On Thursday 17th November the Ministry of Justice published “Reforming the Soft Tissue Injury (“whiplash”) Claims Process. A consultation on arrangements concerning personal injury claims in England and Wales”.
The responses to the consultation were due by 6th January 2017 and the government published its response on 23rd February 2017.
Here we provide you with a guide to the proposed “whiplash” reforms and how they are likely to have an impact on you. As even the name of the consultation is misleading as the consultation is with regards to all personal injury claims and not just “whiplash”.
Aim
The government wants to ‘disincentivise’ minor, exaggerated and fraudulent road traffic accident related soft tissue injury claims.
The proposed reforms are projected to save the insurance industry £1bn a year and this saving is anticipated to be passed on to consumers though reduced motor insurance premiums. The specific benefit is an anticipated saving of £40 per year on an average motor insurance premium.
What are the Reforms?
To Reduce the Number of minor Road Traffic Accident “whiplash” Claims
The Government proposes to reduce the number or minor Road Traffic Accident “whiplash” Claims with two measures:
a. Reducing the money compensation for the injury (by setting a fixed amount payable for injuries lasting less than 2 years), and
b. Reducing the amount an insurer has to pay in costs for the claim (by increasing the Small Claims Track limit from £1,000 to £5,000 for Road Traffic Accident matters).
To put this reform into context, currently if you have the misfortune to suffer a whiplash type injury of around six months’ duration you will receive in excess of £2,000, under the new proposal you would receive £450. Also the Government’s figures say that the average money compensation for injuries caused by road accidents is £1,850. Therefore the vast majority of people who are involved in a road traffic accident and who are injured through no fault of their own will receive one quarter of what they are currently entitled to.
To Reduce the Money Compensation for injury for other Road Traffic Accident claims
The Government proposes to reduce the money compensation for injury for other Road Traffic Accident claims by introducing a tariff of compensation for whiplash and minor psychological claims of up to 24 months in length.
Currently the amount that you can claim is decided by reference to all of the Court awards in England and Wales and tabulated into the Judicial College Guidelines. The guidelines are published every second year and normally each publication shows a slight increase in the amounts of compensation for each type of injury.
You will see that as the injury’s duration extends the tariff becomes less severe but remains a very significant reduction.
| Injury Duration | JC Guideline amount 13th edition (2015) | Proposed Tariff including minor psychological injury | Percentage Decrease (for the top of the bracket) |
|---|---|---|---|
| 0-3 months | £200 to £2,050 | £225 | 89% |
| 4-6 months | £2,050 to £3,630 | £450 | 88% |
| 7-9 months | £2,050 to £3,630 | £765 | 79% |
| 10-12 months | £2,050 to £3,630 | £1,190 | 67% |
| 13-15 months | £3,630 to £6,600 | £1,820 | 72% |
| 16-18 months | £3,630 to £6,600 | £2,660 | 60% |
| 19-24 months | £3,630 to £6,600 | £3,725 | 44% |
To raise the Small Claims Limit for all personal injury claims
Currently the Small Claims Track (SCT) limit for personal injury matters is £1,000. This means that for injuries of £1,000 or above you have access to a qualified lawyer, as your lawyer will be paid (in part) for your successful claim by the other side.
The government states that the SCT has not been raised for 25 years and as such the limit will be raised to £5,000 for RTA related claims and £2,000 for all other types of personal injury claims.
To illustrate the proposed change using the Government’s figures, the average money compensation for injuries caused by road accidents is £1,850.
A Road Traffic Accident claim settled today for £1,850 for the injury element, the lawyer will normally receive fixed costs of £500 plus VAT from the defendant’s insurer and the no win no fee element from you. This is normally 25% including VAT. In essence the lawyer will receive about £900 plus VAT and the medical fee, the injured person would receive about £1,400 and the insurer would have paid out £2,350 plus disbursements for the claim.
In the proposed future the injured person’s total compensation would be £225.
The lawyer (if you can get one) would receive no fixed costs from the defendant’s insurer together with a percentage of the injured person’s £225.
The injured person would receive £225 minus the lawyer’s fee.
The insurer would pay out £225 plus the medical fee.
The table illustrates who receives what and who pays what currently and in the proposed future, for the average injury payment of £1,850.
| Nov 2016 | After the proposed increase, if you act for yourself | After the proposed increase, if you can find a lawyer willing to assist | |
|---|---|---|---|
| Injured Person | £1,400 | £225 | £169 |
| Your lawyer | £900 | £0 | £56 incl. VAT |
| The insurer | £2,300 plus the medical fee | £225 plus the medical fee | £225 plus the medical fee |
The table is clear in showing the winners and losers after the proposals come in.
This is the point where the clue is not in the title as the response says that the small claims limit be raised to £2,000 for all other types of personal injury claims – so not just Road Traffic Act matters or not just whiplash matters.
The effect of the increase is to move the majority of claims into the Small Claims Track. This means no (or minimal) legal fees to be paid by the defendant’s insurer.
To ban pre-medical offers to settle Road Traffic Related soft tissue injury claims
The government will ban settlements that do not have medical evidence.
Timescales:
The Government proposes these measures will be implemented on 1st October 2018
Reaction to the Consultation
We await more details with regards to these proposals and those details will be in the primary legislation the new court rules that will put these proposals into effect. However, what can be said on what we know currently is:
1.The amount of compensation an individual involved in a car crash will get from 1st October 2018 will be drastically cut, to the extent that innocent injured people will receive one tenth of what they are currently entitled to.
2.Insurers will not be able to make pre-medical offers, so there will be no payment without an independent medical.
3.Legal fees being slashed will lead to a rise in injured people acting for themselves or being represented by paid McKenzie Friends or Claims Management Companies.
One of the unintended consequences could actually be a rise in the number of minor Road Traffic Accident “whiplash” Claims.
However, if there are less or no lawyers, and the tariff allows £225 for a trivial injury, then what is to stop litigants in person, McKenzie Friends and Claims Management companies flooding insurers with these claims?
And all this for the promise of a potential saving of £40 per annum on car insurance.
About the author
David Bott is the Senior Partner of Bott and Co Solicitors. He was elected to the Executive Committee of APIL in April 2006 and is a Past President of APIL, having been President until April 2012.
He has been extensively involved in the MOJ streamline process and now sits on the Board of “Portal Co” as an APIL representative. He lectures on Business Management, the new process and PI Law. As well as being an APIL representative, David has been on the MedCo board since May 2015.
David was elected to the Executive Committee of the Legal Management Section of the Law Society in April 2006. He is currently the Vice Chairman of the Legal Management Section and has sat on the fund-raising board and organising committee of the Spinal Injuries Association Cornflower Ball since 2005.
He regularly speaks at conferences and has appeared on BBC1 (The One Show, Watchdog, Rip-Off Britain, North West Tonight), Radio 4 (Moneybox), Radio 5 and local Radio.