Autumn Statement 2015: one week on

One week on from dramatic announcements by the Chancellor of changes to the small claims track limit and of removing entitlement to general damages in low value soft tissue claims, is any of the detail around these proposals any clearer? Do we know more now about how and when the Government is going to act and what the impact of the measures will be?

The only credible answer (at the moment) to these questions moment has to be ‘no’, or at least ‘not yet’.

There really is nothing as yet in the public domain about how and when these reforms are to be brought about. The lack of detail need not, however, prevent us from drawing some inferences, set out below, about the possible scope and timing of these important changes.

With regard to both the proposals, it is probably something of an understatement to repeat this sentence from an earlier MoJ impact assessment in a different area: “No particular benefits have been identified for claimant lawyers.”

Please scroll down this page for further comment on:

  • Increasing the small claims track limit to £5,000,
  • Removing entitlement to general damages in low value soft tissue injury claims

 

Increasing the small claims track limit to £5,000

Scope – all injury claims (?) ·         The language used by the Treasury talks of “transferring personal injury claims of up to £5,000 to the small claims court”. On the face of it, this covers any personal injury claim and is not at all limited to those arising in road traffic accidents, even if the phrase appears under the heading “Motor Insurance.”

·         The CPR defines a claim for personal injuries widely, as:

“proceedings in which there is a claim for damages in respect of personal injuries to the claimant or any other person or in respect of a person’s death, and ‘personal injuries’ includes any disease and any impairment of a person’s physical or mental condition”

·         For the time being at very least, it seems the only prudent course is to plan on the basis that all injury claims will fall under the increase in the small claims track. There has been no clarification so far from either Treasury or MoJ.

Timing ·         Some commentators have talked about this happening as early as April 2016, While that would be pretty quick going, it does not seem entirely unrealistic given the Government’s clear intention to take swift and decisive action to counter what it perceives as the compensation culture around motor claims in particular.
Mechanism ·         The small claims limit is set out the in the Civil Procedure Rules. All that would seem to be needed is a modest rule change, by statutory instrument.

·         Given that this is a procedural matter, the change could have some retrospective effect. In this context, that would mean that the increased limit would affect not only new cases but could also apply to all claims incurred but not pursued at the date of the change.

·         While that approach would be controversial, there appears to be a clear precedent:

“It is well established that the presumption against retrospection does not apply to legislation concerned with matters of procedure, and that provisions of that nature are to be construed as retrospective unless there is a clear indication that that was not the legislature’s intention…”  [Lord Justice Vos, commenting on the QOCS rules in the 2014 case Wagenaar v Weekend Travel]

Impact ·         Significant, to say the least. Claimants with injuries which come under the small track limit would not recover the costs of legal representation and may therefore be expected:

(a)     not to obtain representation and pursue the claims themselves

(b)    not to pursue their claims at all

(c)     to pay for legal representation themselves, out of the sums to be recovered, or

(d)    to retain claims management companies to pursue their claims on a contingency basis.

·         All of these variables would change the current claims environment significantly. It is very likely that (a) and, to a lesser extent, (b) are outcomes the Government wishes to see [(b) in so far as claims which would not be pursued may be perceived to have been fraudulent or speculative]. Outcomes (c) and (d) may be far closer to unintended consequences.

·         Outcome (a) amounts, in effect, to insurers dealing direct with unrepresented third parties. This engagement could require some regulatory bolstering or similar ‘customer care’ style regime in order to boost transparency, trust and confidence. It is plausible that an open system for assessing ‘predictable [general] damages’ could form part of that.

Removing entitlement to general damages in low value soft tissue injury claims

Scope – motor cases only ·         The statement in the Treasury blue book is clear enough:

“removing the right to general damages for minor soft tissue injuries [but ensuring that] claimants will still be entitled to claim for ‘special damages, including treatment for any injury if required and any loss of earnings”

·         Other passages reinforce that this reform is for motor claims only. For example, the section on projected savings says that this change

“reduces motor insurance costs by ending the right to cash compensation for minor whiplash claims”

·         Restricting this measure to motor claims only would link nicely with use in the Low Value RTA Protocol of the term “soft tissue injury claim”, (STIC) which is expressly limited to the motor setting. An STIC is defined there as:

“a claim brought by an occupant of a motor vehicle where the significant physical injury caused is a soft tissue injury and includes claims where there is a minor psychological injury secondary in significance to the physical injury”

·         A point to note from the above is that it seems an STIC (as defined above) cannot be pursued by either a pedestrian or a (motor)cyclist.

Timing ·         This is far from certain. It is safe to proceed on the basis that such a radical measure will need primary legislation which would be preceded by detailed consultation.

·         We can only really only speculate as to timing, but if there were consultation and analysis during the first half of 2016, then the necessary Bill might be introduced in the second half of the year. It could be debated over the winter and might be passed by the spring/summer of 2017.

·         Even if matters were to develop along those lines, the prospect of a series of aggressive challenges – both by way of judicial review and on human rights principles – is a very real one. These sorts of challenges, even if ultimately unsuccessful, could delay implementation quite markedly.

·         Note that in the far more limited field of mesothelioma claims (of which there are fewer than 2,000 annually), a successful judicial review has indefinitely delayed costs reforms first raised by MoJ in July 2013. Some two and a half years on, those measures are still in limbo. If a similar delay were to arise here, then nothing would have happened by summer 2018 – which almost seems beyond contemplation, given the momentum for reforming whiplash compensation in England & Wales.

Mechanism ·         As noted above, primary legislation would appear to be the most likely route to achieve this goal. Reducing the stated aim of ending entitlement to general damages for “minor soft tissue injuries” to an unequivocal statutory provision is not going to be an easy task.

·         Given that this would be a change to substantive rights, rather than to procedural matters, implementation would appear likely to be entirely prospective (ie only for claims arising on or after commencement).

·         The MoJ might be attracted to taking its starting point for any statutory provision as the narrative description of minor neck injuries in the Judicial College Guidelines at chapter 7(A)(c). These cases currently attract a guideline award of £3,630 to £6,600 (including the Simmons v Castle increase).

·         One possible alternative can be seen in the approach adopted in Victoria (Australia). Legislation from the early 2000s requires “a significant injury” in order for general damages to be awarded, ie that:

“the degree of impairment of the whole person resulting from the injury has been assessed by an approved medical practitioner … as satisfying the threshold level” [thresholds being set at 5% for physical injury and 10% for psychiatric injury]

Impact ·         The following issues are among the likely – and at this stage fairly broad-brush – impacts and trends. Although outcome (a) is the Government’s primary intention, it will be necessary to consider other possible effects.

(a)     removal of a significant swathe of STICs from the claims environment, with consequential effects on insurer spend and premium levels and a knock-on effect on claimant firms and other business currently specialising in such cases

(b)    a perceived social down-grading of minor injuries sustained in motor accidents as against those otherwise sustained and for which general damages would still be available

(c)     a risk of ‘creep’, in so far as psychiatric and other effects could become more commonplace in motor claims, in order to ground general damages awards (some assert that ‘whiplash’ and psychiatric harm are equally difficult to diagnose objectively) and to distinguish cases from whatever definition of STIC that may be adopted

(d)    a potential secondary industry emerging around care and rehabilitation costs in STICs, since these losses would appear still to be recoverable on the basis that they are items of special, rather than general, damages.

 


About the Author

akAlistair Kinley is BLM’s Director of Policy & Government Affairs.

Alistair is responsible for BLM’s engagement with government departments and regulators on policy and public affairs issues and consultations affecting the firm and its customers. He coordinated BLM’s market-facing activities in connection with the Insurance Act 2015 and the consultations which preceded its publication and introduction in Parliament.

He is a member of the Civil Justice Council (CJC), a regular speaker and experienced commentator on legal and procedural reforms and was a contributing editor to the Law Society’s Litigation Funding Handbook (September 2014).

 

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