Is it the end of the world for Personal Injury Claims?
By Kevin Donoghue, Solicitor
At 11.12a.m. on Friday 21st December 2012 the Mayan Long Count Calendar will read 220.127.116.11.0 for the first time in 5,125 years.
This event, some say, will lead to the end of the world. Theories about how this will happen include a solar storm, a switch in the Earth’s magnetic poles, another planet colliding with Earth, a planetary alignment, and a total Earth blackout.
Mayan Temple of Kukulkan, Chichen Itza, Mexico. The Temple is a monumental representation of the Mayan calendar.
For many of those in England & Wales involved in civil litigation and in particular personal injury claims, the Mayan calendar is premature. The End of Days is expected to be in April 2013, when a ‘perfect storm’ of changes to the English legal system come into effect. The anticipated reforms include:
* Implementing the Legal Aid, Sentencing and Punishment of Offenders Act 2012 which removes the recoverability of legal costs for the winning party in most circumstances
* banning referral fees in personal injury accident claims
* extending mandatory use of the fixed-fee RTA online ‘portal’ to include cases valued at up to £25,000
* bringing other types of accident, such as public and employer’s liability claims, into a similar fixed-fee portal scheme
* drastically reducing the costs paid for cases in those portals
increasing the small claims limit from £1000 to £5000 for Road Traffic Accident (‘RTA’) personal injury claims (including, but not limited to, ‘whiplash’ soft-tissue injuries)
If these reforms are implemented in their entirety, the likely effect will be to dramatically reduce access to justice for accident victims in all areas of personal injury, not just RTA claims.
Government policy with personal injury claims
In pursuing these reforms, the government has been strongly influenced by a small but powerful group of insurers, who have successfully convinced ministers that the solution to the increase in insurance premiums, particularly motor policy costs, is to remove lawyers and their fees from the process in all but the most serious accidents. By doing so, the government will be able to:
• combat fraud (which, while reprehensible, in motor claims adds only £3.83 per policy),
• attack the perception of a ‘compensation culture’ (which Conservative Lord Young of Graffham reported in 2010 ‘is one of perception rather than reality’)
• save legal costs (the current proposal in the RTA portal is to reduce pre- proceedings settled claim costs from £1200 to £500), and
• reduce the number of claims made against government and local authorities (as claimants will struggle to find lawyers willing to represent them in anything but the most straightforward of cases), and
greatly increase the chances of failure of any claims made (as a consequence of the inequality of arms caused by claimants being un-represented and/or under-funded).
The most significant change will be the increase in the small claims limit, an idea which was considered and rejected in 2007, and again in 2009 (then by Sir Rupert Jackson, who is responsible for many of the above changes but sensibly felt that they alone would suffice to achieve his aims).
It is presently being considered in another consultation paper which was prepared following February’s closed door sessions involving the government and insurers only. Claimant representatives were not invited.
The impact in practice is clear when considering the latest Judicial College Guidelines, the ‘Bible’ for valuing accident claims.
This book is relied upon by judges, barristers and solicitors to give ‘ballpark’ figures when assessing claims. Most importantly, it is referred to by claimant solicitors when considering whether to represent a potential client.
It shows that people who have suffered serious injuries, such as those involving broken bones, will be unable to claim legal fees if the small claims limit is increased.
Examples include a fractured wrist which takes up to a year to recover (valued by the Guidelines at between £2500 to £3375), a partial amputation of the little finger leaving residual sensitivity (valued at between £2800 to £4200), and a whiplash injury taking up to a year to recover (£3100),
Consequently, if the limit is raised, many innocent accident victims will be forced to represent themselves or pay privately out of their own pockets if they want to instruct a solicitor to make a claim. The days of ‘no win no fee’ representation, where the solicitor ensures that the claimant receives 100% of their compensation, will be over for them.
Winners and Losers
Solicitors and their staff, barristers, job-seeking law college graduates, unions and their members (who rely on referral fees to minimise dues), the Court system and judges who will be dealing with unrepresented people, the public purse (which will see reduced income and increased benefits claims as a result of law firms failing), but most of all innocent accident victims, will all suffer.
Those involved in the insurance industry, including insurance companies and their law firms, shareholders, and the Conservative Party (which has received millions in insurance company donations in recent years) will all do well.
Fraud on the innocent
Justice Secretary Chris Grayling (who received £71,000 from Peter Wood, the founder of Direct Line, to fund his office) stated when issuing the consultation paper on the proposed increase in the small claims limit that it would ensure that ‘genuine’ claims are settled while ‘fraudsters are left in no doubt there will be no more easy paydays’.
But how big a problem is fraud in personal injury claims? According to a recent report in The Actuary, in 2011 more people made fraudulent claims when exaggerating home insurance losses (71,000) than those who made dishonest motor insurance claims (45,000). If, on the insurers own figures, only 7% of all motor insurance claims are fraudulent, why force through such massive changes to our civil justice system to harm the honest 93%?
Trust the insurers
For those soothed by Mr. Grayling’s words that genuine claims will be dealt with fairly, the Court of Appeal judgment of 12 December 2012 in Christine Brown-Quinn & Others v Equity Syndicate Management Limted and Motorplus Limited is worth considering.
In that case the Court found that before the event insurers who restrict an insured’s right to instruct a lawyer of their own choosing on the basis of cost were in breach of The Insurance Companies (Legal Expenses Insurance) Regulations 1990. This law gave effect to European Directives and Regulations going back as far as 1997, and had been brought to the insurers’ attention then, and again in 2002 (Sarwar v Alam).
Nevertheless, insurers continued to write policies which were non-compliant to ensure that their panel solicitors were instructed by their customers to save costs. Consequently, innocent accident victims were prevented by their own insurers from instructing a solicitor of their own choosing.
The Court of Appeal, not known for its strong language, lambasted those same insurers in Lord Justice Longmoor’s judgment which states ‘The facts of this case have revealed that the insurers exhibit an insouciance to their obligations under the Directive and the Regulations which leaves one quite breathless.’
Given that, in this case, the victims of insurers’ sharp practice were people who had paid their own insurers for cover, imagine how unrepresented victims who make a claim against insurers will be treated.
Contrary to the popular view, the Maya themselves do not consider 21 December to be the End of Days. According to Dr. Jaime Awe, Director of Belize’s Institute of Archaeology, the significance of 2012 is that it ends one cycle and begins another. As he says, ‘it is a time for reflection, and for considering future direction.’
The government would do well to heed his words, think about the impact of these reforms, and keep the small claims limit as it is. As the consultation on raising the limit is anticipated to conclude on 8 March 2013, just 14 working days before the reforms above are due to be implemented, there is still time.
Kevin Donoghue is a solicitor whose firm, Donoghue Solicitors, represents people who make personal injury claims and actions against the police. Donoghue Solicitors is an Association of Personal Injury Lawyers corporate accredited practice.