Civil justice landscape: “interesting times”
The dust appears to have settled slightly on the government’s response last month on reforming the whiplash claims process. Alternatively, it might be that the dust has been blown away by the discount rate bomb dropped on 27 February.
Given the interlude, we highlight some of the immediate consequences of the whiplash response that will have an impact between now and October 2018.
Perhaps more in the past fortnight than ever before has the claimant and defendant insurance sector been living in “interesting times”. The “interesting times” quotation seems to range from an ancient Chinese curse, to Robert F Kennedy's famed speech of 1966, and on to the title of the Seventh Discworld Novel by Terry Pratchet. After the developments of the past two weeks, we suspect many who work in the injury space of civil justice are unsure if we have been cursed or are living in a fantasy world.
By way of a quick recap – ministers have made a number of policy decisions, including:
- The introduction of a tariff of fixed compensation for pain, suffering and loss of amenity (PSLA) for claims with an injury duration of between zero and 24 months.
- Providing the judiciary with the facility to both decrease the amount awarded under the tariff in cases where there may be contributory negligence, or to increase the award (with increases capped at no more than 20%) in exceptional circumstances.
- Introducing a ban on both the offering and requesting of offers to settle claims without medical evidence.
- Increasing the small claims limit for RTA related personal injury claims to £5,000.
- Increasing the small claims limit for all other types of personal injury claim to £2,000.
So what will the immediate consequences of these policy decisions be on whiplash reform?
A rush to litigate
One of the inevitable consequences of the reforms will be a drive to litigation in the coming 19-months (until October 2018). Claimant law firms will seek to maximise their profits under the current regime advancing claims through the online claims Portal to Stage 3 quickly and seeking to drop claims out of the Portal to achieve increased costs.
The gloves are off
If a claimant firm decides to exit the motor market will their behaviour change? Will it become even more aggressive given they have no concerns about future relationships?
One immediate and obvious solution for those in the claimant market not operating under a damages based agreement (DBA) will be to move immediately to a DBA. Those who do so in haste may have retainer issues insurers could exploit.
However, the likelihood is that insurers will see DBA based behaviours in all claimant firms moving forward. DBA behaviours can be summarised as the claimant law firm negotiating in £100 units seemingly driven by the fact for every £100 they get from the insurer they boost their costs figure by £25.
Pre-med offers not to be recommended
Will the claimant law firm be advising their client that the pre-medical offer made by the defendant is shortly to be banned and as such should not be accepted? Even those who had previously been content to advise acceptance may now be more reluctant. Human nature being what it is would suggest that if something is to be ‘banned’, it is bad for us. Therefore, will we see an immediate decrease in the acceptance rate of pre-medical offers?
Know your opponent (KYO)
While KYO is a well advanced tool for many insurers, the market will undoubtedly change quickly in the coming months. If the doomsayers in the claimant fraternity are correct, established players may disappear.
More concerning will be the rise of the claims management companies. Rumours abound that those with a background in PPI claims may seize an opportunity in the claims sector.
Will some claimant firms seek to secure their future by traditional mergers? Will they ‘merge’ with credit hire providers, physiotherapy and treatment providers or medical agencies?
Unreasonable behaviour arguments on the increase in small claims
Our motor teams have noted a number of larger claimant firms almost habitually making unreasonable behaviour costs applications in small claims hearings in an obvious attempt to increase their recoverable costs. In the most recent attempt that was defeated, the claimant firm served a costs schedule to support their application of £2,500. Will this become the new norm?
There is no sanction against the claimant for making the application and failing, so from their perspective — why not? If they run ten such applications and succeed in one, it is still a windfall for them.
The coming months will surely see the claimant firms use this time to refine their arguments in this area.
What is certain is that we do live in interesting times and that the claimant firms will undoubtedly turn their minds to maximising the costs.
Related item: Fixed costs: two unappealing decisions for defendants