I'm interested in…

  • Strategy & Procedure
  • Catastrophic Injury
  • Professional Indemnity
  • Motor
  • Fraud
  • Disease
  • Liability
  • Commercial Insurance
  • Costs
  • Local Authority
  • Scotland

Civil Liability Bill arrives in a form capable of achieving reform to key issues of whiplash and discount rate

The long-awaited publication of the Civil Liability Bill has taken place. Each of the two parts of the Bill are designed to have a positive effect in reducing the cost of motor insurance and so from that perspective it should be seen as unsurprising that they are being brought forward together.


Part 1 of the Bill deals with existing proposals for whiplash reform, Part 2 with planned changes to the discount rate. The Bill has had its First Reading in the Lords yesterday and has been published today. Its Second Reading is on 24 April when the response of the House of Lords can start to be gauged.


The Bill consists largely of previous draft provisions on both issues. However the government has listened to criticism, principally as to the definition of whiplash as now found in Part 1 of the Bill, and from the Justice Committee on the process for setting the discount rate which has fed through into Part 2.


The government's policy aims though remain in place on both aspects of these reforms. While the Bill would in ordinary times have been brought forward sooner, parliamentary time has now been found. There are signs that the Ministry of Justice is firmly committed to seeing both of the reforms through to the statute book, even if challenges have to be expected when trying to navigate the parliamentary road ahead.


Assuming the Bill succeeds, it seems more likely that change should be expected to arrive later rather than earlier during 2019 on both aspects of the reforms.

Prospects of progress with the Bill

The delayed introduction of the Bill reflects the fact that these are far from usual parliamentary times. Two factors combine together to create considerable uncertainty in terms of achieving progress with Bills such as this. In addition to the pressures caused by the need to give priority to Brexit-related measures, the parliamentary mathematics including the government's use of a confidence and supply agreement for a Commons majority adds a layer of uncertainty.


One advantage of a shorter bill dealing with a single issue, even one involving the addition of a second measure as we have here, can result in an expectation of swifter parliamentary progress. We have here a Bill of 3 Parts and 12 clauses, compared to the Prisons and Courts Bill with its 6 Parts, 72 clauses and 15 schedules.


What are the prospects of the measure passing? As far as whiplash reform is concerned the determination of the government to achieve what it continues as an important reform reducing household spend is noteworthy, and the expectation that the commitment will continue gives a good prospect of ultimate success though opposition must be expected in both Houses.

The impact assessment accompanying the Bill suggests that the Bill was the "centrepiece of the Queen's Speech". If this is an overstatement, it does seem to support the continued perceived importance of the measure.


Discount rate reform might be regarded as less controversial and therefore we might expect a higher prospect of success with that part of the Bill, especially where any potential opposition built around the recent Justice Committee report will have been reduced as a result of a cogent response from the MoJ yesterday.


The current parliamentary session is of course 2 years long so there is sufficient time before June 2019 for the Bill to be enacted. It is difficult if not impossible to predict the time that this Bill will take in its passage through the process, but the current uncertainties suggest a longer period than in ordinary times.


A successful passage of the Bill allowing time for ping pong between the Houses could ultimately be expected even though that might take at least 9 and possibly up to 12 months from now.


We look separately below at when each of the measures included within the Bill might be implemented in the light of that expectation as to when the Bill might reach the statute book, but we are in the case of both reforms likely to be looking at later in 2019 rather than earlier.

Part 1 of the Bill – whiplash reform

This is the reform which has the longer genesis: back to George Osborne's Spending Review and Autumn Statement of November 2015 in fact. It progressed through a consultation and into Part 5 of the Prisons and Courts Bill which was passing through the last parliament until it fell when the General Election of last June was called.


As noted, the Queen's Speech also of last June announced that whiplash reform remained on the government's agenda, and of course work has been going on in support of the reform in the meantime. The MoJ has set up a Steering Group as well as 4 sub-groups with representation from across the sector to further preparations.


It was announced last month that the government's target implementation date had been put back by 6 months from October this year to April 2019, no doubt as a result of the time it was taking for the Bill to get to the front of the queue of measures to gain the parliamentary time to be brought forward. Time in the Lords for it to begin its passage has now been secured.

Involvement of the new Secretary of State

The relatively new Justice Secretary and Lord Chancellor, David Gauke, issued the press release yesterday giving news of the publication of the Bill.


He expects the whiplash reform to deliver £1bn of savings in total or an average of £35 in terms of savings per policy. It was a matter of "putting money back in the pockets of law abiding motorists".


He wanted to ensure that whiplash claims were "no longer an easy pay day". There were"predatory parts of the claims industry that encouraged minor, exaggerated and fraudulent claims" which justified the reform.


The incoming changes were part of a wider programme (alongside the forthcoming ban on cold calling, tougher regulation of CMCs and the clamp down on gastric illness claims) to tackle the compensation culture which had been driving up costs for consumers and taxpayers, and that in its place the government were looking to achieve "a more balanced and fair system".


As to numbers, the statement referred to "unacceptably high numbers of whiplash claims" which had been "too high for too long". A reference was made to RTA personal injury claims being 50% higher than a decade ago; despite a fall in the number of reported accidents and the fact that we had "some of the safest roads in Europe".

Volumes of RTA claims

Looking at the maths showing the CRU annual data below, Mr Gauke's use of the statistics is as conservative as that of his predecessors as he could if desired have referred to a larger increase in claims numbers. Mr Gauke's statistic was also used by the then Justice Minister Sir Oliver Heald at the Second Reading of the Prisons and Courts Bill.

Comparing the level for 2016/17 with that for 2006/07 does indeed show a rise or around 50%. But if one compares the 5 year average between 2000/05 with an average over the last 5 years then the rise is from 395,735 to 780,834 or 97%. It is likely that when the data for 2017/18 is available an average over the last 5 years will remain above 750,000, so around 90% higher than that seen in the first half of the noughties.


Comparison with the Prisons & Courts Bill

The old Bill had had its Second Reading in the Commons and was at Committee Stage when parliament was dissolved, so that Part 5 did not reach the stage of detailed scrutiny in committee. The majority of the Bill dealt with prison and courts reform. We can though look back at its progress as evidence of how Part 1 of the new Bill may fare.


At Second Reading, Labour did not oppose the Bill, but had harboured criticisms which they had wanted to address as it progressed. Their spokesman, Shadow Justice Secretary Richard Burgon mentioned a reduction in whiplash claims over recent years, without giving any claims numbers, but referred to APIL data that claims for whiplash, back and neck had fallen 11% since 2011/12. He said that there was no evidence of the "rampant compensation culture" being claimed.


He welcomed the fact that the government had watered down their initial plans for a ban on recovering damages for minor whiplash as well the intention that the Small Claims Track rise to £5,000 would be limited to RTA claims, saying that the MoJ had "listened a little", and that the clauses in Part 5 would in fact have come as a relief to many people, though the tariff remained too low.


Bob Neill, then as now chair of the Justice Committee, saw the Bill as important and valuable, but also thought that there was room to improve it. No-one could say there was no issue with whiplash, he said, though he disputed whether the evidence base was strong. He supported the move from a minor whiplash ban to a tariff.


There were two suggestions to improve the wording of the Bill made at Second Reading. Bob Neill noted that a claim based on breach of statutory duty (as well as negligence) would take the claim outside the new process. Conservative MP Chris Philp suggested that the wording of the Bill should be widened to include claims involving the lower back as well as the upper back.


In response to Chris Philp the then Justice Secretary Liz Truss's response was that the definition had been arrived at following the consultation and that it was thought by government, at least at the time, to be sufficient to achieve their policy aims.


Matters have moved on since Ms Truss's stint at the MoJ and in fact both the points made by Chris Philp and by Bob Neill have been recognised when we look at the new Bill as changes made as a result of them are the main revisions in fact.

The wording of the new Bill – definition of whiplash

The primary change is in clause 1(1) which sets the overall parameters as to the types of injury included within the new tariff system, beyond which regulations will give further detail of the specific types of injury included with associated tariff figures, and those excluded.


In this way, the high level definition is expected to give confidence to parliamentarians as to the limits of the new process, while the use of secondary legislation should permit easier changes to be made should they be needed in the light of negative experiences.


The old definition of whiplash injury was "an injury, or set of injuries, of the neck or upper torso". The new changed definition is "an injury, or set of injuries, of soft tissue in the neck, back or shoulder".


The change in approach is essentially two-fold. Firstly, there is an express reference to the included claims involving "soft tissue" injury, as opposed to bony injury. Secondly, the parts of the body affected have extended from purely the neck and upper torso to the neck, back and shoulder, the 3 main whiplash sites.


The concern over the previous definition was that it was limited so that more than half of this type of claim would fall partly or wholly outside the tariff. The data showing this taken from Freedom of Information requests which we have made is set out in the table below and shows what has been an increasing trend towards injury sites that would have been wholly or partly outside the former definition, even before expected avoidance behaviours would have had further effect.







Cases fully outside previous definition






Cases partially outside previous definition






Sum of cases fully or partially outside previous definition






Cases fully inside previous definition






What percentage of claims would be fully within or indeed outside the new definition? It is clear with an extended range of injury sites that it will be a higher percentage that will be fully within the definition than the 47% shown above. To assist, the data breaking down CRU registered RTA claims into categories of injury sites is set out in the bar graphs below.


The CRU maintain this data by reference to 8 injury sites, none of which refers to the shoulder. Of those 8 categories, 7 include a reference to whiplash, back or neck, the exception being the residual category of 'other'. The proportion of the total number of RTA claims represented by the 'other' category was 9% in 2012/13 and 2013/14, but then rose so as to reach 14% by 2016/17.


But as the CRU data does not specifically record whether or not the injury is to the soft tissues, we cannot say for sure that the 86% of RTA claims which involve either use of the word 'whiplash' or the site being neck or back are soft tissue injuries, and so at least partly at least within the tariff, though it is likely that the vast majority of those claims will be.


The CRU data is likely to identify the primary injury site. It should be borne in mind therefore that the addition of a second site beyond neck, back and shoulder will take the claim partly outside the tariff. Avoidance behaviour in relation to the ultimate definition used in the new process will have to be guarded against.


More work will need to be evaluate the likely impact of the altered definition, but it ought to reduce the potential for the government's policy aims to be disappointed as looked likely with the former definition.


The wording of the new Bill – other matters

The other main change is in clause 1(4) which makes it clear that while the new scheme is to apply to negligence cases, the fact that the acts causing the negligence are also sufficient to establish another cause of action such as for breach of statutory duty does not take the case outside the scheme.


The detail around the Bill in the form of the draft Statutory Instruments bringing forward the regulations are awaited and should be brought forward as soon as possible to assist further analysis and to see whether improvement is required. Most of the provisions in the Bill which require SIs stipulate that they are to be subject to the affirmative resolution procedure: that is they require the approval of both Houses of Parliament before coming into effect.


As we have seen, the MoJ has put back its planned implementation date for this reform till April 2019. To what extent can the measures being discussed by the MoJ's Steering Group and sub-groups be put in place in the meantime while the Bill progresses? If the Bill comes into law in early 2019, will it be decided at some point that October 2019 may have to become a new target implementation date?

The tariff amounts

These will be addressed in secondary legislation though are likely to be the subject of debate as the Bill progresses. The table below sets out the current proposed position in the central column, the current figures being taken from the impact assessment released with the Bill today, and we compare them to industry data as identified to the MoJ, to Judicial College Guideline figures from both the 13th and 14th editions, and to the MoJ's proposals from their original consultation with in brackets the extra sums then available for associated psychiatric injury.


Today's impact assessment has increased the tariff figures by 4-5%, presumably to reflect the lapse of time since the consultation response last year and the increase in RPI which usually affects PSLA in the meantime.  The MoJ say the figures will be kept under periodic review, presumably like the Judicial College Guidelines.




The impact assessment suggests that claims will fall into the injury duration periods as follows:

 The largest category is 3-6 months with 0-9 months accounting for 73% of cases. Prognosis creep remains another risk.


Part 2 of the Bill – discount rate reform

In September the government published its response to a consultation held on various aspects of how the law and practice would operate as to the setting of the rate, and published draft clauses that would constitute new legislation. Those draft provisions were sent to the Justice Committee to consider as part of pre-legislative scrutiny, and they reported as requested on 30 November. The committee did not shy away from adopting a confrontational approach.


Yesterday saw the MoJ's full and detailed response to the Justice Committee's report, while today we saw how it would be implemented in terms of updated versions of the draft clauses, now in Part 2 of the Bill.

Response to the Justice Committee

In the press release, David Gauke refers also to reform of the discount rate, the aim being to provide a more balanced approach to compensation that will fully compensate victims of catastrophic accidents while addressing current issues around overpayment.


He states also that the MoJ have carefully considered the report of the Justice Committee from the pre-legislative scrutiny, and says that government have accepted the majority of their recommendations. While this is correct, the MoJ have set out a way forwards that they presumably hope should generally minimise delay in having a new process in place (but some delay it seems is likely), at the same time as addressing the committee's preference for additional evidence.


There is one exception to this limiting of delay, which concerns the decision to involve the expert panel as well as the Government Actuary in the first review. If it was not the case already, this development means that the previous target date for implementing a new discount rate by the end of this year or the start of 2019 is unlikely to be met.

The rate – the principles

Claimants, say the MoJ, should recover the money they are entitled to as a lump sum or a PPO or both, and that the discount rate should contribute by providing a fair and reasonable estimate of the return that should be expected to be earned on a lump sum award for future financial loss.


Evidence of both actual and available returns from investments is relevant to that process, they say.


The present rate of -0.75% is very likely to be producing significant levels of over compensation say the MoJ, who refer to GAD research suggesting that current awards may exceed expected returns by around 33%, falling to 20-25% after deduction of tax and investment costs.


More evidence needed as to the rate?

As to more evidence, the MoJ say they do not accept the committee's view that the currently available evidence is insufficient to justify change, noting that it is not realistic to assume claimants invest in index-linked gilts, and that there is already good evidence that they invest in low risk investments.


But in saying that, they accept that their evidence is not fully comprehensive, even though they have taken extensive steps to obtain that evidence. They intend to seek further evidence during the passage of the Bill which can then be used during the first review of the rate which will follow once the Bill passes into law.


Of interest, they note a reason why their evidence gathering has been hampered. They say that holders of evidence (as to what claimants in fact invest in) may be reluctant to provide it if their expectation is that any change in rate (based on that evidence) would be disadvantageous to them. This would appear to be an important point as those acting for claimants indeed seem to be acting as the MoJ have observed.


The additional evidence that they are to seek will include a further call for evidence on details of claimant investment behaviour, as well as further research and analysis from the Government Actuary's Department. They do not though consider that reform should be delayed pending this exercise.

MoJ response – the rate itself

What should the rate be? The MoJ response says the aim of the process should be to identify a diversified portfolio of investments that a properly advised claimant with a low risk approach to investment would make with a view to receiving enough money to meet the costs and losses when they are due to be paid.


The committee had proposed that the rate should tend to be lower so as to produce higher awards to minimise the risk of under compensation. The MoJ did not agree, saying the rate should not be in the lower or indeed any other outlying part of the permitted range.


Reference had been made by the MoJ to a range of between 0 and +1% as a potential outcome at the time of the consultation. In their response to the committee the MoJ say this was intended to be a helpful indication: nothing more. It should not be treated as an actual outcome and this time round they are not speculating as to the outcome.


It is a matter of following these principles to set the appropriate rate rather than considering the specific effects on consumers and taxpayers of doing so. As a result the suggestion of a proposal to measure changes in insurance premiums is unnecessary.

MoJ response – PPOs

The alternative solution of the potential use of PPOs was noted. The MoJ are to investigate the quality and effectiveness of advice currently available to claimants on whether to take PPOs, and additionally they will provide or endorse guidance on standard practice so that claimants are properly informed.


Also on PPOs they will investigate whether the law and procedure can be improved so that any avoidable obstacles to their use can be overcome.

MoJ response – time to first review and prospects for reform

As to the process of setting the rate, the MoJ have agreed with the committee that the expert panel should be involved in the first review as well as in subsequent reviews. It is this that will add time to the process.


From when the Act comes into law there will be up to 90 days (or effectively 3 months) to start a first review followed by up to another 180 days (effectively a further 6 months) to conduct and finalise the review and determine the rate. Within that period of 180 days the expert panel will now be consulted and will report. Compared to the original proposal, the timelines are the same, but instead of involving the expert panel on the first review the original intention had been for the Government Actuary alone (apart from the Treasury) to be consulted.


Assuming the identity of the expert panel to be used on the first review is taken forward promptly, the extra time needed is likely to arise from the need for them to prepare a report, as opposed to what seemed a shorter process of seeking input from another governmental department.


Last November, the MoJ were reported as saying that they expected new processes to be in place so that a review of the rate would be concluded by the end of this year or early 2019. While the result of a review need not take the full 9 months from an Act passing into law, the involvement of the expert panel would tend to make us expect that the process will be longer rather than shorter within that 9 month window.


This would suggest a discount rate change in the second half of 2019 should be seen as a potential outcome.


The strength of the MoJ's detailed response coupled with the making of concessions to the committee's view where it was considered appropriate would though suggest that the prospects of achieving this reform have been strengthened.

MoJ response – other matters

The report of the expert panel will be published each time, and the Lord Chancellor will give reasons for his/her decision. An Impact Assessment will be published after every change.


The Bill will be amended to make it clearer that different rates can be selected for different heads of loss or for different periods of time, and the panel will be required to consider those areas when reporting to the Lord Chancellor.


As to the question of claimants being able to recover the costs of obtaining ongoing financial management advice, the government is to obtain external input and consider the legal principles further. This would not be a matter for the expert panel as they lacked the expertise.

The wording of the new Bill

Comparing Part 2 of the Bill to the wording circulated with the consultation response, the changes are to implement the matters raised in the response to the Justice Committee.


Clause 8 will amend the Damages Act by inserting a provision that a new discount rate can distinguish between classes of case by reference to the type of future loss, the length of time over which the loss will occur, or when in the future it will arise.


The previous second clause of what would have been the Bill saying how the first review would be conducted differently from subsequent reviews has been removed: now the process is the same for all reviews.


Clause 4 introduces an obligation on the Lord Chancellor each time a rate determination is made to give reasons for setting the rate and to publish "such information about the response of the expert panel established for the review as the Lord Chancellor thinks appropriate".


While clause 6 increases a quorum for the expert panel from 3 to 4 members.

The Future

The Bill is due to have its Second Reading in the Lords on 24 April. This should give an early clue as to the political temperature on the issues raised in that House. The joint letter from insurers confirming a commitment to pass on the costs benefits arising from the Bill within the existing competitive market will be noted.


For more information please contact Simon Denyer, Partner on +44 (0)161 604 1551 or email simon.denyer@dwf.law

By Simon Denyer

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.