The Government's Autumn Statement 2015 announced two proposals that, if implemented, will significantly affect the personal injury market.
Firstly, Chancellor George Osborne announced plans to increase the small claims track limit for personal injury claims from £1,000 to £5,000. If the new limit is introduced, any claim with an overall value of less than £10,000 and where the injury element (including clinical negligence) is valued at less than £5,000 will be dealt with in the small claims track - limiting the claimant's ability to recover solicitors' costs to £70 - £80.
The outcome of these proposals is likely to be an annual £1billion saving to the insurance industry. In his speech Mr Osborne indicated that he expected the industry to pass on this saving, so that motorists see an average saving of £40 - £50 per year off their insurance bills.
The increase in the small claims track limit for personal injury has been on the cards for many years and all previous government have resisted it. Is this positive news for Defendants and their insurers?
The Forum of Insurance Lawyers ("FOIL") has said ‘FOIL is committed to the removal of excessive costs from the litigation system, tackling abuse of damages for financial loss and tackling fraud’.
The Claimant lobby, represented by the Association of Personal Injury Lawyers ("APIL") points out that since the overhaul of medical reporting and introduction of a portal for claims, whiplash claims have fallen by more than a third. APIL president Jonathan Wheeler said ‘If the small claims court limit is raised to £5,000 all that will happen is that genuine victims of injury will not be able to afford the legal help they need to bring genuine claims.’
What options are open to Claimants in these cases? It is likely that Claimant lawyers will still offer to carry out the work and will offer a Damages Based Agreement to the Claimant which could be more profitable to the lawyer than the current fixed recoverable fees with a CFA. There will still be firms willing to take these cases on for a "slice" of the award. The other option to a Claimant who wants to preserve 100% of their award would be to act as a litigant in person. This might enable compensators to negotiate lower settlement sums, but the impact of increased litigants in person on the insurance industry and the already strained court system may bring its own challenges.
Secondly, and perhaps more surprisingly the Chancellor announced plans to scrap compensation for "minor" soft tissue injuries. If implemented, this will represent a major change to the law relating to personal injury. It will be the first time in England and Wales that a tort will carry no cause of action. The proposal prohibits courts from awarding general damages for pain, suffering and loss of amenity in minor soft tissue injuries. Claimants suffering such injuries will only be able to claim for “special damages”, including the cost of medical treatment for their injuries and any loss of earnings.
Unfortunately, the Chancellor did not clarify the definition of "minor". The Government is due to consult on the details of this proposal in the new year and we can expect further information at this stage. Hopefully any legislation drafted to implement this change will be carefully worded, or we can envisage a raft of satellite litigation … watch this space!