The Government has now released the Civil Liability Bill and confirmed its intention for the revised process for setting the discount rate.
In February 2017, the then Lord Chancellor, Liz Truss, issued two statements within a week of each other. The first detailed the proposals to introduce the cap on whiplash induced soft tissue injury claims following a road traffic accident (RTA) and to increase the Small Claims Track (SCT) limit to £5,000 for RTA claims and £2,000 for employers liability and public liability cases. With little time to digest this, the Lord Chancellor announced the reduction of the discount rate from 2.5% to an eye watering -0.75%, the change seeing an unprecedented increase in reserves and settlement levels for applicable claims. (Gov.uk, 2018).
In the announcement made on the 20th March 2018; Justice Secretary and new Lord Chancellor – David Gauke said: “The number of whiplash claims has been too high for too long, and is symptomatic of a wider compensation culture. We are putting this right through this important legislation, ensuring whiplash claims are no longer an easy payday and that money can be put back in the pockets of millions of law abiding motorists” (Gov.uk, 2018(2)).
The Civil Liability Bill
The Civil Liability Bill (The Bill), as expected confirms the setting of fixed amounts of compensation for whiplash claims (including soft tissue injuries to the neck, back and shoulders and an associated minor psychological injury), allowing for a fixed percentage increase above that tariff for exceptional claims.
The Bill also looks to ban the practice of seeking or offering to settle whiplash claims without medical evidence.
Access the complete Civil Liability Bill at https://www.gov.uk/government/publications/civil-liability-bill .The tariff itself will be set by secondary legislation, but the proposed tariff is within the impact assessment released in line with the Bill. If accepted, in essence, claimants will receive awards ranging from £225 for a 3 month injury to £3725 for an injury lasting 24 months. This is an increase in line with inflation to the sums put forward with the Prison & Courts Bill in 2017. As these claims will fall within the boundaries of the SCT limit – legal costs will not be recoverable as they are now; a reduction therefore to the average claim cost where a liability exists can be expected with savings in the lowest value of claims returning in excess of 80% of the current levels awarded. (Legal Futures, 2018)
The Ministry of Justice also intend to raise the SCT limit as previously announced – however, this does not require primary legislation but will be done in conjunction with the wider reforms.
The Discount Rate
In the case of the Discount Rate, this is now to be set with reference to ‘low risk’ rather than ‘very low risk’ investments as at present. We therefore would expect this to eventually rest somewhere in excess of 0% to 1% - this is a welcome increase and will see applicable claim reserves reducing accordingly. (Clydeco.com, 2018)
Needless to say, the advice on new claims will be not to settle at the current -0.75% rate, but to use the Bill as a negotiation tool for early settlement discussions with claimant lawyers on the right cases.
The Ministry of Justice have stated that they wish for these changes to be implemented in April 2019. As the reforms are applicable to all accidents occurring after implementation, we can expect to see a spike in new claim activity prior to this date. The Ministry of Justice also stated it is to press on with the planned wider reforms in banning cold calling, capping travel sickness costs and tougher management of claims management companies (CMCs) – although no specific mention is made in respect of the proposals set out by Lord Justice Jackson in his secondary report in July 2017. (Review of Civil Litigation Costs: Supplemental Report Fixed Recoverable Costs, 2017)
The proposals are likely to see a rise in the number of litigants in person interacting with defendants when seeking compensation. There is planned development to the Ministry of Justice Injury Claims Portal to allow litigants in person to submit claims as a lawyer would current on their behalf in a more friendly way. The caveat of course in removing the attraction to recover legal fees from the paying party is that we risk seeing a rise in CMCs filling the void left by law firms leaving the market. The removal of lawyers from the process will also remove a filtering layer, currently undertaken by lawyers of the initial claim triage process.
Ultimately the Bill will need to follow its natural course through the Houses and we can expect some alterations to the contents as it does so. It may be somewhat optimistic to therefore have the reforms in place by April 2019 but it is certainly on its way.
- Gov.uk. (2018). Change to personal injury discount rate - GOV.UK. [online] Available at: https://www.gov.uk/government/speeches/justice-update [Accessed 19 Apr. 2018].
- Gov.uk. (2018). Justice Secretary unveils new bill to cut car insurance premiums - GOV.UK. [online] Available at: https://www.gov.uk/government/news/justice-secretary-unveils-new-bill-to-cut-carinsurance-premiums [Accessed 19 Apr.2018].
- Legal Futures. (2018). PI reforms in full - fixed whiplash damages to begin at £225, 1 October 2018 start date - Legal Futures. [online] Available at: https://www.legalfutures.co.uk/latestnews/pi-reforms-full-fixed-whiplashdamages-start-225-1-october-2018-startdate [Accessed 19 Apr. 2018].
- Clydeco.com. (2018). Discount rate set to increase : The insurance hub: Clyde & Co (en). [online] Available at: https://www.clydeco.com/blog/insurancehub/article/discount-rate-set-to-increase [Accessed 19 Apr. 2018].
- Review of Civil Litigation Costs: Supplemental Report Fixed Recoverable Costs. (2018). [ebook] Right Honourable Lord Justice Jackson. Available at: https://www.judiciary.gov.uk/wpcontent/uploads/2017/07/fixed-recoverablecosts-supplemental-report-online-2-1.pdf [Accessed 19 Apr. 2018].
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