This is the third of three articles recently written by Thompsons Solicitors for the Society of Labour Lawyers' publication Justice for All. If you would like to contribute an article analysing or commenting on a legal development from a left-wing point of view, please send submissions to email@example.com
Claims costs drop for the sixth year while customers continue to overpay
People get injured at work. Whether it is because employers fail to put in place and enforce proper systems or because health and safety is not given sufficient priority, every year thousands of working people sustain workplace injuries which are not their fault.
The Civil Liability Bill announced in the Queen’s Speech in June 2017, the government will strip the public of their right to free or affordable access to legal representation by raising the small claims limit to £2,000 for personal injuries, including those sustained at work, and up to £5,000 for road traffic accidents.
There is no inflationary or other logic proffered by the government for these fundamental changes. Hundreds of thousands of people injured every year will lose out on compensation they deserve. Claimants would be forced to either fight their employers on their own up against highly-resourced insurance-backed defendants, or pay legal fees out of their own pocket if they are successful.
Despite having limited time to deal with new policy while negotiating Brexit, the government still chose to re-introduce the plans when they (just) got back into power in June. They want to go ahead with limiting the rights of injured people despite it costing – according to the government’s own figures - the Treasury £135m and the NHS £13m each per year. It will also (again on the government’s figures) hand over an extra £200m in profit to insurers every year.
There is no evidence to justify these proposals. The government's own statistics show the number of work injury cases has dropped 30% over the last four years. At the same time, the Association of British Insurers (ABI) admit that motor insurance claims costs are down to £4.79bn (2016) from £8.30bn in 2010 - a reduction of 42%.
‘Fraud’ is the unsupported 'justification' being used to attack claims by people injured in road traffic accidents (yet not enough of a problem to be reported to their shareholders as they should do under financial reporting requirements). And Aviva reported in December that they paid out 99.85 of motor claims which fundamentally undermines they claims of a fraud ‘crisis’.
Even if there were fraud issues that the insurance industry could independently prove, there is no suggestion whatsoever of any problem with fraud in workplace accidents.
The only possible justification for an increase in the small claims limit might be inflation but even that doesn’t stack up. Jackson LJ in his 2009 Review of Civil Litigation Costs set out the position clearly. At paragraph 3.3 of chapter 18, he stated that:
If a satisfactory scheme of fixed costs is established for fast track personal injury cases (both contested and uncontested) and if the process reforms bed in satisfactorily, then all that will be required in due course will be an increase in the PI small claims limit to reflect inflation since 1999. A series of small rises in the limit would be confusing for practitioners and judges alike. I therefore propose that the present limit stays at £1,000 until such time as inflation warrants an increase to £1,500.
No reason has been given by the government to depart from this conclusion. The question therefore, to follow Lord Justice Jackson’s lead, is whether inflation warrants an increase to £1,500. The short answer is that it doesn’t.
Jackson LJ correctly set 1999 as the starting point for the calculation of the impact of inflation because that is when special damages were removed from the calculation of what cases fall within the small claims limit and it was re-set at £1,000 for general damages only.
Given that the government applies CPI to the pensions and benefits paid to injured workers pursuing EL claims, the logic must follow that if there is to be any increase the same measure should be applied to the small claims limit which would mean only an increase £1,440 would be justified.
Perhaps it is because the insurers don’t feel restricted to inflation-only increases in respect of their premiums that they think it is acceptable to ignore inflation when it applies to the small claims limit. In the last year, the cost of motor insurance has gone up from £500 to 3597 in the last year alone. Certainly their shareholders are getting more than inflation. In 2016 the remuneration packages for the CEOs of the four major insurance companies ranged from £3.38m to £11.25m.
The government is pushing to take away legal assistance from thousands of injured people. The audacity of this is staggering – the changes to the small claims limit that will only mean more profit for the insurers and leave people injured at work or on the roads out in the cold.
It is simply unacceptable.
This is the third of three articles recently written by Thompsons Solicitors for the Society of Labour Lawyers' publication Justice for All. If you would like to contribute an article...
This is the second of three articles recently written by Thompsons Solicitors for the Society of Labour Lawyers' publication Justice for All. If you would like to contribute an article analysing or commenting on a legal development from a left-wing point of view, please send submissions to firstname.lastname@example.org
Draft legislation on the discount rate is another attack on personal injury claimants
By Gerard Stilliard, Head of Personal Injury Strategy at Thompsons Solicitors
Recently the government continued their attack on those injured through no fault of their own with their draft legislation on the personal injury discount rate. There are significant shortcomings in the proposals, as discussed in the evidence we submitted to the Justice Select Committee.
The discount rate relates to the assumed rate of return which those receiving damages from a serious, long-term personal injury will be able to earn on their lump sum award. The rate determines whether victims receive the correct level of damages over the duration of their disability.
The (now twice-!, Ed) previous Lord Chancellor made an inevitable and long-overdue decision in March 2017 to amend the discount rate to ensure it was lawful. Until the recent correction, the discount rate had been far too high for many years, meaning that insurers were able to conclude injury claims based on an assumption of a return on compensation that bore no relation to the reality of the returns people were getting on their savings. Injury victims were getting short changed by insurers for years and there is nothing that those of us who represent the injured could do about it, because the rate was fixed.
Since March 2017 and under pressure from the insurer lobby, the government has acted in unseemly haste to introduce this draft legislation, which could be used to push the rate back up at the expense of seriously injured people.
The proposed legislation will mean that, in many cases, those with life-changing injuries will have to take greater risks with their investment and will be less likely to receive sufficient money to pay for the many years of healthcare, income support, rehabilitation and housing adaptations which their injuries have made necessary.
This is not acceptable. It undermines the fundamental and longstanding principle that those who are innocent victims of injury should receive full compensation for their losses. The government should look carefully at how seriously injured people in practice invest their damages. In our experience, those who come into funds after a traumatic injury are understandably cautious. Often they would prefer the security of a Periodical Payments Order (PPO), an annuity paid by the defendant/insurer – but insurers often refuse to make such payments, choosing to have the injured person bear the risks of investment.
Our evidence to the Justice Committee explained that the government’s approach to the discount rate is informed by the false assumption that the seriously injured are often ‘overcompensated’ for their injuries. In our extensive experience, this is a phenomenon which hardly ever occurs. We believe the losses suffered by injured people in the proposed changes will simply mean extra profit for insurers, and that is wrong. Any changes to existing legislation must always place the needs of the victims of injury at the heart of the assessment of damages.
Our three key messages to the Justice Committee were:
- Those investing a lump sum award of damages should not be expected to take any more than a minimal risk.
- The Lord Chancellor should continue to be responsible for reviewing the rate of return, but should do so on a more regular basis in order to be able to respond to significant changes in market conditions.
- Injured people who receive lump sum payments in damages must always be provided with the best investment advice. Mechanisms should be put in place to make sure no one is left to be captured by commercially motivated and loosely regulated financial advisors, whose best interests may not always be the same as their clients.
The bottom line for the select committee and the government must be to develop legislation that is appropriate for the victims of personal injury – those who have been injured, often catastrophically, through no fault of their own.
This is the second of three articles recently written by Thompsons Solicitors for the Society of Labour Lawyers' publication Justice for All. If you would like to contribute an article...