Reforming the Soft Tissue Injury (‘whiplash’) Claims Process Impact
In 2015 plans were announced to reform the PI claims sector with a ban on compensation for minor whiplash claims and an increase in the small claims…
In October 2015 the then Chancellor of the Exchequer announced plans to reform the personal injury claims sector with a ban on compensation for minor whiplash claims and an increase in the small claims track. Despite various reports of these reforms being shelved or paused, the Ministry of Justice (“MOJ”) has launched its consultation on measures proposed to reform the personal injury and ancillary claims sectors. Despite the title of the consultation, it proposes a wide variety of civil litigation reform, not merely limited to the whiplash claims process.
Whilst it is common for consultations to have a 12 week response period, a shorter consultation period has been set with the consultation open until the 6th January 2017 and the outcome due to be published by the 7th April 2017. The MOJ is consulting on a number of key areas namely:
- Whiplash compensation,
- Small claims track (SCT) limit increase, and
- Ancillary matters.
1. “Whiplash” compensation
Whilst initially thought to be looking purely at whiplash claims, the MOJ is now also focusing on all soft tissue injuries arising out of road traffic accidents (“RTAs”). In particular, it is consulting on the definition of a minor soft tissue injury and whether this should be linked to the duration of symptoms with two time periods, 0-6 months or 0-9 months being proposed. Although the MOJ has indicated that 0-6 months is the preferred cut off, they are also consulting on whether this should be based on a prognosis or a diagnosis basis. This feeds into a number of proposals:
Proposal 1 is for the ability to obtain damages for pain, suffering and loss of amenity (“PSLA”) for minor soft tissue injuries to be removed entirely, save for special damages which will still be recoverable (loss of earnings, care, rehab etc.). It is likely that claims for special damages will continue to require a medical report and it may also be the case that medical evidence is required to clarify the duration of symptoms in the event that it is alleged that an injury is close to the threshold before which compensation is payable.
Proposal 2 is the introduction of a fixed sum (£400 or £425 with psychological injuries) for minor soft tissue injury claims. This is expanded by the proposal to introduce a tariff for those injuries exceeding the definition of ‘minor’ set out above up to a maximum of 24 months in duration with a maximum sum achievable of £3500 (£3600 including psychological injuries). The MOJ is keen for the tariff to be based on a single figure as opposed to a bracket, perhaps paving the way for the introduction of an automated process.
The table below replicates the proposed tariff system:
|Injury duration||Tariff without psychological symptoms||Tariff with psychological symptoms|
Whilst the government has proposed the figures as set out above, these appear to have been based on the 12th edition of the Judicial College Guidelines which have already been superseded by the 13th edition. It may well be the case that the proposed figures will be revisited as part of the consultation process.
It is also proposed that there is a ban on pre-med offers, not necessarily limited to RTA claims only, promoting a clear role for MedCo in the future. The MOJ has recognised the importance of ensuring that any such ban is enforced and is also consulting on the best way to ensure that any ban is effective.
2. SCT limit increase
The MOJ is again consulting on two proposals:
Proposal 1 an increase to the SCT PSLA limit for all classes of personal injury claims from £1000 to £5000, or
Proposal 2 an increase to the SCT PSLA limit only for claims arising out of RTAs.
There is also reference to a provision for complex claims to be re-allocated in the usual way, although what is complex remains to be seen with raw data on the issue requested. These proposals could mean that legal costs are no longer recoverable in most soft tissue injury claims with the exception of limited SCT costs, medical reports and issue fees.
3. Ancillary matters
In light of the proposals, as part of this consultation process, the MOJ has called for evidence on the role of unrepresented claimants, claims management companies and McKenzie Friends. In addition, evidence is requested on ancillary issues including:
- Qualified on way costs shifting (“QOCS”) with a proposal requiring a claimant to seek permission of the Court to discontinue less than 28 days before trial;
- Credit hire - the MOJ is consulting on changes to the ways that credit hire vehicles are provided/sourced;
- Rehabilitation - the MOJ is looking at methods of stamping out the growing trend of rehabilitation fraud; and
- Recoverability of disbursements - the government are looking to make the cost of acquiring a medical report the responsibility of the claimant and for the cost to be irrecoverable against the defendant.
Whilst an increase to the SCT requires only a rule change and a Statutory Instrument, the other changes proposed will require an Act of Parliament.
It is clear that the proposed reforms are the most significant set of civil reforms this decade, and would radically alter the personal injury claims market. By way of overview, there may be the following impacts:
- Unrepresented claimants: The proposal to remove the right to compensation for bodily injury arising out of an act of negligence is a significant change to the laws of England and Wales and is likely to face significant challenge and parliamentary scrutiny. The tariff system may well be preferable, in that it provides certainty of damages for a claimant in a format that is transparent and easy to understand, although what is not clear is quite how the figures have been arrived at. Coupled with an increase in the SCT, we could see a large number of claimants unable to secure legal representation, or those that are perhaps unwilling to share a percentage of a reduced general damages claim with a solicitor through a CFA or a DBA. These claimants, acting in person, (‘LIPs’) could well face difficulties in understanding the process of bringing a claim and may need more assistance from defendant insurers as well as more simplified guidance notes from the MOJ, although the new Master of the Rolls has suggested that law students who had completed the academic and vocational stage of their legal qualifications may be able to provide legal advice to LIPs. Insurers and their panel solicitors may need to become more focused on identifying the nature of individual cases and whether they arise out of a valid cause of action, due to those claims being presented less clearly than before by LIPs.
LIPs already account for an increase in touch points with insurers, together with an increased claims lifecycle. These proposals will inevitably mean an increase in LIPs and ultimately could lead to an increase in resource demand for insurers. Insurers may need to seek staff with non-traditional skill sets such as claims and customer service to deal with and assist unrepresented claimants.
- Solicitors: The proposals inevitably mean that the legal service market will have to adapt. There will predictably be a reduction in fixed fees from those currently achievable in the portal and it may well be that some claims are not economically viable for claimant solicitors resulting in some exiting the market. We expect to see consolidation within the market with those with more agile and optimised operations more likely to be able to make sufficient money from representing those lower level claims. Where solicitors do continue to act, there may be a greater utilisation of damages based agreements where solicitors can claim a percentage of the damages which is currently capped at 25% in personal injury claims. We may even see arguments for the cap to be increased or removed completely which may result in solicitors firms competing on the level of their percentage fee. Alternatively, or alongside other changes (such as the introduction of the Briggs online court), solicitors may perhaps offer fixed price unbundled services for each part of the litigation process.
- CMCs: In the event that solicitors withdraw from a percentage of the market where they are unable to make sufficient money from these low value claims, there is a real possibility that CMCs will rush to fill the void. They benefit from less stringent regulation than solicitors and generally have a lower cost base allowing them to represent claimants for a lower fee. The MOJ is consulting on CMCs and McKenzie Friends as part of this consultation process and it may well be that provision is made to allow these businesses with a lower cost base to represent claimants in these lower value actions.
- Counsel: With the proposed reforms seeking to improve the ability of LIPs to bring their claim without the need for legal representation, this has the potential to hit the junior bar very hard. There would be no need for an advice on quantum or advocacy at a disposal hearing or trial on the issue of quantum and representation at any trial of the issues may prove to be unnecessary. In time, this may have a consequential impact on the availability of counsel for litigation work generally. Without the opportunity for junior counsel to ‘cut their teeth’ on lower value claims, there may also be an impact on the quality of service from the Bar. There could be an increase in those claimants directly instructing barristers to represent them at hearings; however, with the cost implications for claimants, this could prove to be unlikely.
- Insurers: As considered above, should the proposals be adopted, whilst insurers will see a positive impact on their indemnity spend, their operational expenditure may well increase due to the increase in LIPs. In terms of the tariff approach, there is the potential for claims to be exaggerated so as to tip into a higher level of damages. Insurers will still need to be able to identify and tackle exaggerated and/or fraudulent claims. Any negative impact in that regard could see an increase in such claims, which would obviously run contrary to the Government’s policies around reducing the number of fraudulent claims although on the whole, insurers should see a positive impact on their indemnity spend as a result of these proposals. However, the government has confirmed that they will announce the result of their review into the discount rate by the 31st January 2017; if the discount rate is reduced, it may be more difficult to pass on the benefits of these reforms by way of reduced premiums to motorists.
- Judicial & quasi judicial bodies: The removal of damages for a particular type of claim (‘minor’ soft tissue injuries) or the introduction of a tariff for those claims up to two years in duration may result in the freeing up of judicial time at district judge level. However, this is likely to be tempered against an increase in LIPs which may lead to court hearings becoming longer as LIPs may need more legal assistance and guidance, or more appeals being pursued.
Can we help?
We will be keeping a watching brief and will report back as soon as there are any further developments. In the meantime, should you wish to discuss this in more detail, or would like assistance with any other matter, please do not hesitate to get in touch.
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