The future of low value personal injury: CJC says no more reforms after the whiplash reforms
The Civil Justice Council (CJC) working group has published its recommendations on what further reforms could be introduced for low value injury (under £25,000) injury claims. With a focus on resolving meritorious claims more quickly and with the costs reduced, as well as preventing unmeritorious claims, the group concludes that once the pending ‘whiplash reforms’ have been implemented, there should be no further substantive reforms – not least until the detail of recent measures is clarified.
The whiplash reform programme is now said to go live in May 2021, after numerous delays. Concerns remain about key issues outstanding, including the lack of new rules about the court process and new tariffs. As such, all practitioners are operating in the dark and any preparation (including training or system adjustments) has been based on assumptions.
We, therefore, welcome the pragmatic approach of the CJC and hope the MoJ listens. Outstanding issues must be addressed before further reform is contemplated. Rather, the emphasis should be on letting those measures bed in so that their effectiveness can be properly measured. Any unintended consequences or ongoing areas of concern can then be addressed with full visibility of the claims process and behaviours, and with reference to adequate data.
We consider the key recommendations, which include the operation of earlier costs measures. Some areas allowed for a consensus of opinion, whilst other did not and remain live issues.
The report acknowledges that with more cases allocated to the Small Claims Track (SCT), Litigants in Person (LiP) will need to be given access to the claims portals including the Official Injury Claim Portal (OICP). Further, a comprehensive pre-action protocol will be required for SCT claims and there will need to be directions for their case management. It was agreed that these should be written in a comprehendible way.
With the proposed increase in the SCT limit for employers' liability (EL) and public liability (PL) claims from £1,000 to £2,000 and for road traffic accident claims to £5,000, more cases will fall within the SCT limit. As such, this is likely to lead to more LiPs in the system, who may struggle both with the legal complexities of their claim relating to liability, causation and quantum and with the need to provide sufficient relevant factual information to enable their claims to be properly investigated. In particular, employers' liability claims are often claims by an individual against an employer where existing relationships exist. This can often add an additional layer of complexity and sensitivity, which in turn impacts the speed and cost to reach resolution.
The report acknowledges that “if there is to be any extension of the OICP system to other types of case, it must be undertaken with great care, avoiding a 'one-size fits all' approach. This includes the setting of [fixed recoverable costs] (FRC), which needs to be properly considered in the light of adequate data.”
The working group propose close continued monitoring of the new SCT and OICP to avoid any problem areas becoming entrenched. This includes capturing the data necessary to identify and address any abuse, as a high volume of cases will be processed where qualified one-way costs shifting (QOCS), will often apply. We agree that close monitoring is vital. We have previously welcomed government plans to expand the use of fixed recoverable costs in litigation, but warned that more needs to be done to stop claimants and their lawyers playing the new system.
The report recommends that child abuse cases and some multi-party claims should not be caught within the reforms. The government has also previously confirmed that the new process will not apply to those who have been termed 'vulnerable road-users', such as cyclists, motor cyclists, children or protected parties.
The group did not agree on whether the current portal should be extended for other claims to include all low value personal injury claims. It was noted that some low value claims will involve multiple defendants, relate to complex issues and extend to defendants who are unfamiliar with the portal and as such, would require extensive training of staff. An example of an area perhaps unsuited to such claims would be travel claims.
It was recognised that with an increased volume in claims, more District Judges will likely be needed and more small claims hearings will impose an even greater burden on the judiciary. Court fees will likely increase to compensate which calls into question access to justice.
We share the concerns raised with regard to claims incubation and claims layering, in addition to the short Claims Notification Forms (CNF), which could potentially leave defendants in difficulty when carrying out an analysis of the claim. The purpose of the MoJ Portal is to facilitate the exchange of claim information and documents between claimants and compensators at a reduced operational cost. As such, the CNF is intentionally a comprehensive document as it needs to ensure a compensator is able to make important decisions about the accident, such as if the accident was caused by their insured’s breach of duty or if the accident caused some injury to the claimant.
More needs to be done to stop claimants and their lawyers playing the new system.
Fraudulent claims continues to be a topic that divides opinions and there remain differing levels of discord on all the key areas considered.
There was consensus on all sides that fraud remains a problem and that greater public awareness of the problem is required. Where there is fraud, there ought to be penalties.
Beyond these basic principles, there was little by way of practical agreement in addressing how the problem is tackled. In fact, at the heart of the areas of disagreement includes how fraud is measured and the scale of the problem.
Measuring fraud, a covert activity, is difficult. The ABI definition takes into account, and attempts to measure, (unsuccessful) attempts at fraud which themselves create a cost impact for insurers. Claimant representatives increasingly seek to minimise the problem of fraud by focussing on a narrower definition built on proven/confirmed fraud.
Where there is no agreement on the problem it follows that there will be little agreement on the solution.
We have always described fraud as a behaviour that seeks to extract a benefit from exploiting weaknesses in the claims process arising from desirable activity that promote expediency and efficiency. Fraud measures are therefore a balance: too onerous and they create friction that increases cost and impacts genuine claims; too lax and fraud thrives.
Whilst insurers spend time on, and invest in, developing fraud measures that minimise the impact on efficiency in the claims process, claimant representatives are increasingly challenging against further measures that they see as an imposition on their business practices.
As recent measures to combat fraud have focussed on reducing the incentive by reforming areas such as damages, legal costs and claims referral (both the process and rewards in this area), claimant representatives argue that before further reforms take place there must be clear and reliable evidence available.
Insurers know there remains a problem, albeit one that is sometimes hard to see. The reforms to date represent only a job part done in building effective fraud resilience into the personal injury claims process. The Insurance Fraud Taskforce recommendations will help to do this, as long as those recommendations are properly checked for relevance at the point they are implemented. We believe that:
- More effective data sharing and data processing freedoms for fraud prevention can help and will allow innovation to keep pace with changing fraud behaviours.
- More effective id checks throughout the claims process will provide certainty to all, and provides no greater imposition on claimants than is expected in a world where data privacy and security measures are common.
- The opportunity to test claims properly should remain an available deterrent to fraudsters, notwithstanding the aims to reduce frictional cost in the claims process.
The report states that “the increase in the SCT limit and the introduction of the OICP will inevitably lead to an increase in claimants seeking assistance from CMCs. The OICP company should work with the FCA to ensure that CMCs cannot unfairly exploit a market of potentially vulnerable individuals.”
Recommendations that McKenzie Friends should not be permitted to charge fees to LiPs and that the CPRC should consider rules of court for McKenzie Friends and a code of conduct, were considered.
There was a lack of consensus in the group in terms of whether claimant costs charged by CMCs should be controlled. It was noted that the “introduction of the tariff will reduce general damages for the whiplash element of a motor-related personal injury claim but still provides an opportunity to maximise general damages in the non-whiplash elements and in special damages areas such as credit hire, credit repairs, storage, recovery, rehabilitation, etc.”
While a tariff will demystify what is currently contained in case law and the Judicial College Guidelines for a LiP regarding awards for PSLA, the law around credit hire is particularly complex. There is concern that credit hire companies would be able to exert sufficient influence over a LiP such that they, the credit hire company, were the driving party behind the claim.
The increase in the SCT limit and the introduction of the OICP will inevitably lead to an increase in claimants seeking assistance from CMCs.
CJC working group
The report recommends a blanket ban on cold-calling in terms of seeking instructions to make a personal injury claim. We agree with this recommendation. We have previously commented that cold calling, late notification of claims, claims farming and opportunistic claims have increased and we are now at a time where people are financially disadvantaged by the economic impacts of COVID-19 can make claims for the smallest amount of ‘quick cash’ can be tempting. Previous research demonstrates the impact of recession on fraudulent activity and fear that we may now face an increase in the scale of fraud across all lines of business and scams we are accustomed to (such as ‘crash for cash’) as well as new areas, like COVID-19 claims.
The report also advises that the SRA and FCA should coordinate to ensure that there is no abuse of the ban on referral fees and to monitor abuses by CMCs, and that MedCo should be required to publish detailed data on the frequency and nature of abuses of the system both by users and experts.
This was a particularly contentious topic within the working group and as such, it was left that the situation should be actively reviewed. Areas of concern included late discontinuance of claims and the definitions of ‘fundamental dishonestly’ and 'substantial injustice'.
Members from defendant backgrounds with specialist fraud departments were particularly concerned that if the court was required to approve a notice of discontinuance, LiPs would have to deal with these applications, which would in effect become a trial.
Some members of the working group were of the view that further guidance is needed on fundamental dishonesty, whilst others disagreed and felt that the provisions under both Section 57 of the Criminal Justice and Courts Act  and in creating an exception to QOCS protection, are working well. We agree. As we have stated above, fraud is a behaviour and, given that it will change to the opportunity, one that is not well codified. Finding a claimant to be fundamentally dishonest is a matter of fact and context, not a matter of defined lines. The danger of codifying fundamental dishonesty is that you will inevitably legitimise behaviours, however problematic, up to that drawn line.
An extension to the current FRC regime also did not allow for consensus by the working group. The government has proposed to increase the fast track to include claims up to £100,000 to include “straightforward cases” and therefore widen the number of cases which would fall into the FRC regime. This would encompass EL and PL claims and a significant majority of industrial disease cases. It is proposed that EL and PL claims would fall in Band 3 and disease cases within Band 4 (of a 4 Band FRC grading). Industrial deafness cases are, however, to be allocated their own regime.
Such a significant extension to the fast track is good news for defendants but contentious and unlikely to be implemented, albeit a smaller extension to the valuation should be anticipated. There was significant disagreement as to what types of claims should be excluded with some members of the group arguing that claims involving child abuse, multiple defendants and cases involving multiple insurers, group actions, protected parties and Fatal Accident Claims be exempt from the regime.
It is probably unlikely that the government will extend the fixed costs regime to industrial deafness claims, with the recent surge of these claims having dissipated.
We await to see whether the new May 2021 deadline for the whiplash reform programme will be met and if so, how low value personal injury claims will be handled.
Meanwhile, as the lack of agreement by the working group illustrates, there are areas with regard to existing measures that require further consideration. We suspect that the operation of the forthcoming measures will add to the debate. In particular, there are notable gaps in respect of measures to tackle fraud. This must be addressed and the market needs time for these measures to settle and be assessed – especially post the COVID-19 pandemic, which adds another significant factor to contend with, including with regard to courts backlog. Further, how the rules replace the abandoned solution provided by ADR must be urgently addressed and a workable solution delivered.
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- A key ingredient for fundamental dishonesty: the need for trial
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