Injury: Small claims limit last went up in 1999, union says

The government and insurance industry are being “disingenuous” to insist that the small claims limit has not been increased since 1991, a leading trade union has insisted

USDAW also said that insurers’ argument that “damages inflation” justified a £5,000 limit for road traffic accident (RTA) cases was plain wrong.

A representative of USDAW gave evidence at January’s hearing on the small claims limit rise held by the justice select committee, and has put in further written evidence in response to an invitation by committee chair Bob Neill MP.

USDAW said it was “disingenuous” of the government and the insurance industry to insist – as minister Lord Keen did in his evidence to the select committee – that the small claims limit has not been increased since 1991.

“In fact in 1999 the small claims limit did increase in real terms when special damages were removed from the calculation as to whether the value of a claim was less than £1,000 and therefore fell within the small claims court.

“This 1999 change represented a 20%+ increase in the small claims limit [even though] the value of the claim had not changed.”

The union noted that Lord Justice Jackson’s costs review treated 1999 and not 1991 as the starting point for any inflationary rises. He recommended that the limit should stay at £1,000 “until such time as inflation warrants an increase to £1,500”.

USDAW said that, based on the consumer price index (CPI), £1,000 in 1999 would now be worth £1,440, and £1,620 under the retail prices index (RPI).

“The government applies CPI increases to pensions and benefits paid to injured workers and we would suggest that it follows that CPI is the logical indexation to apply to the small claims limit for injured workers.

“In addition, within the last few days, Mark Carney, governor of the Bank of England, has stated that the RPI inflation index has ‘no merit’ and should be scrapped…

“We believe that the proposed increase to £2,000 is unjustified on an inflationary basis and would agree with Lord Justice Jackson that any increase at this stage is premature.”

USDAW cited the Association of British Insurers (ABI) as saying last year that a £5,000 limit for RTA claims (ie, a 500% increase) was justified on the basis of “damages inflation”.

At January’s hearing, Shirley Denyer, representing the Forum of Insurance Lawyers, said that, between 2012 and 2017, damages rose by 20%, while RPI was 5.5%.

“Whilst the figures vary dramatically, both are in fact wrong,” said USDAW’s submission, explaining that the Judicial College Guidelines showed that damages inflation “in fact corresponds very closely with the RPI figure over the same period”.

It added: “The government has given no reason for this departure nor any objective basis for the proposed figures.”

However, additional evidence submitted by FOIL argued that RPI was the more appropriate measure of inflation for the small claims limit.

“Although CPI is now commonly used as a standard measure by government, the index used to update damages awards in the Judicial College Guidelines is RPI…  On that basis an increase in line with inflation from 1999 would result in a small claims track limit of £1,667.40: above Lord Justice Jackson’s threshold for an increase.”

The evidence said that in updating the guidelines, “the Judicial College seeks to reflect not only inflation but also the decisions of the courts on quantum. This can lead to increases in the recommended awards significantly in excess of inflation”.

For example, in the 2015 edition, with RPI since the last edition being 3.4%, there were a number of above-inflation increases, such as a 75% hike in the top of the bracket for provisional awards for moderate lung disease.

“It is difficult to give an overall view on the increase in damages since 1999,” FOIL said. “The classification of injuries changes over time and it is difficult to compare like with like over different editions of the guidelines.”

Meanwhile, research released by claimant firm Thompsons – timed to coincide with today’s ABI annual conference – said car insurance claims costs fell again in 2016, a 42% drop compared to 2010 and contradicting insurers’ narrative of rising costs.

It said ABI data showed that the net cost of car insurance claims incurred decreased in 2016 for the sixth year in a row, from £8.3bn in 2010 to £4.8bn last year. However, the average price of motor insurance increased 20% in 2016.

The firm accused motor insurers of “misleading the public when they claim there is a crisis, when their own data clearly demonstrates that claims costs are down and profits of the major players in the market such as Admiral and Direct Line continue to increase”.


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