This blog captures recent developments in legislation affecting damages for future losses in personal injury claims in the three UK jurisdictions and in Ireland. As might be expected, there are marked differences in approach and some are moving faster than others.
England & Wales: Civil Liability Bill
The rate-setting powers in Part 2 of the Bill have been approved in Parliament and the legislation awaits Royal Assent (whether that is at risk because of broader European issues remains to be seen).
As part of the fact-finding aspect of setting of a new rate, the Ministry of Justice today began a ‘call for evidence’ which will run until 30 January 2019. It covers how claimants are advised, how they invest and what yields they secure. As much of this sort of information is likely to be held by the claimant legal, IFA and deputy community, it has to be hoped that their level of engagement with the call for evidence is somewhat greater than has been the case to date.
The MoJ has also asked about technical matters that have an important role in setting a rate (i.e. taxation, inflation and investment management charges) and about the composition of notional investment portfolios that might meet the investment risk test in Bill. Evidence on these aspects may be more widely available across the insurance and investment sectors.
Although the call for evidence paper does not state clearly when the formal review process in the Bill will commence, the following passage may tend to suggest that Ministry is unlikely formally to instruct the Government Actuary before responses are received: “To ensure that the relevant data and information is available in time for the first review to take place within the timescales proposed under the Bill, the Ministry of Justice has decided to issue this call for evidence before the Bill is enacted.”
The call for evidence and response questionnaire are available here.
Scotland: Damages (Investment Returns and Periodical Payments) (Scotland) Bill
A Parliamentary Committee report on the Bill was published this week. It largely approves the general scheme of the Bill, which is now expected to secure its stage 1 debate before Christmas.
It is worth remembering that the rate-setting process in this Bill is more prescriptive than that in England & Wales and is designed as more of a technical exercise than a political one. The process specifies a notional investment portfolio, mandatory adjustments for tax and investment charges and a “further margin” against the risk of under-compensation. Although these aspects are controversial and disputed by the defender/insurer sector, the Committee was nevertheless satisfied with them “on balance”. Further debate on these points seems inevitable.
The Committee indicates that Ministers might explore how the discount rate in force when a claim is raised (issued) might be applied, ostensibly in order to prevent “gaming” of the system. It also talks of including the MIB in the list of secure PPO funders in the Bill “once uncertainties about its position created by Brexit are resolved”. Both of these concerns seem slightly misplaced. The first since gaming is equally possible by pursuer or defender and may largely depend on the firmness of that party’s view as to whether an imminent rate change will be for or against their interest. On the second, while the operation of the MIB might change due to Brexit if the UK does not adhere to or replicate the regime of the European Motor Insurance Directive, it seems highly unlikely that its financial security and support by all of the UK motor insurance market should in any way be compromised by leaving the EU (and it might be noted that the foundation of the Bureau significantly predates the first Directive).
A welcome recommendation from the Committee is that the frequency of rate review should be extended from three to five years, as is the case in England & Wales. The full Committee report, published on 3 December, makes a number of other points about the Bill and is available here.
Ireland: Part 2 of the Civil Liability (Amendment) Act 2017
The one development to report is that the legislation (part 2 of the Act) enabling the court to award PPOs was brought into force back on 1 October. We are unaware of any cases being resolved since then by a PPO.
It may be noteworthy that this legislation includes the MIB Ireland in its list of secure funders of PPOs (by inserting a new section 51J into part IVB of the Civil Liability Act 1961).
The absence of a functioning local legislature continues to act as a backstop against reforms of the kind set out above. The statutory power to set a discount rate is devolved and, as a consequence and unlike in England & Wales and in Scotland, it was impossible to effect a change in the rate in the first quarter of 2017 (or since). The discount rate of 2.5 per cent is therefore still in force.
Authored by Alistair Kinley, director of policy and government affairs