How the Civil Liability Act reforms will change whiplash claims
25 February 2020
14 July 2020
Laurence Besemer, Patrick Hayward, Donna Scully
Looking at the upcoming changes to the Civil Liability Act and how they will affect both insurers and customers.
The upcoming reforms to the Civil Liability Act 2018 are looking to reduce the overall costs involved when customers make a whiplash injury claim. This means that for defendant motor insurers there will be fundamental changes to how these claims are managed.
In brief, the changes include the introduction of a new tariff of set-amounts for compensation for whiplash injury claims (with a court power to apply an uplift in limited circumstances), and new rules to prevent settlements being made before a medical assessment. Alongside this, the Small Claims Track limit for low value road-traffic accident injury claims will be raised from £1,000 to £5,000 (which means that claimants will not generally be able to recover their legal costs from an insurer), and a new Portal is being launched by the Motor Insurance Bureau (MIB) for injured parties to issue their claims without the need for legal representation.
To consider how these changes will affect both the insurer and the customer, we will explore the impact on both and what to expect once these reforms take place.
To begin with, Laurence Besemer from the Forum of Insurance Lawyers (FOIL) looks at how insurers might approach these changes and the technical implications involved:
The defendant perspective
In principle, insurers welcome any system that provides certainty and assists in controlling costs. Correspondingly they dislike any process that is open to differing interpretations, risks satellite litigation and thus increases the overall cost of a claim.
Current concerns are that any attempt to implement, by 6 April 2020, Part 1 of the Civil Liability Act 2018 relating to ‘whiplash’ injuries, risks leaving a number of areas where there may be doubt or confusion as to how the new service will operate.
A key concern is whether the IT platform, which is central to the whole process, will operate efficiently and be both accessible by and comprehendible to users, many of whom will be unrepresented.
The new process will sit between the Small Claims Track, the existing Portal protocol for low value personal injury claims arising from road traffic accidents and the Fast Track. In addition to the guidance that will be needed within the new Portal to assist with its operation, there must be clear procedural rules defining which claims are included; what each party to the claim is required to do; timescales; and how default or ‘poor behaviour’ are to be dealt with. These rules must cover, comprehensively, details ranging from what constitutes a ‘vehicle’; to how alternative dispute resolution (ADR) will work within the process; and what happens where a claim does not settle but needs to go before the court.
There is then the tariff, to be introduced by way of statutory instrument, defining what damages are recoverable for the various degrees of ‘whiplash’ injury. The tariff will not apply to injuries falling outside the definition of ‘whiplash injury’ contained within the Act but non-tariff damages must be claimed at the same time. Defendants are concerned about how these additional damages are to be valued and, if necessary, assessed by the courts.
Abuse of the process is a concern at several levels. Are claimants, now without legal representation by lawyers, vulnerable to exploitation by others willing to assist with bringing the claim? Will claimants (with or without assistance) be tempted to exaggerate the non-tariff elements of their claim with a view to achieving a higher level of damages than may in fact be justified? As with any system where contact is purely by electronic means, can there be sufficient safeguards to prevent fraudulent claims?
As is often said, ‘the devil is in the detail’, but here that detail is vital to the success of what defendants will otherwise see as a welcome move in the right direction.
Donna Scully from Carpenters Group now looks at what these changes mean for insurance customers and what could change when making a claim:
The claimant perspective
Whenever it is implemented, the Civil Liability Act 2018 will irrevocably change the way that personal injury claims are made. It will have a significant impact on how claimants seek redress for injuries sustained in a motor accident and will reduce awards by up to 90%. By allowing self-litigants, CMCs and others for the first time to directly pursue and process claims, it will fundamentally reshape the claims market by opening it to non-legal entities.
Only fifteen clauses long the Act itself is only the mask covering the detail and mechanics of the changes. To fully understand the impact, the Act must be seen in conjunction with what lies beneath, a new Portal that seeks to shift the majority of legal claims away from lawyers into the uncertain arena of self-litigation, integrated with the system to commission medical reports. The Portal will not only be paid for and developed by the insurance industry, but for the first time, will be operated by insurers, with no independent or cross-sector oversight as with the existing Portal and MedCo.
The Portal’s impact will be judged as much by what it does not cover as the areas included. Rehabilitation, credit hire and accident repair will all fall outside the scope of the new system, with many fearing cost inflation in these areas as these loopholes are exploited.
A campaign that began with the justifiable aim of combating fraudulent behaviour has long morphed into a cost-saving exercise, with many lawyers likely to exit the market as fees tumble, professional standards are removed and a frictionless, largely automated system replaces human checks and balances. Insurers have promised to return the savings to consumers in more competitive premiums, but given potential for increased costs and gaming elsewhere, it is doubtful whether the savings envisaged will materialise so be there to be passed on at all. We shall see.
In this free-for-all market, injured people, in the immediate aftermath of what may have been a traumatic experience, will be left to run their own claim and battle their way through what will still be a complicated process. Some may yet be able to attract legal representation, through Legal Expenses Insurance and there will be brave souls who seek to navigate the claim themselves, but perhaps the majority will be at the mercy of a range of claims farmers eager to find a way to make money out of the new system. The perfect system is probably unattainable, but cost-savings in legal fees, increased costs for rehab and credit hire, the loss of legal protection and an increase in fraud may lead many to wonder whether – after four years of uncertainty - it has all been worth it. I hope that is not the case.
Whilst the anticipated reforms should help to achieve the aims of reducing the costs involved in minor injury claims, there are still a few moving parts where the detail needs to be clarified. There has been significant process in the development of the MIB’s technology platform (‘Official Injury Claim’), but we have not yet seen draft procedural rules or secondary legislation that will be needed ahead of the reforms coming into effect.
It appears increasingly likely that the changes will be pushed back, potentially to October 2020 or April 2021. Whilst this is not ideal from an insurer perspective, it would reduce the risks associated with pushing for a launch this April, ie that poorly drafted rules can be exploited to either push claims out of scope of the Portal, or to inflate the costs of other elements of the claim, and that the system and procedures will not always be as easy for self-represented claimants to navigate as intended.
We intend to revisit this subject once the relevant rules have been finalised and published, and there is certainty regarding the final shape of the changes.
This document is believed to be accurate but is not intended as a basis of knowledge upon which advice can be given. Neither the author (personal or corporate), Society of Claims Professionals or Chartered Insurance Institute, or any of the officers or employees of those organisations accept any responsibility for any loss occasioned to any person acting or refraining from action as a result of the data or opinions included in this material. Opinions expressed are those of the author or authors and not necessarily those of the Society or Chartered Insurance Institute.