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Ill Conceived with Disingenuous Motivations: Personal Injury Reform

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About The Author

Samuel Cuthbert (Private Law Manager)

Sam read Philosophy at Durham University, followed by the GDL funded by the Lord Brougham Scholarship and a Hardwicke Scholarship from Lincoln's Inn. Sam is now spending a year, prior to undertaking the BPTC, to develop his legal interests in a paralegal capacity. His legal career is starting in a M&A paralegal role at a large Viennese firm. He is a passionate speaker and has his sights set firmly on a career at the bar.

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The spending review in November 2015 bore troubling news for personal injury (PI) firms as the Chancellor pledged to raise the small claims limit from £1,000 to £5,000 while axing soft tissue and whiplash cash payouts completely. The following article discusses the impact of those proposals, as well as the implications for the victims whose path to achieving a legal remedy will be punitively obstructed.

The motivation behind cutting the compensation available for whiplash claims is to counter fraudulent claims, was outlined by the Chancellor, stating that:

This will end the cycle in which responsible motorists pay higher premiums to cover false claims by others. It will remove over £1bn from the cost of providing motor insurance and the government expects the insurance industry to pass an average saving of £40 to £50 per motor insurance policy on to consumers.

Similar proposals have been on the government agenda for a number of years. The Ministry of Justice confirmed in October 2013 that they would not raise the small claims limit heeding advice from the Transport Select Committee that such a move would obstruct justice. However, that decision has since been reneged upon, the implications of which include alienated victims and an ineffective solution to tackling fraudulent claims.

In place since the early 1970s, the small claims limit was intended to ensure that claims which required less hearing time, and were of a lower value could be dealt with quickly and effectively. Starting at £100 at its inception, and fluctuating over time, the limit has worked to ensure that each case is heard in the right court thus achieving fair results. However moving this threshold from the previous £3,000 to the current £5,000 undermines the arguments in favour of a small claims court, namely its ability to achieve fast and just settlements.

The Raised Threshold

Unsurprisingly, the raised threshold has been the source of much disquiet within those specialist areas of the legal profession directly affected. These grievances can be set into three categories: excessive reliance on the insurance industry to guarantee the supposed benefits of the raised threshold, the removal of adequate safeguards for genuine claimants, and the ineffective means by which scrapping whiplash payments seeks to tackle the problem it was intended to solve.

It is worth noting at this juncture that in small claims the Court generally will not mandate the payment of legal costs of another party excepting fixed costs outlined in CPR part 45. In practice, this means that parties are usually expected to pay their own legal fees, which, when deducted from any court award, often has the effect of making said award negligible and legal representation close to fruitless. The effect of this on the raised threshold is that more valuable claims, in which the best level of legal representation is most important to achieving the right settlement, may now be brought by litigants in person.

Excessive Reliance on Insurers

Initially, the changes will see the insurance industry bear a less significant risk in insuring motorists, given that more claims will pass through the small claims court, within in which – as made out above -, often, legal counsel is not instructed, and thus the value of the claims is lower.

However, there is little more than an expectation that the benefit the industry will receive in lower legal costs will be passed onto the motorist for whom it was supposedly intended.

Suppose that such monetary benefits were not passed on to the consumer, and premiums remained high despite more cases being considered minor as they now fell within the £1,000 - £5,000 range. The economic saving is simply afforded to the insurance companies who are now less likely to have to pick up the tab for either legal fees or whiplash payouts.

In that scenario, the Chancellor would be moving the cost from the balance sheet of the Ministry of Justice to that of the NHS. This follows from the premise that the consumer would incur the same cost as previously, only now with more claims being heard in the small claims court, the same claimants are more likely to appear representing themselves. The problem therein concerns failing to guarantee suitable levels of compensation are afforded, something better ensured by legal representation, to those who require it.

This may well be the situation given recent affirmation in Parliament, that the government have no plans to ensure the monetary benefits are passed onto the consumer. An utterance of a political platitude about the conservative ideology of small government provides an easy answer to criticism of this ilk, but included in such an ideology is unlikely to be a supposed attempt to manipulate insurance premiums down at all. There appears, therefore, little room in the argument for political ideology.

Moreover, criticism of such a move gathers momentum when one consults the results from the final quarter of 2015 including a considerable period after the spending review announcement. Comparison website Confused.com released statistics suggesting that car insurance premiums had their biggest annual rise since 2011, in the final quarter of 2015.The average premium is now £78, or 13.2% more than the same time the preceding year. It would seem that any notion of the insurance industry passing on benefits to consumers is yet to have the desired effect.

And what of situations in which litigants in person fail to secure the necessary payout to cover the cost of their injury? The gap between the money needed to comprehensively compensate for an injury and the actual compensation amount needs to be plugged by persistent NHS care. Cases of facial scarring would provide a relevant example (further covered below): there is little to protect a litigant in person from failing to make the submissions to ensure an award which sufficiently covers the cost of counselling which may be required to come to terms with such an injury.

Removing Adequate Safeguards

More concerning still is the position into which those with legitimate and genuine claims are forced. Jonathan Wheeler, former president of the association of Personal Injury Lawyers, pursued this line of argument:

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 and there will be an epidemic of cold calling from claims management companies as they rush to take advantage of vulnerable people who won’t be able to afford legal representation.

The suggestion that this move obstructs justice for those with legitimate claims is a credible worry in itself, but more concerning still is the trade-off, which seems to be at the heart of the proposal. The raised threshold leaves exposed a very vulnerable group of individuals. Those with credible claims and real injuries are left out in the cold in favour of the insurance industry, which is merely expected to pass the benefits on to the consumer.

At best this may be seen as myopic, at worst an indictment of absent compassion on the part of the Chancellor. Personal injury claims can, and often do, include very serious injuries; broadening the scope of what constitutes a small claim by raising the limit will see injuries including facial scarring classified as 'minor' having come through the small claims court. Such an uncaring and unsympathetic reclassification of so serious an injury undermines the suffering of the victim, and sees those injuries claimed for without the legal representation so needed to achieve the fairest result for all parties.

The logical progression of this argument is to consider the practical implications of increased numbers of claimants with more serious injuries navigating the intricacies of the English court system without much-needed legal advice. They may face defendants - often employers or organisations in personal injury claims - with deeper pockets and insurance policies likely to cover counsel fees should they deny liability. Further, without the experience of legal counsel, parties with more bargaining power are better placed to manipulate litigants in person into settling claims at a much lower sum than might be considered fair. In such a situation, the victim’s vulnerable position is exacerbated as a direct result of the raised threshold that facilitates the claims being brought in the small claims court.

Axing Whiplash Compensation

Those whiplash damages due to be scrapped are known as general damages, that is to say, the damages which flow from a person’s wrongful/tortious action towards another. Such damages would cover treating the actual suffering and pain caused by the incident; often neck and back pain in whiplash claims. These remain distinct from special damages, however, which are intended to compensate the victim for losses incurred as a result of the defendant’s wrongful/tortious action. An example of special damages might be the cost of continued medication and rehabilitation.

The new system will still allow claims for special damages, but not general damages. It is clear that the rationale behind this is to quell the supposed culture of litigiousness whilst ensuring that those who have incurred losses are adequately compensated. However, such a proposal is not fit for purpose and there are two main worries born out of it.

Firstly, there would be added congestion in the courts with increased claims for special damages. Those who are now prohibited from claiming general damages try their luck in claiming for special damages, for, as an example, continued pain in or prevention of work related activities.

Secondly - and this flows from the previous point – there is nothing to stop the would-be fraudster claimants from instead claiming for special damages. It is natural that such damages have a slightly higher burden of proof, but with no other damages to apply for, there seems to be very little discouraging fabricated or exaggerated claims for those intent on doing so.

Unfair and Unfit for Purpose

In that regard, it is unclear how far the scrapped whiplash payments could effectively tackle the intended target of fraudulent claims, or indeed how far it merely provides a cover story for the government implementing cost saving practices.

Jonathan Wheeler put this well, stating:

These proposals are not, as stated, about stopping fraudulent claims. Fraudulent claims are clearly repellent but they should be dealt with by targeting the fraudsters and not the vast majority of honest claimants who have been injured and bring genuine claims.

It is strange that the government should approach the matter in such a problematic manner, when a much cleaner, less intrusive solution to the problem of fraudulent claims would be to prohibit insurers passing on leads to claims management companies. These companies, according to First4Lawyers, ‘encourages the public to make claims for non-fault accidents’ and prohibiting the dissemination of such information would reduce the scope for prompting injured persons into making accusatory claims.

As it stands, the opposite could well become a reality, as is clearly made out in Catherine Dixon’s article contending that:

With no recoverable legal costs, the market would be open for claims management companies using damages-based agreements, who could swamp the system by encouraging high volumes of claims to make their businesses viable

When considered alongside the raised small claims threshold, and the ill conceived implications thereafter, it becomes clear that the proposals from the most recent spending review do not turn on the victim’s best interests at all. Instead, they exacerbate the victim’s position, passing economic benefits onto the insurance industry with no guarantee that those benefits will ever reach the consumer. It is for these reasons I suggest that cutting departmental spending is the motivation for these pledges, and that talk of clamping down on fraudulent claims and saving motorists money is little more than sugar coating what is a serious affront to a very important area of law.

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Tagged: Personal Injury, Tort Law

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