards more 'proportionate' to the injury suffered. A 24 month whiplash injury has been reduced from £6,600 to £3,725 for example.
Accordingly the vast majority of whiplash claims will fall squarely within the new small claims track limit (discussed below), which is to be applauded and will hopefully seek to satisfy the Government's honourable aims of combatting fraud and tackling the endemic compensation culture.
|Injury Duration||2015 average payment for PSLA – uplifted to take account of JCG uplift (industry data)||Judicial College Guideline (JCG) amounts (13th edition) Published September 2015||Tariff|
|0–3 months||£1,750||A few hundred pounds to £2,050||£225|
|4–6 months||£2,150||£2,050 to £3,630||£450|
|7–9 months||£2,600||£2,050 to £3,630||£765|
|10–12 months||£3,100||£2,050 to £3,630||£1,190|
|13–15 months||£3,500||£3,630 to £6,600||£1,820|
|16–18 months||£3,950||£3,630 to £6,600||£2,660|
|19–24 months||£4,500||£3,630 to £6,600||£3,725|
The tariff limits injury prognosis to two years, or what should have been two years if the claimant had not failed to mitigate their loss. The medical report will be key in borderline cases exceeding two years and questions to medical experts to clarify the prognosis period may become more prevalent.
The Bill provides for a discretionary uplift on the tariff awards, presumably to deal with cumulative effect of multiple injuries scenarios. Although the consultation mentioned an increase of 20%, no guidance has been included in the Bill and it will be left at the courts discretion. The uplift potential will be attractive to claimants and multi-site injury claims may increase and will need to be scrutinised with care. Satellite litigation on the issue of mitigation and appropriate uplift cases is expected.
Small claims limit
The small claims limit for RTA-related claims will rise to £5,000, and £2,000 for non-RTA PI claims.
Although doubling the claim threshold, it is not thought the non-RTA increase will materially reduce the number of claims made. Of more concern is the likely move of organised fraudsters from motor into this claims arena, with resultant claims inflation also likely to be seen. The recent rise in holiday illness claims is an example of this market movement already taking place. Happily the Government has stated it will consider whether a further increase to £5,000 for all PI claims is required in the future, which will allow any problematic developments to be countered.
The RTA related small claims track increase is likely to remove claimant lawyers from the process due to eliminating costs recovery. However there is no reason to assume claimants will have their rights of access to justice affected, as the vast majority of whiplash claims are straightforward. The increase should go some way to de-commoditising the whiplash claims market, which has been a historic driver for claims.
As the small claims track will be differentiated for RTA and non-RTA claims, this perhaps suggests that claimants will try to identify a non-RTA element to secure costs entitlement. The regulations will need to be clearly drafted and interpreted purposively by the courts to avoid any errant behaviours. Close scrutiny will be required in relation to claimant firms' conduct under the new rules and appropriate tests cases sought to define parameters.
A close eye must also be kept on accident management companies and McKenzie friends as they may seek to occupy the space vacated by solicitors, which could serve to maintain current claim levels. Appropriate accompanying regulation of this revamped sector will be required to ensure suitable safeguards are in place. Introducing a ban on cold calling will also be vital to prevent claims farming, the proliferation of fraudulent claims and other behaviours symptomatic of the UK's compensation culture.
Pre-medical offer ban
The Government has confirmed it will ban offers to settle without medical evidence in RTA-related whiplash claims only. The ban will include the making, soliciting, accepting and receiving of a settlement offer.
In light of the move to a tariff system this is a useful development. Previously insurers settled these, typically short prognosis, low value, cases on an economic basis. The reduction in settlement values in the tariff system means there is now less commercial need for this.
The Government intends to implement the changes wholesale on 1 October 2018. Prior to that, the Bill will need to proceed through both Houses of Parliament. The Bill had its First Reading in the House of Commons on 23 February 2017, but no date has yet been set for the Second Reading. Regulations will also be required to codify the proposals made in the Government's response document. This will add much needed detail to the outline legislative proposals set out in the Bill.
The second part of the Government's reform agenda is also expected on the following issues that also formed part of the consultation, although no indication has yet been given of when this can be expected:
- Credit Hire;
- Early Notification of Claims;
- Rehabilitation; and
- Recoverability of disbursements.
In the meantime, insurers should be prepared for a rise in claims volumes as solicitors seek to take advantage of damages and costs entitlement under the current rules.