Personal injury
Unknown unknowns:
the current state of play in the PI market
Since the Spending review and autumn statement 2015 proposed radical change to personal injury claims, practitioners face further uncertainty. Polly Botsford investigates.
About the author
Polly Botsford is a freelance legal journalist.
It was not that long ago that the personal injury market was put through a plethora of reforms: out with referral fees and in with damages-based agreements; out with recovering after-the-event (ATE) premiums and in with cost budgeting. Three years later, the government has further proposals in the pipeline announced in the Spending review and autumn statement 2015. ‘It feels as if personal injury lawyers have been under attack from government and the media for a very long time,’ one practitioner tells the CILEx Journal. To make matters worse, the Ministry of Justice (MoJ) has yet to publish any consultations on the latest round of reforms, and so lawyers must sit and wait on these ‘unknown unknowns’ .
In Chancellor George Osborne’s Autumn statement, the government announced that it would be abolishing general damages for low-value whiplash claims: ‘To make it harder for people to claim compensation for exaggerated or fraudulent … claims’ . Practitioners say that if this goes ahead, it will decimate the industry and wipe out 130 years of common law under which general damages is a well-established remedy for injury to the person. Neil Sugarman is president of the Association of Personal Injury Lawyers (APIL), which has over 200 CILEx members. He argues that the reform is misguided because: ‘You are getting rid of all that for a tiny minority of cases, which may or may not be fraudulent. To abolish general damages is totally disproportionate and unfair.’
From an access to justice point of view, ministerial objectives appear skewed. Craig Budsworth is a Fellow of CILEx and branch manager of the Birmingham oÿce of True Solicitors: ‘If you look at that same Autumn statement, you will see that the government is introducing cash compensation for rail passengers whose train is late. So, what they are saying is that you should be compensated for a late train, but not if you suffer an injury. It’s just shocking, really.’
The detail on the whiplash proposal is as yet unknown because the MoJ has delayed launching its consultation on the proposals, and the EU referendum is not helping to focus minds. The latest announcement suggests that the consultation will be published after the referendum, with implementation scheduled for 2017.
Meanwhile, practitioners are left in limbo. There is lack of clarity on whether the reform will be for soft tissue claims or whiplash only. It is also not clear what is meant by low-value claims. This could be claims worth £500 or £5,000. If it is the latter, then the repercussions are overwhelming.
There is scepticism about the consultation because the MoJ is seen as having moved the goalposts. Neil Sugarman says: ‘What was once a concern about insurance fraud has become concern over claims which, in the words of Lord Faulks QC [the justice minister] recently, are “trivial and unnecessary” .’
Practitioners say that lawyers will refocus in other areas and will not represent claimants, who will then be left representing themselves. This will be a disaster for a system which relies on experienced lawyers using the Claims Portal. Susan Brown, chair of the Motor Accident Solicitors Society, argues that insurers: ‘Will actually see their process costs go up as they face litigants in person: from cheap online processes with professionals, insurers will have to field calls directly from the public.’
The second major reform announced was more injury claims being dealt with in the small claims court by increasing the upper limit there from £1,000 to £5,000. As all personal injury lawyers know, this means that legal costs cannot be recovered and so lawyers are very unlikely to take on these types of claims. APIL estimates that about 60% of personal injury claims are within the £5,000 limit and only 6% are under £1,000; so the vast majority of cases will be caught by this rule change (though, again, it is not clear whether the reform will apply to all personal injury claims or only road traffic accident (RTA) claims).
This proposal was first mooted in 2013, but was later abandoned following a report from the House of Commons Transport Committee in July of that year, which argued that increasing the limit of the small claims track posed a number of problems. First, there would be more unrepresented claimants, resulting in an imbalance. The committee reported: ‘We believe that access to justice is likely to be impaired ... [and] [i]nsurers will use legal professionals to contest claims’ (para 13). Second, to make it impossible for lawyers to represent claimants would mean that: ‘claims management firms might find a way to enter the process, fuelling another boom in their activities’ (para 14). Craig Budsworth agrees. He says: ‘If properly regulated legal practitioners can’t afford to do the work, then the claims management companies will - and they have far lighter regulation than we do. So, how does that improve the system? It doesn’t ; it might make it a lot worse.’
These proposals come at a time when the cost of litigation is under heavy scrutiny anyway from Lord Justice Jackson, who is tasked with the overhaul of the Civil Procedure Rules. Fixed costs have now been introduced for personal injury cases in the fast track. Practitioners have also seen the arrival of fixed costs for medical reports for soft tissue injuries in fast track RTA claims.
The most recent proposals from Lord Justice Jackson, made public in January of this year, extend fixed costs for all claims (not just personal injury) up to a value of £250,000. Practitioners are very concerned at how this would work in practice. Neil Sugarman says: ‘It will be like trying to run a case with your hands tied behind your back.’
These higher value claims, though they make up a small minority of a law firm’s total cases (estimated at around 7%), tend to be the more profitable cases which, within a personal injury practice, might well subsidise the lower value claims. A lot will depend on at what level the fees are fixed. As Susan Brown notes: ‘Non-lawyers don’t really understand how long things take.’
A practitioner is not going to look at just one of the reforms in isolation, but is going to look at the impact of all of theseproposals together - coming as they do shortly after the reforms from 2013, when fixed fees were introduced and there were dramatic changes to the funding arrangements of success fees and so on.
One of the paradoxes, however, is that firms have responded reasonably well to the 2013 reforms, and if there is less profit around personal injury departments are ‘finding ways to remain profitable,’ says Susan Brown. There have been firms that have designed new product lines to align with insurers: Carpenters Law; Goldsmith Williams; and Plexus Law, for example. There have been joint ventures such as Lyons Davidson with Admiral insurance company, and more recently Lyons Davidson teamed up with LV= (the market has also seen corporate casualties, however, such as Parabis Law). In addition, firms may have restructured their locations to benefit from cost differentials. Most recently, Slater & Gordon has announced its personal injury ‘centres of excellence’ as part of a major restructuring in the face of heavy losses, and which will be in geographical areas where such work is cost-e ffective.
The question for personal injury firms is how to survive; the question for the government is whether its ‘war on whiplash’ is having any effect. The statistical evidence is highly contentious.
Since 2013, the number of motor injury claims has, according to the Compensation Recovery Unit’s (CRU) figures, remained fairly static:
- In 2012/13 (pre-2013 reforms), the total was 818,334 claims; and
- in 2015/16, the total was 770,791 cases.
There is no reliable data on whiplash claims specifically. In 2015, APIL made a freedom of information request to the CRU and reported that, in 2014/15, there were 377,000 whiplash claims compared with 488,221 in 2012/13. These figures were then disputed by insurers by using information from the Claims Portal.
It is not clear either whether or not a reduction in whiplash claims would support the lawyers’ case: if there has been radical reform and no reduction in claims as a result, then it might be that the MoJ is reforming the wrong thing. Practitioners argue that the government needs to tackle all the players in the system, and that includes not only insurers but also claims management companies.
There is still huge confusion in the marketplace between cold-callers and legal practitioners. For this reason, APIL is launching a campaign, ‘Can the Spam,’ to highlight this confusion. Neil Sugarman explains: ‘We are not against fighting fraud, we are not against regulating cold-calling and text messaging. We, as lawyers, are not allowed to do either of those things - and would not do so - but we continue to be tarred with the same brush.’
Perhaps, also, the MoJ should just wait and give the 2013 reforms a chance. MedCo is a case in point: the new portal, launched just over a year ago, of 626 independent medical experts is used as part of the pre-action protocol for low-value RTA claims. MedCo was intended to reduce costs and fraud. But it has been riddled with its own difficulties : it survived a judicial review challenge by a medical expert company last summer, only to find that a number of organisations which featured in the portal had to be investigated and suspended for breaching MedCo’s own guidelines. Craig Budsworth is a director of MedCo. He says: ‘A number of positive changes have now been introduced to our systems, and I am confident there will be a beneficial impact on claims.’
Further reforms to personal injury claims are a concern for many CILEx members (there are about 3,700 members who are personal injury lawyers), and the ‘unknowns’ are ominous: challenging times are ahead.
Consulting on costs in clinical negligence
RTAs and employer and public liability cases have been worse hit by reforms, but clinical negligence has not been immune. At the time of going to press, it was reported that the government is to postpone the controversial introduction of fixed recoverable costs for clinical negligence, which was due to come in on 1 October 2016. According to APIL, it received confirmation from health minister Ben Gummer that implementation would be delayed because the consultation process is also behind schedule. The minister acknowledged that the implementation timetable was not achievable.
The main ‘unknown’ is what value of cases will be affected by this: are we talking £25,000 or £250,000? Clinical negligence differs from other personal injury claims in that there is significant front-loading of work: lawyers must compile all the medical records and get an expert’s report before even considering filing a client’s claim; the work is also often complex.
David Thomas is a Fellow of CILEx and partner and head of the London clinical negligence team of Simpson Millar. He argues that if the value is set too high, these reforms will see ‘a race to the bottom’ in an effort to save legal costs. The net effect will be ‘fewer experienced lawyers who are best placed to weed out ill-conceived cases’ .