PI claimants can still use lawyers for small claims work, says justice minister

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12 January 2017


Parliament: minister’s figures wrong, says MP

The government yesterday gave little indication that it was prepared to yield over its proposed reforms to personal injury (PI), arguing that raising the small claims limit would not stop claimants using lawyers.

Justice minister Sir Oliver Heald highlighted the £40 cut in motor insurance premiums the reforms would generate, saying: “Are we to sacrifice that simply to uphold a [small claims] threshold that has been in place for so many years, since 1991, and in the interests of solicitors?”

He was speaking in Parliament at the end of a debate on access to justice, organised by Labour MP and former Thompsons PI partner Rob Marris, less than a week after the consultation on the reforms closed.

Sir Oliver said: “We face whiplash cases on an industrial scale. The number and cost of those cases, and their adverse impact on the price of motor insurance, is a concern for government.

“There have been huge improvements in car safety, so how can it be that 770,000 road traffic accident claims were made in 2015-16, compared with only 460,000 in 2005-06, with around 90% of the claims in 2015-16 being whiplash-related? That figure is too high and the government must take action to tackle this issue and protect consumers…

“If we can save £40 per head on motor insurance policies, clearly those are issues that we should be consulting on…

“To provide reassurance to members, people can still employ a lawyer to help them with a case that is in front of the small claims court, and they can try to reach an agreement with their lawyer about how their case is funded.

“Of course, the point is that they cannot recover costs, but there is no ban on taking legal advice, though clearly people would need to look at the economics of that.”

He added that if a claimant has a complex case that should be dealt with by the county court in its full setting, they can apply for it to be transferred there.

Earlier in the debate, when Sir Oliver had quoted the claims figures, Mr Marris said they were wrong. “The government’s Compensation Recovery Unit indeed talks of 771,000 claims in round terms, of which 441,000 are for whiplash. That figure has come down by 7% since 2011-12.

“The overall figure is already coming down, so it is not going in the direction the minister thinks it is and perhaps he will rethink the proposals.”

The MP was critical of the Association of British Insurers (ABI) for putting out “misleading” information and mocked its claim that many cases of successful fraud go undetected, especially for whiplash.

“The ABI is assuming what it is trying to prove. It is assuming that there is fraud, but it admits that if there are such cases, they are going undetected. We do not know whether there are undetected cases of fraud or there never was a case of fraud.

“If it assumes what it is trying to prove, I certainly hope my insurance premiums are not set by insurance company actuaries who take such an approach.”

Conservative MP Chris Philp, who has been one of the main supporters of the reforms in Parliament, appeared to concede that any changes should only apply to soft-tissue injuries. “I fully accept that where a cyclist or motorist has broken a rib, wrist or leg, their claim is perfectly valid and verifiable and should be allowed to proceed,” he said. “We are talking about soft tissue injuries, where there is no objective medical evidence other than the claimant’s own claim.”

When it was pointed out to him that the higher small claims limit would apply to all injuries, not just soft tissue, he said: “The consultation document refers on its front page to soft-tissue injuries. I am sure that the minister will consider how that might apply to broken bones, but the title of the consultation refers to soft-tissue injuries only.”

He backed a ban on pre-medical offers and cold-calling, adding: “There should also be a duty on claims management companies and solicitors to explain explicitly to prospective claimants that fabricating evidence is an unlawful act. They currently do the reverse; they actually encourage false claims.

“The ministry should look again at qualified one-way costs shifting, because it creates a very perverse incentive for insurance companies to settle even when they could win a case in court.”

Mr Philp said that if insurers do not pass on the savings to motorists – as the claimant lobby argues they will not – “I would expect the Competition and Markets Authority to be encouraged by the government—or even required, if the government have that power—to conduct an investigation… I do not expect these savings to end up in the back pockets of the insurance industry”.

Mr Philp also took aim at insurers “circumventing” the referral fee ban through alternative business structures.

“That is where the insurance company has some form of equity or profit share stake in a claims management company, the details still get passed on, and the insurance company effectively gets paid via the equity stake as a means of circumventing the referral fee ban. That is clearly an abuse and we should take steps to end it.

“Finally, there are many examples of insurance companies procuring services such as car hire, legal services or vehicle repair services very cheaply, and they get recharged to the at-fault party’s insurance company at a significantly marked-up price. That is profiteering and, again, steps should be taken to prevent it happening.”

Another Conservative, Craig Tracey, chairman of the all-party group on insurance and financial services and a former insurance broker, said it was “clear” that the 2013 LASPO reforms “have not had the desired effect of tackling the compensation culture”.

He continued: “They went some way to tackling issues such as referral fees, but frequency of claims has not been tackled as claimants can still enter into a no win, no fee agreement and a substantial portion of their claim is taken by the lawyer or claims management company to cover legal fees, so claimants sometimes get only half of the amount awarded to them. Is it access to justice when somebody else benefits more than the person who was injured in the first place?”

Mr Tracey said ABI figures showed that in 1991, 50% of claims would have been valued within the £1,000 small claims limit, a figure that dropped to 9% in 2012.

“From my discussions with the insurance industry, it is clear to me that it supports the principle that full compensation should be given for more serious injuries, and it is committed to simplifying and streamlining the process so that savings will be passed on to the consumer and the policyholder.

“Critically, there will be access to justice for everyone. Claimants with more minor injuries will still get their vehicle repaired, there will still be access to loss of earnings compensation and, rightly, there will be a focus on rehabilitation.

“Having dealt with such injuries for many years, that is what most people want. They want to be back in the position they were in before the claim. It is right to ask why there should be a link to a cash settlement on top of this when many of the minor injuries that we are talking about are similar to those sustained on sports pitches around the country day in, day out, where no one would give a second thought to making a claim against an opponent?”

Labour MP Yvonne Fovargue questioned why workplace injuries were included in the proposed higher small claims limit.

“What evidence is there of fraudulent claims against employers? In my experience, it is difficult to encourage people to make a claim even when the employer has been negligent, because they are extremely worried about the possible consequences.

“When that is coupled with the fact that if someone is unfairly sacked, there is a tribunal fee, I feel that people are beginning to lose faith in the justice system.”

Sir Oliver did not respond to this question in his remarks.



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