The Civil Liability Bill has now been published setting out the proposed changes to the compensation regime for whiplash injuries.
The Bill mirrors previous iterations, but leaves much of the detail to be specified by the Lord Chancellor via as yet unpublished regulations. Details of the proposed tariff system for whiplash injuries are not provided, although it seems likely the structure will closely resemble earlier draft legislation.
The stated aim of the Bill is to lower motor insurance premiums, and the Government's impact assessment states it is expected that 85% of the savings brought about by the reforms, valued at around £1.2 billion, will be passed onto consumer by insurers. Furthermore, the impact assessment states that without reform, the volume and value of road traffic related whiplash claims will remain at current levels.
The proposals cover RTA-related whiplash claims and minor psychological claims, with either claim as the primary injury.
Section 1(1) of the Bill states that 'whiplash injury' means "an injury, or set of injuries, of soft tissue in the neck, back or shoulder that is of a description specified in regulations made by the Lord Chancellor".
This definition, whilst leaving the specifics to the Lord Chancellor, is potentially wide enough to satisfy the Government's aim of reducing the scope for relevant claims being displaced into other categories of claim and thus falling outside of the proposals. Whatever the Lord Chancellor's fuller definition to be provided in the regulations looks like, satellite litigation is to be expected around any grey areas.
With respect to psychological injuries, the Bill refers to ‘minor psychological injuries’. This definition will presumably not cover serious psychological illnesses, for example, post-traumatic stress disorder and depression. We expect that the scope will be limited to minor psychological injuries, such as ‘travel anxiety’ and ‘shock’.
By including 'minor psychological injury' within the claims that will be subject to the Bill, this should prevent exaggeration by potentially bring the claims outside the Bill, 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.
Furthermore, the Bill makes clear it is aimed at RTA induced whiplash and/or minor psychological injuries, and will not include motorcyclists, cyclists and pedestrians.
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, we expect that claims numbers will need to be monitored as the potential for fraud could become more prevalent given that damages entitlement will remain at current levels for these claims.
Tariff system to be implemented, but not yet defined
The Bill confirms a tariff system for whiplash claims with an injury duration of up to two years will replace the current Judicial College Guidelines.
The Bill notes that the tariff system will set out in regulations by the Lord Chancellor. Although likely to follow previous draft bills, the specificities of the tariff system including figures and defined periods are as-yet unknown.
Whatever the particulars, it is anticipated the tariff system will result in a significant reduction against current compensation entitlement and is line with the aim to make awards more 'proportionate' to the injury suffered.
Taken in the overall context of the personal injury reforms, the introduction of the tariff is likely to bring the vast majority of whiplash claims squarely within the proposed new small claims track limit for road traffic accidents, likely to be set at £5,000.
These proposed reforms to the small claims track are currently being scrutinised by the Justice Committee and a report is expected to be published in the next few weeks, after the Government stated its intention to introduce the reform programme in April 2019.
The Bill provides for a discretionary uplift on the tariff awards in ‘exceptional circumstances’. Similarly to the tariff system, ‘exceptional circumstances’ will be defined by the Lord Chancellor and Lord Chief Justice in regulations and will specify the maximum percentage by which the uplift may exceed the relevant tariff amount.
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 amounts is to be expected.
Ban on pre-medical offers
The Bill effectively bans offers to settle whiplash claim in RTA related claims without sight of medical evidence first.
A ‘regulated’ person will be in breach of this part of the Bill when they know or have reason to suspect a whiplash claim is being made, and without having sight of the appropriate ‘evidence’, carries out one of the prohibited activities relating to a claim of this nature.
A 'regulated person' is not defined within the Bill, but the Bill lists those regulatory bodies to whom regulated persons are expected to answer to, such as the Law Society, the Bar Council, the Financial Conduct Authority and the Claims Management Regulator. Insurer claims handlers, claims management company representatives, solicitors and barristers will all be regulated persons, and will be required to comply with the ban of pre-medical offers.
The prohibited activities will include inviting a person to offer a payment in settlement of the claim, and offering, making and accepting a payment in settlement of the claim, without seeing appropriate evidence of the whiplash injury first.
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.
In terms of enforcement of any breach, the Bill provides “the rules may in particular provide that, in relation to anything done in breach of section 4, the relevant regulator may exercise any powers that the regulator would have in relation to anything done by the regulated person in breach of another restriction.”
Any breach will not be deemed to be a criminal offence or a breach of statutory duty, and will not make an agreement to settle the whiplash claim void or unenforceable.
This shifts the emphasis onto the ‘regulated’ party handling the claim (both claimant and defendant representatives) and will not penalise a claimant who was offered or accepted a settlement. We will await with interest any reports of regulated parties being subject to sanction from their regulatory authority for breach. This will be of particular interest in light of the proposal to shift the regulation of Claims Management Companies to the Financial Conduct Authority as part of the Financial Guidance and Claims Bill.
The Bill is due for its second reading within the House of Lords on 24 April 2018, then proceeding to the Committee and Report stages.
The proposals are controversial and have already drawn a vociferous response from the claimant lobby, particularly given that additional proposals will further change the costs environment by increasing the small claims track limit for these very claims. The Government's impact assessment states that it is assumed that those in the claimant lobby such as solicitors and CMCs will find alternative activities of equal economic value.
The response from the claimant lobby to date suggests they do not share this view, although claims migration has been seen following previous reforms. It is possible that a further shift to NIHL claims might occur or the pursuit of larger numbers of housing disrepair and data breach claims.
As the devil will be in the detail of the as yet unpublished regulations, there is much still left up in the air and uncertainty remains as to how the new regime will function under the new proposals.
Whilst the Bill is positive in pursuing the Government’s aim of lower motor premiums, indeed the Government’s own press release indicated that this was the singular aim, we expect that the Bill may not receive a smooth ride through either houses of parliament.