Both Labour and the Liberal Democrats yesterday questioned the government’s approach to reforming whiplash claims, although several peers in the House of Lords backed the overall direction of the Civil Liability Bill.
The four-hour debate, which also included discussion of the proposed changes to the discount rate, highlighted a number of concerns about the bill, including the fact that in part 1 – the whiplash section – one particular type of claim was being singled out for attention.
Labour justice spokesman Lord Beecham said: “The question arises: why should comparable injuries not attract comparable awards, and comparable recovery of the cost of a claim, whether they are incurred in a road traffic accident or any other accident for which a defendant is deemed liable?”
However, Lord Keen of Elie QC, the Ministry of Justice’s spokesman in the House of Lords, responded: “We consider that we are taking a proportionate approach. Yes, it distinguishes whiplash-type injuries that occur in a road traffic context from other forms of accident or injury, but that is because we have to address a particular mischief.”
Lord Beecham raised multiple questions about the bill, including where the evidence was to underpin it.
“The [new] system is entirely based on the timescale, and not the severity, of the pain and suffering endured,” he said.
“These replace, for road traffic cases, payments which the MoJ – without adducing any evidence – regards as ‘out of all proportion’ to the level of injury suffered.”
He also asked whether the government had “made or received any assessment of the impact on the court system of more unrepresented claimants in this area of the law”, said the proposed new small claims limits were higher than if the existing figures had been simply uprated by inflation, and the risk of “parasitic” claims management companies moving in to represent claimants.
Lord Beecham was one of several speakers during the debate to raise last week’s report by the House of Lords delegated powers committee that criticised the government for leaving two key elements – the definition of whiplash and the new compensation tariff – to secondary legislation, rather than having them on the face of the bill.
Lord Keen pushed back to an extent – saying the government considered that this approach would allow for greater flexibility – but sounded as though he may give way particularly on the definition.
“It may be that noble Lords would like to see rather more in the way of definition so far as whiplash is concerned, and I take on board the observations that have been made,” he said.
There was a general acceptance that action was needed to curb fraudulent or exaggerated claims.
Lord Hope of Craighead, former deputy president of the Supreme Court, said: “The abuse has been going on for some considerable time, and it is time that something was done to address it.
Former justice minister Lord Faulks said: “My view is that this part of the bill is aimed in the right direction and is a necessary correction to the whiplash claims racket.”
Lord Keen said that last year the insurance industry identified 69,000 motor insurance claims that it considered fraudulent.
“By their very nature, these claims are difficult to detect, so I ask the House to consider that the problem goes much further than this already significant number. That the number is so high is indicative of an ever-pervading compensation culture in this country.
“The knock-on effect of this has been to drive up insurance premiums. I would go as far as to say that, for some, it has become socially acceptable to make a whiplash claim for little or no injury.”
At the same time, there was recognition that insurance companies should have done more to challenge claims in court. “There is a clear message for the insurance industry: it is about time it fought a few more cases,” said Conservative Lord Hayward.
Lord Keen agreed that “insurers have been complicit in the development of this claims culture over the past 10 years or more in their willingness to avoid undue expense and simply to settle claims without the necessity for any form of real evidence”.
Labour’s Lord Monks, former general secretary of the TUC, said “insurance companies have been extremely weak”.
He said: “If you can concoct a claim, you get £5,000 or maybe something near it. That did not just go around one northern town; it spread like wildfire. I believe that the insurance industry bears a lot of the responsibility for the situation we are in today.
“Add to that the claims management industry, which has been fostered by the opportunities that have been provided, and it seems to me that as lawmakers we should be looking very much at their activities as well as remedying any abuses that are around.
“My worry about the bill, particularly with the increases in the cost limits and so on, is that the blame is being put on the victims and they are the people who will lose out.”
Lord Monks also argued that the “massive reduction in the number of claims that is likely to be occasioned by these changes will have an adverse effect on health and safety standards. Deregulation in this area increases the risk of injury at work, and the bill simultaneously would restrict the ability to seek redress”.
Former Conservative cabinet minister Lord Hunt of Wirral, a partner at defendant insurer law firm DAC Beachcroft, suggested that the whiplash reforms were “sensible and uncontroversial”.
He said: “For far too long, we have as a country sustained a system in which there is an unseemly squabble over the value of soft-tissue injury claims.
“That has been far more to the benefit of those paid to do the squabbling than it has been for their clients, the victims. What matters most to their clients is prompt and fair redress, not a mathematically precise assessment of their loss.
“The idea of creating a fixed tariff for such claims, while novel in common law terms, is the right way forward. It takes the mystery out of how such claims are valued and avoids the use of precious court time in arguing over valuations.
“It can and must create a smoother process for the claimant, who will rightly be placed at the centre of such a process.”
The former Lord Chief Justice, Lord Thomas, called on the government to give “serious consideration to funding the Courts & Tribunals Service or some other body to provide proper online advice” to claimants.
“What is this compensation level to be set at?” he added. “Is it to be set to deter fraud, or is it a matter of compensation? If it is the latter, and assuming that an ordinary individual needs advice, who is to pay for the advice? Is that part of the compensation or not? That point must be addressed.”
The insurance industry’s promise to pass on savings to consumers through lower motor premiums was questioned repeatedly, with Labour’s shadow Attorney General, Shami Chakrabati urging the government to explain “the teeth” behind the promise.
Liberal Democrat spokesman Lord Sharkey added: “I am not convinced by the government’s touching faith in the insurance industry…
“I would like to see a healthier scepticism on the part of the government and, if need be, a clear statement that if savings are not passed on to policyholders then the industry may be subjected to a tax penalty on a windfall saving.”
His fellow frontbencher, Lord Marks, said the party would also like to see the small claims limit for motor claims increased to £3,000, rather than £5,000.
Arguably the most thoughtful and detailed contribution came from Conservative ex-barrister Baroness Berridge.
She suggested that the “irrational differences” between the tariff and the current Judicial College guidelines valuing injuries could be subject to challenge in court.
She continued: “I am not in principle against a tariff system: we currently have one called the Judicial College guidelines and we also have one for the criminal injuries compensation scheme, but the tariff has to apply to all cases so that people can readily understand the fairness of their compensation.
“Also, why does the government tariff say that a 10-month injury and a 12-month injury merit exactly the same amount of compensation? There is not even a bracket of figures in the examples of the tariff I have seen. How can this be just?”
She also predicted that the tariff, at least at the levels outlined by the government, would impact on other forms of compensation.
“Is it the government’s intention to bring down compensation on a whole range of injuries by the use of this statute? Will not insurance companies be able to raise non-tariff injuries and use this legislation to say the Judicial College guidelines are too high overall, trying for a revision of the whole system?”
Baroness Berridge expressed concern at the duty to mitigate the effect of an injury so as to bring it within the two-year period covered by the tariff, if possible.
“It seems this might encourage defendants routinely to argue that earlier treatment would have led to lesser injuries so they would be in the tariff, and that is a difficult argument for litigants in person to meet and argue against,” she said.
“I would be grateful to know why the government are putting the common law duty to mitigate on a statutory footing only in this area and inserting a section that will lead to an increase in the complication of litigation.”
She concluded: “There will be an effect on genuine claimants: they will not benefit from the bill. I fear we are hearing too loudly from the lawyers and the insurers, and I have yet to see any representation purely on behalf of genuine claimants from an organisation with no other vested interests.”
The bill will next go into committee, where it will be examined on a line-by-line basis, with peers able to table amendments. A date for this has not yet been set.