Posted 19 January 2016 by Donna Scully
On 25 November Chancellor George Osborne in his Autumn Statement pledged to raise the small claims limit for personal injury (PI) claims to £5,000 and scrap general damages for ‘minor’ soft tissue injuries. It was a surprise to hear these reforms coming from the Treasury and not the Ministry of Justice (MoJ). It was even more surprising that they were revealed prior to publication of the Fraud Task Force report (FTF), due out shortly.
Osborne says the reforms will remove over £1bn from the cost of providing motor insurance and he expects the industry to pass on this saving, so motorists see an average saving of £40-£50 a year off their insurance bills. The proposed rise in the small claims limit has been on the agenda for years and the ABI has lobbied hard for it. The government opted not to increase it in 2013 after being warned against the move by a report of the Transport Select Committee (TSC). The government said then it would not increase the limit until safeguards were in place to protect genuine claimants, but I cannot see that any safeguards are in place.
Further, the TSC recommended that the government tackle fraud better and deal with that instead of raising the limit and simply disenfranchising innocent accident victims in the process. The government then extended the MoJ portal to cases up to £25,000 and to include non-RTA cases, to introduce AskCuepi and Medco and to set up the FTF. All this work was carried out by the MoJ in an effort to tackle fraud better.
But instead of assessing the success of these reforms and waiting to see the FTF report, the Treasury (not MoJ, which was tasked with addressing fraud) has stepped in and proposed further major reforms, subject to a consultation in the New Year.
Well, what do we think of the proposed reforms? Heads are spinning on both sides of the fence as to how they will be implemented and work, and whether they will have the desired effect of reducing claims, particularly bad ones, and provide the savings Osborne says they will.
The proposal to scrap general damages for minor soft tissue injuries has us most perplexed. It is a bizarre proposal: a plan to abolish the right to damages for injuries caused by somebody’s negligence. For the first time in UK legal history there will be a non-actionable injury.
The Association of Personal Injury Lawyers warns that a rise in the small claims limit will see an epidemic of cold-calling by claims farmers as they rush to take advantage of vulnerable people, on a contingency basis, who otherwise won’t be able to afford legal representation. Another commentator warned it will move us a step closer to US-style contingency fees so that the number of claims will not reduce, nor will fraud and the level of damages will increase to mitigate contingency arrangements.
We will have to wait and see, but I am concerned these reforms are a ‘knee-jerk’ reaction and not well thought out. I sincerely hope they are not implemented in the rushed and shambolic way that the Legal Aid, Sentencing and Punishment of Offenders Act was.