Brokers beware! Potential changes to the personal injury claims arena

Background

The changes to civil litigation rules potentially affect any broker advising on the placement of motor, employers’ or public liability (including commercial combined) risks. This article therefore explains the key changes which have occurred and which may occur so that you as a broker can speak knowledgeably to your clients.

The implementation of the Jackson Reforms has introduced qualified one way costs shifting (QOCS). A successful defendant is unable to enforce any costs order against an unsuccessful claimant unless there is an applicable exception under the Civil Procedure Rules (fundamental dishonesty being the main one). The quid-pro-quo is that a claimant can no longer recover any success fee or ATE premium from the defendant.

The use of the Claims Portal has been extended to employers’ liability, public liability and disease claims. There has been the introduction of fixed fees for fast track employers and public liability claims.

Last but not least, cost budgeting has been introduced for multi-track claims and the courts have been given powers to limit costs to be incurred. The aim of these reforms was to encourage quicker and cost effective settlements and curb the level of costs being incurred. These are the most significant changes brought in by the recent round of civil justice reforms.

Proposals

Not happy with the Jackson reforms, the government is looking at further methods of reducing the level of costs associated with personal injury litigation.

In November 2015 George Osborne announced that further steps were to be taken by the government to “bring forward reforms to the compensation culture around minor motor-accident injuries.” Mr Osborne announced that he would remove legal costs by increasing the small claims limit (under which virtually no costs are recoverable) for personal injury claims arising from motor accidents to £5,000 (currently £1,000). The aim of these proposals was to eradicate minor whiplash injury claims and to crack down on the fraud and claims culture in motor claims. Much has happened since November 2015 so it will be interesting to see where the government’s priorities lie in the future.

The law of unintended consequences

So what do these proposals mean for insurers, insureds and brokers? It is widely acknowledged that the proposals will save the insurance industry millions of pounds per annum and such savings may be passed on to insureds by way of lower premiums. Claimants can still pursue legitimate claims in the small claims track. So everyone should be happy, right?

No one can predict what will and will not happen but it is unlikely that low value personal injury claims (whiplash or otherwise) will be completely eradicated. Low value claims may reduce in volume but the way in which they are pursued is likely to change.

The number of litigants in person (LIPs) is likely to increase. Claimant focused personal injury law firms may step away from such claims as they will no longer be profitable. Consequently, more court time is likely to be dedicated to LIPs who are unfamiliar with court rules and process. This will add to costs overall.

Another possibility is that low value claims may be examined and investigated in further detail by claimant lawyers to see if the value can be increased over the small claim limit. Over the past three years we have seen an increased number of injury claims involving chronic pain and psychiatric injuries which, if supported by medical evidence, can increase the value of the claim and associated costs. Claims which may once have been limited to the small claims or fast track, have the potential for creeping into the multi-track.

The difficulty with dealing with claims involving chronic pain and psychiatric injury is that they are difficult to challenge as they are by nature subjective. A claim for chronic pain and/or psychiatric injury is usually supported by the claimant’s medical evidence. If the matter is in the fast track then it is very difficult for a defendant to obtain the court’s permission to obtain its own medical evidence to challenge the claimant’s.

We are not suggesting that claimant lawyers will intentionally seek to manipulate the case in order to avoid small claims but cases may be looked at more closely when they appear to be a small claim. For example if a claimant has not recovered in line with his/her original prognosis, a further medical review is appropriate and if the ongoing symptoms cannot be explained, then chronic pain may be identified. This has the consequence of increasing the value of a claim (moderate pain disorders are valued from £17,600).

By the same token, minor whiplash claims will often be associated with some form of minor psychiatric injury (travel anxiety or adjustment disorder). These symptoms may also require further exploration to ensure the claimant has fully recovered. All of these steps will increase the value of the claim and will undoubtedly increase costs for insurers and insureds.

Conclusion

While the government intends to further curb the costs associated with personal injury claims, it is clear that the changes need to be well thought out and preferably with consultation with representatives from both sides of the fence.

While changes to the small claims limit may reduce some of the low value minor whiplash claims, it is doubtful that it will achieve the reduction sought by the government. There are often unintended consequences and brokers should be alive to all of these issues when considering the risk that their customers present to insurers.

These issues are clearly important for any broker who has a claims handling function and there may be wider consequences to consider for those brokers who have delegated underwriting arrangements and the exposures that these changes may generate.