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Civil Liability Bill on whiplash reform moves through Committee Stage in the Lords with issues for the MoJ to re-examine

Yesterday saw the Committee Stage in the House of Lords in relation to Part 1 of the Civil Liability Bill dealing with the proposed whiplash reforms which was navigated though not without some controversy.

In addition, following the Bill's Second Reading, and on the eve of the Committee Stage, the government had recently published its draft Whiplash Injury Regulations which set out its proposals as to how the parts of the reform designed to be covered in regulation rather than an Act of Parliament should proceed.

Summary of the Second Reading

Various amendments were submitted by members of the House of Lords and were listed for debate at Committee Stage as the detail of the Bill starts to be considered.

As to the need for the reform itself, the Lords who spoke did so from what they said was a perspective of support for the principles underpinning Part 1 of the Bill. While clearly continuing to have government support, the justice spokespeople in the Lords for the other main parties were also supportive of the main principle behind the Bill, albeit some of the amendments raised would reduce its impact greatly.

According to Lord Marks for the Liberal Democrats, there was "a very serious problem" caused by the types of claims affected, so that he supported reform. Lord Beecham for Labour also accepted that there had to be change, and that any abuse of the claims process was unacceptable, and indeed reflected on those people with genuine injuries.

There was though considerable opposition on 2 main points where the government will now think further. Peers wanted more of the definition of whiplash to be in the Bill itself rather than in regulations, and also saw a need for there to be a mechanism to ensure that savings from the reforms were passed onto motorists.

A further controversial issue which Lord Keen accepted will need to be returned to in both Houses will be the level of the tariff itself.

The detail of the amendments raised and debated is set out below.

The Whiplash Injury Regulations

The main matter clarified was in relation to the detail of what "whiplash injury" would actually constitute, a matter raised by clause 1 of the Bill.

The Bill itself defines "whiplash injury" as meaning "an injury, or set of injuries, of soft tissues in the neck, back or shoulder that is of a description specified in regulations".

The regulations now say that "whiplash injury" means "a sprain, strain, tear or rupture of one or more of the muscles, tendons or ligaments in the neck or back which has been caused by the backward or forward or sideways movement of the neck beyond the limit of its normal range of motion, the effects of which may include, but are not limited to-

(a)    Pain in the neck, back, shoulders or arms;

(b)    Reduced mobility in the neck, back or shoulders;

(c)     Headaches;

(d)    Muscle spasms;

(e)    Swelling in the neck."

In addition, the tariff itself as referred to in clause 2 of the Bill is set out. It was confirmed yesterday by Lord Keen that the draft regulations mistakenly refer to the version published by government last year with the response to the consultation. Instead, they ought to have replicated the matrix included with the Impact Assessment published with the Bill which incorporates increases of 4-5% attributable to inflation. No doubt the correct figures will be re-inserted into the regulations shortly.

The regulations also give some additional detail as to how the system allowing a 20% increase on tariff amounts in exceptional circumstances will operate, and say that in relation to the requirement to have medical evidence before settlement thata report obtained through MedCo will be needed.

 Let's now move to yesterday's debate. These were the main matters discussed:

Should the definition of whiplash be more fully set out in the Bill?

This was the main area  where it seems that the government may agree some limited variation to its planned approach. This would not necessarily lead to a reduction in the anticipated effect of the reform but instead would affect its presentation.

While not a universally held view, the majority of the Lords who spoke took the view that the definition of whiplash injury should be on what is called "the face of the Bill itself", rather than being only in regulations. Support for that view in particular was based on the views of the Lords' Delegated Powers and Regulatory Reform Committee which reached that clear opinion.

Lord Marks thought that the government's disregard for the committee's views was potentially linked to it taking a similar position in response to the same committee on the EU Withdrawal Bill. However, thought Lord Marks, while there might be a more appropriate reason to take a different view from the committee in relation to the EU Withdrawal Bill which could be seen a special case, it should not be treated as a precedent when it came to the CLB.

Lord Faulks from the Conservative benches spoke in favour of the government's current approach. He saw the Bill as tackling "very slippery and powerful opposition" in terms of the claims industry, and wanted to help the government in dealing with the problem, which he thought the current approach did.

Lord Marks suggested what he termed a potentially acceptable compromise approach of including an expanded definition in the Bill, with the power to amend in regulations.  He saw the government's proposed definition from the regulations as one that might be workable pending further debate.

In reply, Lord Keen for the MoJ seemed to suggest that certain compromise might be made along the lines of the Marks suggestion. He would consider again to what extent the definition should as now be partly in Bill (as an overarching definition) and partly in the regulations (providing the detail), and was not taking a final position at that moment.

The same argument was presented in debate along the lines of the Delegated Powers Committee view that the other aspects covered in the regulations should also be included in the Bill rather than in regulations, though not as vociferously as with the definition of whiplash. Nor did Lord Keen give the same assurance in response, so no change may follow in the government position on those aspects.

Should the Chief Medical Officer be involved in drafting a definition of whiplash?

This proposal was moved by Lord Beecham for Labour, saying that medical input was essential and indeed that a proper definition should come from a medical source rather than being a political decision.

Other speakers however saw this as indeed a political issue and therefore a matter for government. Lord Keen countered that extensive inputs had been obtained into the definition, including medical experts and both claimant and defendant representatives, and opposed further change.

Should back and shoulder injuries be excluded from the definition?

This was also proposed by Lord Beecham. No direct reference was made to the data from FoI requests of the CRU showing the significantly reduced impact that this would make to the reforms if adopted, but no doubt it was in mind.

Lord Keen responded that the definition had evolved from the Prisons and Courts Bill in the light of feedback that the original definition was not broad enough, and that the current definition was now thought appropriate to achieve the intended reforms.

Should the affected category of claims be reduced from 2 years to 12 months?

Lord Beecham again proposed this change on the basis that it would be sufficient to cover the vast majority of whiplash claims, and that a 2 year injury was a lengthy period for a minimal level of compensation.

Lord Keen in reply was opposed to the change and saw this as reducing the number of affected claims and therefore would reduce the anticipated beneficial impact on premiums. It would also, he wisely thought, encourage claims displacement and inflation in terms of length of relevant symptoms.

Should claimants driving in the course of their employment be excluded from the Bill?

Labour Lords also sought to exclude from the tariff those cases where claimants were acting in the course of their employment when the accident occurred. The justification given was that the risk of fraud from those claimants was reduced as the accident would also have been reported to the employer. The Lords proposing the change asked for any evidence that fraud issues extended to that type of claim.

In response Lord Faulks noted the likelihood of claims displacement if this amendment was made. Lord Keen was of the same view seeing this as a distinction without a difference: you might as well exempt all drivers of red cars for instance, he argued. While a report would be made to the employer of the accident this would not amount to verification of the alleged injury. While the type of evidence requested in relation to this specific type of claim was not available, the government did not intend to follow this proposed exclusion any further.

How should the need to mitigate loss apply where the necessary medical support was not available?

It was argued by Baroness Primarolo for Labour that claimants who could not mitigate their losses as far as the effects of the injury was concerned due to the unavailability of physiotherapy or Psychological treatment for reasons such as limits on NHS resources needed specific provision by way of amendment.

Lord Keen was short in response: if there was no treatment available then the claimant in question could not be seen as having failed to take reasonable steps to mitigate their loss. No change to the Bill was needed.

How should the quantum figures for a tariff be set?

This was debated strongly, with the position being led by Lib Dem peers Lords Sharkey and Marks who put forward the proposal that the tariff should be replaced with the current Judicial College Guidelines figures. While not said, this would essentially maintain PSLA levels as they are currently and negate one of the main planks of the reform.

Lord Sharkey referred to what he called a massive transfer of funds from claimants to motorists in terms of reduced premiums and to insurers. Why was such a huge and arbitrary transfer taking place he asked? Lord Marks thought that the extent of the reductions did not seem appropriate in a civilised society: the figures were far too low.

On the other hand they argued that the JCG figures were fair and workable. While accepting the guidelines themselves said in introduction that they were only persuasive, they were the best alternative.

Former Supreme Court Justice Lord Brown of Eaton and Under Heywood agreed with other speakers that where to set the figures was a political rather than a judicial decision. His own view though was that damages in cases of lesser injuries were in fact too generous.

Lord Keen maintained the government line despite frequent interruptions apparently demonstrating the strength of view in opposition. A judgment had had to be made where to pitch the level in order to solve the problem of a claims culture involving increased claims numbers despite a reduced number of accidents and safer vehicles, even though claims numbers had stabilised over the last year or two. Other European countries had carried out similar measures.

No specific formula lay behind the figures, there was no target saving, instead the government had proceeded by looking at what policy was needed to deal with the current issue, he said. Lord Sharkey responded that it sounded like a job done on the back of "a political envelope".

Lord Keen accepted that this was an aspect of the reforms which would be discussed further in both Houses.

Should the position of Vulnerable Road Users be improved?

This is the term used for pedestrians, cyclists, horse riders and indeed motor cyclists; in fact anyone other than motor vehicle drivers and their passengers whose claims are included within the plans for whiplash reform.

Lord Keen confirmed that VRU claims remained within the reforms only so far as the SCT increases. There had been no concession by government to that effect as incorrectly reported recently; this had always been the intention. But he would meet further with interested peers.

What was the position as to the new processes?

Lord Marks was concerned about claimants being able to recover the cost of the medical reports now required, which he saw the current CPR only giving the court a discretion to allow.

Lord Keen confirmed that it was the intention that if liability was admitted this cost would indeed be recoverable, and that while he thought the CPR provided for that, he would look at the rules again to ensure that they did.

Lord Marks thought that the Civil Procedure Rule Committee should be consulted before the SCT limit was raised. Lord Keen was opposed as there had already been a consultation.

In terms of process, a new Pre-Action Protocol and portal were being developed which would be accessible to litigants in person.

Uplifting tariff amount limits?

The regulations allow the court to permit up to a 20% uplift in exceptional circumstances as defined in the regulations. Lord Beecham proposed an alternative power to allow an uncapped increase where "it would be just to do so in the circumstances of the case". He thought that a limited increase of 20% on an already constrained sum was going too far.

Lord Keen could not agree. He preferred to keep the provision in regulations so that the government could respond to developments.

Praise all round for MedCo

Even speaking for Labour Lord Beecham said he supported the role of government setting up MedCo and wanted to continue to see it flourish. He went on to propose that the medical evidence required before a claim could settle should be either from a MedCo expert, or from "other descriptions of persons with medical qualifications".

Lord Keen also saw that MedCo had been a success and did not feel that other experts were needed but was willing to discuss Lord Beecham's concerns.

How to ensure insurers passed on savings?

This was the second area where most of the interventions pointed to the House of Lords' view being that the government needed to consider the issue further.

Amendments listed included requiring the FCA to require insurers to report annually on savings passed on as reduced premiums; obliging the Secretary of State to report annually on the impact on premiums, or appointing an independent adjudicator to do the same.

Peers spoke of there being no proper mechanism in the Bill to ensure savings reached motorists; that a strict mechanism was needed and that the government were currently showing a laissez faire approach; that more was needed beyond the letter of intent from insurers, and that insurers needed to be penalised by a levy or through taxation if they failed to keep up to the mark.

Noting that all interventions were in one direction, and notwithstanding the highly competitive market in which savings had been passed on before, and where if necessary the FCA or the CMA would investigate, Lord Keen said he heard the message seeking further discipline. He would give further consideration to this issue going forward. He did not though consider as had been suggested that insurers had a conflict of interests between duties to regulators and to shareholders.

Cold calling raised again

Despite the Royal Assent recently given to the Financial Guidance and Claims Act 2018 which dealt with this issue, certain amendments raised it again in the context of the CLB. One amendment sought the inclusion of a provision obliging the Treasury to review the effectiveness of the regulatory provisions in the context of whiplash claims and to report at least annually for 3 years.

Lord Keen saw the existing law through the new Act as sufficient.

Next steps

The Committee stage for Part 2 of the Bill dealing with discount rate reform is due next week, and that is expected to be less confrontational. The Bill then moves forwards to Report Stage when further scrutiny will be given to the more significant matters highlighted above.

We will see over the weeks ahead how in particular the MoJ intends to deal with the views of peers that more of the definition of whiplash should be moved from regulations into the Bill itself, and that additional provision may be needed in respects of savings being passed by insurers into reduced motor premiums. The CLB continues to move forwards though more controversial debate must be expected on Part 1.

Regards

Contact

For more information please contact Simon Denyer, Consultant, Insurance
DD +44 (0)161 604 1551, E simon.denyer@dwf.co.uk

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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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