Bob Neill, Conservative MP and chairman of the justice select committee, has accused the Ministry of Justice (MoJ) of “firing in entirely the wrong direction” in its plans to reform low-value personal injury claims.
Mr Neill told a committee meeting this morning that instead of restricting general damages for a “certain type of tort”, in this case whiplash claims, the MoJ should be putting claims management companies (CMCs) out of business.
He said the MoJ plans meant that “general damages won’t be available for one type of tort when they will for another”. Mr Neill asked James Dalton, director of general insurance at the Association of British Insurers (ABI) – who was giving evidence before the committee on the reforms – whether this change in the law required “a more compelling justification” than simply a reduction in insurance premiums.
“It is a change in tort law, there’s no doubt about that,” Mr Dalton replied, and said it was up to MPs and Parliament to decide whether to make that change.
Mr Neill said later: “I get a sense that the real problem is that the Ministry of Justice is firing in entirely the wrong direction on this.
“They’re seeking the ability to restrict general damages for a certain type of tort, whereas in reality they should be knocking these claims companies out of business completely.”
He asked Mr Dalton: “Isn’t that the reality, and they’ve ducked that and they’ve failed to have the guts to stand up and really tackle the claims management industry?”
Mr Dalton replied: “I think that might be a little unfair, if I may be so bold to say that.”
He said the powers of the Claims Management Regulator, based at the MoJ, had significantly increased in recent years, and it was a “much more interventionist” regulator, “knocking on doors, arresting people and shutting companies down” and “imposing significant fines” on CMCs.
“I would then go on to say that you have to remove those incentives from the system which encourage these firms to behave in the way they do in the first place.”
Alberto Costa, Conservative MP and a solicitor, suggested the problem was a “mix up” between the issues of fraudulent claims, CMCs and duties of care.
“Should we as a society not be seeking to enforce existing laws to minimise fraud, rather than attempting to change duties of care that have grown up over decades under our common law system?
“Is not the problem fraudulent claims, rather than whiplash injuries?”
Mr Dalton replied that this depended on whether we wanted a society where “low value, minor whiplash injuries” were compensated in very large numbers.
Mr Costa said later that fewer and fewer lawyers were going into the personal injury market and the real problems was “non-regulated individuals” making fraudulent claims.
Both Mr Dalton and Neil Sugarman, president of the Association of Personal Injury Lawyers (APIL), also giving evidence, agreed that claimant solicitors should name the source of their claim.
Mr Dalton said this would enable the ABI to check whether it was one of the law firms or CMCs it had concerns about.
Mr Sugarman warned that if the small claims limit for personal injury cases was raised to £5,000, as proposed by the MoJ, the number of litigants in person (LIPs) would increase.
He said that according to a response to the consultation from the Association of District Judges, which he had read about on Legal Futures, district judges had “grave concerns” that the number of LIPs would increase and the system grind to a halt.
Mr Sugarman said increasing the small claims limit would be an “open goal” for CMCs, and they would represent claimants in the small claims court, despite being unregulated and uninsured.
Mr Neill commented that if the small claims limit was raised by inflation, the increase would be £1,600, rather than £5,000.
Simon Stanfield, chairman of the Motor Accident Solicitors Society (MASS) said afterwards: “Bob Neill MP and his committee posed some fundamental questions around the justification and rationale for the MoJ’s proposals, illustrating why they are ill-considered, misdirected and deeply unfair.
“We hope that the committee will now consider it entirely appropriate to pose these questions directly to an MoJ minister. The government’s proposals will have far-reaching consequences and should be subject to vigorous examination before they are progressed further.”
Donna Scully, former chairman of MASS, added: “The committee clearly agree that the MoJ proposals are misdirected and it should return to the original objective, eradicating fraud, not dispensing with age old common law and undermining people’s legal rights.”