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Following the enactment of the Civil Liability Act 2018 (CLA 2018) in December 2018, Karan Ahluwalia, solicitor at Bindmans LLP, examines its reforms to whiplash injury claims and its new mechanism to change how the personal injury discount rate is set.
The introduction of CLA 2018 is an attempt by the UK government to repair what it perceives to be a broken system.
CLA 2018 is, however, another worrying example of the government’s drive to reduce the cost of litigation for insurers without fully considering the wider impact these reforms will have on those who have been injured as a result of negligence. CLA 2018 has four key areas.
A whiplash injury is now defined by law as an ‘injury of soft tissue in the neck, back or shoulder that is…a sprain, strain, tear, rupture or lesser damage of a muscle, tendon or ligament in the neck, back or shoulder, or an injury of soft tissue associated with a muscle, tendon or ligament in the neck, back or shoulder’, and it can be amended by the Lord Chancellor after CLA 2018, s 1 has been in force for three years.
The introduction of CLA 2018 now means that damages for pain, suffering and loss of amenity for those who have suffered a whiplash injury lasting up to two years will be determined by a tariff-based award scheme which is yet to be formally published by the Lord Chancellor.
The tariff will also include provisions for those who have suffered from minor psychological harm arising from the accident in which an individual suffered whiplash.
The tariff will not apply to claims brought by motorcyclists or their passengers, cyclists, pedestrians or other road users who are not using a motor vehicle.
CLA 2018 has included provisions for banning the practice of settling whiplash claims prior to obtaining a medical report. It also includes a regulatory clause, which gives the Treasury power to make regulations enabling the Financial Conduct Authority to monitor and enforce compliance with the rules as to the requirement for there to be a medical report prior to settlement.
CLA 2018 also confirms that a portal system will be created to handle whiplash claims. The system will be designed for litigants in person and promises to be simple and user friendly.
Following the Civil Liability Bill being given Royal Assent on 20 December 2018, a review of the current discount rate to be applied to personal injury compensation will now take place on or before 19 March 2019. The review will no longer be in accordance with index-linked government securities (ILGS), but must be considered on the basis that the rate of return should be the rate that, in the opinion of the Lord Chancellor, the claimant of damages could reasonably be expected to achieve if the recipient invested the relevant damages for the purposes of securing that:
1. the relevant damages would meet the losses and costs for which they are awarded
2.the relevant damages would meet those losses and costs at the time or times when they fall to be met by the relevant damages
3.the relevant damages would be exhausted at the end of the period for which they are awarded
Under CLA 2018, the initial review following the Royal Assent must be considered by the Lord Chancellor, Government Actuary and Treasury. However, any subsequent reviews or changes to the discount rate will to be determined by the Lord Chancellor following consultation from an expert panel established for the review and the Treasury.
The Lord Chancellor now has the power to make an order, which will prescribe different rates of return for different classes of case. However, CLA 2018 does not prohibit the courts from implementing a different rate of return into account if any party to the proceedings successfully pleads otherwise.
Although parts of CLA 2018, such as a regular review of the discount rate, are welcome, the framework of CLA 2018 is specifically designed to limit damages and recoverable costs for claimants and their solicitors. The government, along with the insurers’ powerful lobbying body, has made no secret that the primary purpose of the reforms is to target fraudulent claims which have allegedly cost the insurance companies millions in investigations and settlement payments.
In my view, references to ‘fraudulent claims’, ‘ambulance chasers’, and ‘rise in insurance premiums due to personal injury claims’ are specifically designed to disparage and tarnish claimants and those who represent them. Not only does it ultimately affect an individual’s right to justice with the introduction of such reforms, but it leaves those who have suffered injury isolated and unfairly judged, leading to an increasing guilt for bringing a claim.
I believe that, unfortunately, the implementation of these reforms will significantly affect the majority of those who have been genuinely injured through someone else’s actions. Many will now struggle to secure both legal representation and the level of compensation to which they are entitled.
CLA 2018 has created tremendous uncertainty both in the immediate and long-term future for all stakeholders affected by the legislation. There are four key areas of concern.
CLA 2018 has already widened the definition of a whiplash injury beyond the scope of the universally agreed medical definition. However, the provision set out in CLA 2018, ss 2(a)–(b) allows the Lord Chancellor to amend the definition following a review. Consequently, there is a significant risk that the definition will widen further, resulting in individuals whose injuries traditionally would not be considered as whiplash being caught with the definition.
The tariff that will determine the award for pain, suffering and loss of amenity has yet to be determined by the Lord Chancellor. However, as early as May 2018, it was proposed that damages would range from £225 to £3,725—a substantial decrease from the current system where damages are guided by case law and the Judicial College Guidelines. Again, like much of CLA 2018, these figures can be amended in the future by the Lord Chancellor following a review. Consequently, there is a risk that damages will be reduced further.
Although not part of CLA 2018, an increase in the small claims track limit is part of the government’s overall package of reforms. Once the reforms come into force, the intention is that the small claims limit will increase to £5,000 for road traffic accident (RTA) claims (excluding vulnerable road users) and to £2,000 for all other personal injury claims. It is expected that the increase will take effect in April 2020 at the same time as CLA 2018, Part 1 comes into force.
CLA 2018 provides the framework for calculating the discount rate in the future. The profession has been generally supportive of regular reviews of the rate. However, the rate has yet to be determined by the Lord Chancellor and will be subject to its first review without input from an independent expert panel.
CLA 2018 is an industry game-changer with the potential to irreversibly change the market for the considerable future.
The reforms, which have included a tariff for reduced damages for RTA claims, will result in many of those suffering injury not being appropriately compensated.
Furthermore, the imposition of a new £5,000 limit on RTA claims involving motor vehicles, along with a £2,000 limit for all other personal injury claims, will see specialist practitioners unable to recover their costs. This will result in solicitors being unable to assist claimants in bringing a personal injury claim, which will likely increase the number of people running their own claims via an online portal while trying to navigate complex legal procedures, medical terminology and settlement negotiations.
Implementing these reforms will see the personal injury sector follow the growing crisis seen in the family courts in recent years where individuals are representing themselves, leading to longer-running cases, as well as an inequality of arms between self-represented claimants and solicitor-represented insurers.
This undermines a fundamental principle of the rule of law.
The wider implication of CLA 2018 will be determined by the level of discount rate set by the Lord Chancellor in the coming months. By requiring claimants to invest their award of damages in a risk-bearing portfolio, however, there will inevitably be a significant departure from the long-standing principle of restorative justice and fairness.
These reforms, similarly to the reforms under the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO 2012), fundamentally seek to reduce compensation for claimants and cap solicitors’ fees. We have already seen a marked shift within the industry where firms are simply unable to take on some cases due to the financial burden of running a case, and in the worst-case scenario, firms closing down altogether.
The successful introduction of LASPO 2012 and CLA 2018 reforms will encourage the government to continue to pursue further fixed-fee reforms within clinical negligence.
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