With April 2019 outlined as the government’s aim for bringing the Civil Liability Bill into force, little time remains to argue and lobby for changes
As the Civil Liability Bill makes its way through Parliament, the positions of its advocates and detractors remain polarised. One one side, whiplash and other personal injury claims are out of control and are forcing up car insurance premiums in particular. On the other, justice is being done for the insurers and not the victims who the policies are supposed to protect.
Adding fuel to the fire ahead of the bill’s second reading in the House of Lords on 24 April, the Compensation Recovery Unit (CRU) reported that motor insurance claims are at their lowest for a decade—contradicting the government’s ‘compensation culture’ rationale for introducing whiplash reform and changes to the personal injury discount rate.
Commenting on the CRU’s figures at the time of their release, Association of Personal Injury Lawyers (APIL) president Brett Dixon made clear his belief that they discredited the principles behind the Civil Liability Bill, of clamping down on “too high for too long” whiplash claims that are “symptomatic of a wider compensation culture”, as justice secretary David Gauke put it in March.
But those figures didn’t change the minds of the Association of British Insurers (ABI) or its members. At the beginning of this month, the ABI’s latest Motor Insurance Premium Tracker put the cost of the average motor insurance policy at £478 in Q1 2018, or £13 down from Q4 2017. However, the ABI also compared the latest average with what was recorded in Q1 2017—and the average policy was £14 cheaper back then.
Rob Cummings, assistant director and head of motor and liability at the ABI, commented: “While this small fall in the last few months gives some relief to motorists, it is in line with seasonal trends and the underlying cost pressures from things like personal injury claims remain.”
“It can’t be right that for every £1 in compensation paid to whiplash claimants, an additional 47p goes to their lawyers. The Civil Liability Bill now going through Parliament will fix a broken system and help millions of motorists whose premiums had been going up and up over the last two years.”
The sitting lords largely parked this divide in favour of a wide-ranging debate on the Civil Liability Bill last month. But there was an acknowledgement of the argument that is raging, with Lord Beecham urging caution when considering “the benevolent intentions of the industry and its heartfelt aspiration to reduce premiums”. Lord Hunt of Wirral, who is chairman of the British Insurance Brokers’ Association, expressed his hope that “the reforms in the bill are in no sense controversial”, although “we shall inevitably hear a great deal of noise from all those vested interests on both sides”.
The fine print
Part 2 of the Civil Liability Bill proposes moving the calculation of the personal injury discount rate, currently set at -0.75%, away from ‘very low risk’ to ‘low risk’ investments, as well as forming an expert group to advise on its level every three years.
Speaking ahead of the second reading, Trevor Ward, a senior solicitor at Fletchers Solicitors, warned that “the proposed assumption to move from very low risk to low risk investments (the definition of which has not yet been made clear) may go against the ‘100% compensation principle’ by setting the future rate on the basis that claimants have to take some risk.”
He explained: “This assumption seems to indicate that claimants must invest in a diverse portfolio of investments (which are not equivalent to index-linked government stocks) and should take more risk, with financial appropriate advice—albeit, not the same level of risk that a prudent investor would take. It’s very difficult to decide how to interpret these definitions and to determine who will pay for the cost of appropriate financial advice for claimants.”
“Changing from very low risk to low risk suggests that claimants are expected to receive a better return on their future investment, and so future calculations for pecuniary loss to the victim will likely be reduced. This assumes that there is sufficient evidence available to outline the types of investments that claimants can take advantage of, in order to define the meaning of ‘low risk investments’.”
“But, it’s been argued that there is insufficient evidence as to what claimants actually do with their funds, but that seems to have been dismissed by the government as being unnecessary at this time.”
The possibility that claimants could turn into “stockbrokers”, as some have described it, and as one lord repeated, was challenged extensively during the second reading in April, not least by Lord Hope of Craighead, who pointed toward Clause 8(1) of the Civil Liability Bill, which would allow a court to take a different rate of return into account, including a lower return, if any party shows that it would be more appropriate in the case in question.
Lord Hope said: “I have in mind—and I have never forgotten it—a case I once had to deal with where a highly talented young woman had been rendered tetraplegic as a result of a road accident which was certainly not her fault. The injury was so severe that she was almost totally paralysed. She could not move any part of her body below the neck. She could breathe but she could not speak. She could communicate only by sucking and blowing through a tube to spell out words on a screen in front of her. For her, the award was assessed on the assumption that it would be necessary to provide and pay for 24-hour care and attention every day, and for the accommodation and equipment she needed to sustain any kind of reasonable comfort, for the rest of her lifetime.”
“It would seem quite wrong for someone in her condition to be required to expose the award to risks to any degree just because, without that, her award may bear more heavily on the defendants and their insurers—and perhaps through that, on the general public. So I not only welcome the new clause as a safeguard against the risk of unfairness in these extreme cases; without it, the bill would risk, in the more extreme cases, giving rise to an injustice which ought never to be contemplated.”
APIL’s Dixon said following the second reading: “A rate based on ‘very low’ investments is the only way to deliver 100 per cent compensation to catastrophically injured people. As soon as you ask them to invest their compensation in anything more risky, you are talking about effectively giving them less than 100 per cent compensation and that is not acceptable. This will be a key point for us in the debate ahead.”
Dixon did welcome the creation of an expert group and the fact that the lord chancellor will be required to give reasons for any decisions about the rate. “At the moment, though, the lord chancellor is only required to consult the expert group before setting the rate. It is extremely important that there should be a requirement for the lord chancellor to take the response of the expert panel into account, and this requirement should be on the face of the bill.”
Turn down that racket
Part 1 of the Civil Liability Bill promises to cap damages for whiplash claims and ban settlements struck without medical evidence. Separate secondary legislation is also increasing the small claims limit for road traffic accident claims to £5,000 and for all other personal injury claims to £2,000.
Lord Faulks, a practising barrister who works on personal injury and clinical negligence cases in particular, said during the second reading that Part 1 “reflects a strategy to restrict the level of damages and to discourage these ambitious, or fraudulent claims”.
He addressed several criticisms levelled against Part 1 and pointed out that special damages—that is, loss of earnings or medical expenses attributable to the injury—will still be recoverable, and there is a power for an uplift on the tariff for damages in exceptional circumstances. He also pointed out that there remained plenty of time for debate to deal with the bill’s many criticisms.
“My view is that this part of the bill is aimed in the right direction and is a necessary correction to the whiplash claims racket,” Lord Faulks concluded.
Dixon said of Part 1: “Whiplash must be defined by experienced and independent medical experts, based on medical facts. It should not be defined to suit government policy. We are, of course, fundamentally opposed to the tariff system. At the very least it should be set by the Judicial College at levels which are fair and not only take into account the duration of symptoms, but also the type and intensity of the injuries and well as individual personal circumstances.”
The secondary legislation that is increasing the small claims limit for road traffic accident claims is not under the scope of the Civil Liability Bill, but has been sold as part of the same package of whiplash reforms. Ed Fletcher, CEO of Fletchers Solicitors, is concerned about how this change could affect vulnerable road users.
He said: “It’s hard to dispute the need to wipe out fraudulent claims, notwithstanding the arguments as to how prevalent fraud actually is, but serious consideration needs to be given to how the current proposals will put vulnerable road users at a substantial disadvantage.”
“The government’s ‘blanket approach’ on the small claims limit fails to take into account that vulnerable road users are rarely, if ever, involved in the type of fraudulent claims that are being blamed for the soaring cost of car insurance. The proposals do not take into account the more complex nature of the type of accidents involving vulnerable road users.”
“Not only are injuries more complex because they do not have the added protection of their vehicle, but in motorcycle claims, for instance, the question of who is to blame is twice as likely to be disputed compared to the average motor claim. This makes it harder for such matters to be dealt with fairly through the small claims court by a litigant in person.”
Lord Marks of Henley-on-Thames remarked during the second reading that setting the threshold at £5,000 will “deny very large numbers of genuine claimants legal advice and representation because the only way they can afford lawyers in these cases is by relying on conditional fee agreements and the recovery of costs from insurers”.
“The increase in the small claims limit will increase the number of litigants in person and reduce access to justice in general, hitting, as always, the most vulnerable citizens the hardest.”
Lord Marks went on to point out that the increase will also take the vast majority of whiplash claims outside the pre-action protocol for low-value personal injury claims in road traffic accidents and the portal associated with it, “which, for all its faults, has provided a route to settling many of these claims quickly and economically”.
“If the small claims limit is to be increased, then I suggest the scope of the portal and the protocol should be broadened, or at least we should have a new parallel protocol to assist claimants in person in these cases. I draw some support from the speech of the noble and learned Lord, Lord Thomas, in that regard, but I regard £5,000 as simply too high for the small claims limit and would endorse the £3,000 figure proposed by the Bar Council and the Personal Injuries Bar Association.”
The Civil Liability Bill is scheduled to enter the committee stage in the House of Lords on 10 May. With April 2019 outlined as the government’s aim for bringing the legislation into force, little time remains to argue and lobby for changes.
First4Lawyers has launched a campaign urging members of the public to tell their MPs that the government’s plans to reform personal injury claims are wrong to prioritise repairing cars over people. The marketing collective for personal injury and clinical negligence law firms has produced an animation that is intended to illustrate how an ordinary person will suffer and be left to fend for themselves against insurance companies. The animation tells the tale of Jane, who suffers painful injuries as a result of an accident caused by a ‘boy racer’ but is left exposed by the government’s reforms. The First4Lawyers campaign will utilise the intentionally emotive hashtag #RepairTheRightBody.
APIL is similarly keen to encourage changes to the Civil Liability Bill. Dixon said: “APIL will be at the forefront of challenging this bill with the aim of bringing the focus back to injured people. We’ll do this through amendments, lobbying, briefings, and using reliable research and data to paint a clear picture both inside and outside of Parliament of what is happening in the current climate. The government has had whiplash injuries in particular in its crosshairs for many years and APIL is absolutely committed to getting the best outcome and preserving the rights of injured people. As you would expect, we are exploring amendments to the bill.”