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Government step away from a ban but increase the SCT limit for RTA and EL/PL

Yesterday the government produced its response to the consultation on reforming soft tissue injury claims arising out of road traffic accidents and the proposed increase in the SCT limit to £5,000. In the event, it has decided not to impose a ban on minor whiplash claims but has instead pressed ahead with its idea of a tariff for all whiplash claims with a prognosis of 24 months or less, including where there are minor psychological injuries.

The SCT limit is to be raised for all RTA related claims (not just soft tissue injury cases) to £5,000. The government has also announced an increase in the SCT limit for EL/PL claims to £2,000. Accompanying the consultation response, legislation has also been proposed in the Prisons and Courts Bill which will give effect to the government's intentions. A second response document regarding the call for evidence part of the consultation is due to come at some later point. DWF Motor and Fraud Head and MedCo Director, Nigel Teasdale, takes a look at what has been announced so far and how it might affect the claims landscape.

The detail of the announcement

With more detail to come from the government in a second document, the government has stated in Part 1 of its response that it will:

  • Implement a tariff for RTA injury claims where there is a prognosis of 24 months or less

    • The tariff will include minor psychological injury claims, but exclude psychological injury claims such as depression and post-traumatic stress disorder

  • Use the prognosis approach in determining how long an injury is likely to last

  • Raise the SCT limit for all RTA related cases to £5,000

  • Raise the SCT limit for EL and PL claims to £2,000

  • Ban pre-meds

The government has indicated that it intends to implement all of these reforms together by October 2018 and has introduced legislation in the Prisons and Courts Bill. The Bill, which had its first reading in the Commons yesterday, will need to successfully proceed through both Houses over the coming months if the reforms are to be successfully implemented. As yet no date has been set for when the Bill will receive its second reading. To increase the SCT limit, the government need only introduce a statutory instrument.

No ban on whiplash

It will surprise some that the government has decided to turn away from its proposal that it would ban all whiplash claims where the prognosis period was 6 months or less. This was one of the bedrocks of the reforms when they were proposed in the Autumn Statement in 2015. The government states that it has not brought in a ban as a result of "…the arguments put forward by respondents".

Many have expressed the view that for the reforms to truly deliver on the government's stated aim to reduce whiplash claims, only an outright ban would do. Absent that proposed reform, the question will be whether the reforms that are left will successfully reduce the frequency of RTA related injury claims, once the reforms have been implemented.

The definition

A tariff will apply to all whiplash claims and "minor psychological claims", where the prognosis is that the symptoms will last for 24 months or less. Whilst the consultation document refers to "whiplash claims", section 61(1) of the accompanying Prisons and Courts Bill defines "whiplash injury" in this way:

"“whiplash injury” means an injury, or set of injuries, of the neck or the neck and upper torso that is of a description specified in regulations made by the Lord Chancellor"

Whilst it will be for the Lord Chancellor to define what will be meant by "whiplash injury", it seems likely that a definition will be drafted in such a way for the reforms to apply to all of those claims that are widely understood to be "whiplash claims" and which are the reason why the government is taking the action it is.

This is quite a departure from the original soft tissue injury definition proposed which was taken from the MedCo requirements and it seems on the face of it there will be different definitions for determining which processes to follow which might be an area of concern, together with the concern around displacement into other non-demonstrable soft tissue injuries

Whilst neither the consultation response document, nor the new Bill define what is meant by "minor psychological claims", the response document does say the government:

"…proposes to limit the scope of this measure to minor psychological injuries, such as travel anxiety and 'shock'"

The new Bill also states at section 62 (3):

"If the claimant suffers one or more minor psychological injuries on the same occasion, the amount or the total amount of damages for pain, suffering and loss of amenity payable in respect of the minor psychological injury or injuries is to be an amount specified in regulations made by the Lord Chancellor"

By wording the definition in this way, claimants with multiple minor injuries could not seek to avoid the new process.

The government has confirmed that the length of any injury will be determined by reference to the prognosis approach, so the claimant will be expected to be seen by their expert at a time when they are still experiencing symptoms.

The tariff

The figures that now feature in the tariff as now published are slightly higher than those previously announced by the government in their consultation document, which is apparently to take into account a later version of the Judicial College Guidelines. The figures given, which we reproduce below for ease of reference, cover both whiplash claims and any minor psychological claims so at least we will not have two different figures depending on whether there is a minor psychological injury element to the claim. The new Bill also provides for the Lord Chancellor to increase or reduce the figures in the table:

Injury Duration

2015 average payment for PSLA – uplifted to take account of JCG uplift (industry data)

Judicial College Guideline (JCG) amounts (13th edition) Published September 2015

New tariff amounts

Amount in consultation

0–3 months

£1,750

A few hundred pounds to £2,050

£225

(0-6 months) £425

4–6 months

£2,150

£2,050 to £3,630

£450

7–9 months

£2,600

£2,050 to £3,630

£765

£740

10–12 months

£3,100

£2,050 to £3,630

£1,190

£1,150

13–15 months

£3,500

£3,630 to £6,600

£1,820

£1,760

16–18 months

£3,950

£3,630 to £6,600

£2,660

£2,575

19–24 months

£4,500

£3,630 to £6,600

£3,725

£3,600

Where a claimant fails to mitigate their injury, leading to a longer recovery than might otherwise be the case, section 62 (1)(b)(ii) of the Bill means that those claims will still need to follow the new process, as the section defines the relevant duration period in this way:

"...the duration of the whiplash injury—

(i)             does not exceed, or is not likely to exceed, two years, or

(ii)            would have been, or would be likely to be, no more than two
years but for the claimant’s failure to mitigate the whiplash
injury"

The government has also announced that it intends to allow judges to add an extra 20% to the figures given above in those cases where there are "exceptional circumstances". The government has deliberately chosen not define what might constitute exceptional circumstances to avoid fettering a judge's discretion, but it is worthwhile noting that, even in those cases where the injury lasts 24 months, were 20% to be added, the level of the award would still be less than £5,000 and the claim would be dealt with in the SCT in future. As with the figures in the tariff, the Bill provides the Lord Chancellor with the power to increase or reduce the percentage.

Neither the consultation document nor the new Bill offer any insight as to the process by which a claimant will be able to have the court consider whether to allow the uplift, but presumably it will follow a process similar to the one that exists now for Stage 3 Protocol cases.

Rise in the Small Claims Track financial limits

Part 1 of the consultation response confirms that the SCT limit is to be raised in two ways:

  • A raise to £5,000 for all "RTA related" claims

  • A limit of £2,000 for all other injury claims, "in line with inflation"

To implement these reforms, the government does not need primary legislation, rather the changes can be made through the use of a statutory instrument, and hence there being no mention of this aspect of the reforms in the new Bill.

With the expectation being that many claimants will now act for themselves, or with the assistance of a CMC or Mackenzie Friend, it seems likely that changes will be needed to the way in which these claims are processed, in future, both through the court system and through the Claims Portal. That is especially so if, as is anticipated, there is a substantial increase in the number of cases proceeding in the SCT and thankfully the government acknowledge in their response that there will be a need to review the way in which the Claims Portal and MedCo operate and also to look at the wording of the relevant protocols.

RTA claims

There had been a possibility that the increase in the SCT limit to £5,000, proposed in the consultation document would only be in relation to soft tissue injury RTA claims. However, the government has now confirmed that it intends for the increase to apply to all RTA related injuries, which would include a wide variety of injury types, including fractures and scarring.

With no tariff (at least as yet) in respect of other injury types, it is likely that there will be friction in these types of claim that are not covered by the tariff, as the parties continue in future to argue over the appropriate level of damages that should be payable. That is especially likely to be the case where the claimant is a litigant in person, or represented by a CMC acting under a contingency fee agreement.

As well as the potential for prognosis creep post reform (which we look at below), there is a danger that claims inflation may take place in those claims that are not included in the tariff, as claimant lawyers seek to push up awards in those cases in an effort to avoid claims being subject to the increased SCT limit.

Other injury claims

The government's planned increase in the SCT limit for other injury claims is probably likely to be less controversial than the proposed level of increase in RTA cases. The current financial level has stood since 1991 and even the most ardent claimant injury lawyer would have had to concede that some increase was due. The only other possible argument would be to do away with a small claims process altogether for such claims and rely instead on the existing Portal.

EL and PL claims are generally recognised to be more complex than RTA cases, especially where there are disputes in respect of liability, but as processes develop to deal with the increase in the SCT limit for RTA cases and with the introduction of the online court in the next few years, it will be interesting to see in the future whether the limit is looked at again.

A ban on pre-medical offers

This has now been confirmed and will cover not only the making of pre-med offers, but also "the making, soliciting, accepting and receiving of such an offer" and the ban will be overseen by the "relevant regulator", which includes the FSA, the SRA and the Claims Management Regulator. The inclusion of the latter seems to acknowledge the increased role that CMCs are likely to play in the future.

The detail around the ban can be found in sections 65 to 67 of the new Bill.

MedCo's role in a post reform world

As the response document recognises, for the reforms to work MedCo will have a key role to play, both in ensuring that "prognosis creep" does not take place and in facilitating the success of the ban on pre-meds.

As we have seen time and again, the claimant personal injury sector is adept at change in response to reform and often finds a way to circumvent legislation or the imposition of new rules. For the reforms to succeed it will be essential that MedCo is free to do its job in monitoring the performance of accredited experts and MROs, to ensure that prognosis periods do not lengthen inappropriately.

It has often been said that the offering of pre-meds in whiplash claims is related to insurers having a historical lack of faith in the quality of the medical evidence that they were seeing and in the independence of the experts who produced those reports. With MedCo now well established and with experts and MROs having to declare any financial interest, the landscape is changing and hopefully by the time of implementation there will be confidence in the medical evidence being produced.

It remains to be seen whether MedCo could be extended to other types of injury beyond soft tissue and to claims for Rehabilitation which has been flagged for a number of years as an area of concern.

A bumpy legislative ride

The recent one-off Justice Select Committee session, which took place a few weeks ago, saw both the ABI and APIL give evidence before the Committee, saw some hostile questioning of the witnesses, particularly the ABI, from MPs on both sides of the House of Commons which could suggest that the legislation is likely to come in for some very close scrutiny in the Commons, where the government have a majority of just 16.

The House of Lords is also likely to take a keen interest in the legislation and could prove to be an even more sceptical forum for the reforms than the Commons and it should be borne in mind that there is no government majority here. When the Lords came to consider what became Section 57 of the Criminal Justice and Courts Act, which was introduced by the previous government, it was greeted with a great deal of hostility and several attempts were made to amend the legislation, albeit without success.

The most contentious areas of the reforms that the government proposed back in November, were probably extending the small claims track for EL/PL claims to £5,000 and making general damages irrecoverable for minor whiplash, so in that sense the government might have taken some of the heat what opposition there might have been toward the reforms. However, we see the level of the proposed tariff as the most likely battleground.

What is still to come?

Part 2 of the government's response

The government has said that it will publish a second document that will look at the other areas that the government raised in its consultation document, such as the need to tackle credit hire, late claims, commercially driven rehab and the implementation of the reforms suggested by the Insurance Fraud Taskforce in their report from January last year.

We see tackling rehab now as particularly important, especially as claimant lawyer operations look to ways to replace the revenue that they will now lose as a result of these reforms. If action is not taken, then the industry could find itself arguing over the level of rehabilitation claims, in a similar way that the arguments over credit hire continue to rage 20 years later.

We wait to hear when that document will be published.

The need for CMC regulation to pass to the FCA

As long ago as May of last year, Carol Brady in her report, following her fundamental review of CMC regulation, recommended that responsibility for regulating CMCs should pass from the MoJ to the FCA and that recommendation was accepted by the government at the time that Brady's report was published. That change requires primary legislation and we understand that it is unlikely now that legislation will be brought by the Treasury before this May and that the FCA are now unlikely to take responsibility for regulation until 2019.

With CMCs likely to feature more prominently in the future, it is essential that regulatory responsibility is handed over to the FCA as soon as possible and that the other recommendations made by Brady in her report, such as the introduction of a 'fit and proper' persons test are also brought in, ideally by the time that the reforms are to take effect.

Review of the Fixed Recoverable Cost regime

If displacement is to be limited from the whiplash claims arena into other claims areas, then it is important for the FRC regime to be extended into non-injury claims, including credit hire, above £10,000 and for the CJC to now report as to how they propose to fix costs in NIHL claims. These are two obvious areas where claimant lawyer operations will look to shift their focus, as they are still areas that are not covered by FRCs and where hourly rates can be recovered.

What next?

We await to see what the government has to say in the second part of its response, as the government's approach to those issues will form an important part of whether the reforms are likely to be a success.

In Scotland, the combined effect of these reforms (which do not apply to Scotland) and the proposal to introduce QOCS there, could see claimant law firms  and CMC businesses move north of the border as the conditions there are more favourable and which in turn would lead to a surge in claim volumes.

It will also be important to chart the progress of the Prisons and Courts Bill through Parliament, which we shall monitor closely and you can also do directly on the Bill page. As we continue to digest and absorb the details of this announcement we will be updating you further.

Contact

For more information contact Nigel Teasdale, Partner on +44 (0)1772 554264 or email nigel.teasdale@dwf.co.uk

By Nigel Teasdale

Comments (1) - Add a Comment

  1. Antony Greensweig Avatar

    By Antony Greensweig

    An excellent appraisal, Nigel. One concern I have is over 62 (8) of the bill which seems to suggest that if a claimant has a whiplash, as defined, as well as another injury (lower back, for example) then the latter can be added to the tariff - so if the claimant had a 6 month whiplash and a 6 month lower back injury he could recover the tariff £450 as well as the currently awarded £2000+ for the back injury?
    I guess it depends on the definition in the regulations but the inference of the bill is that the effort is to combat whiplash, defined as neck and upper torso...
    What is your take on that?

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This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

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