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GN Law Media: Reforming personal injury: the Civil Liability Act 2018

Since receiving royal assent on 20th December 2018 – although it may not fully be enacted until April 2020 – the Civil Liability Act 2018 (“CLA”) has changed the way victims of whiplash and road traffic accidents receive damages and the limit for personal injury claims in the small claims track.

Whiplash

“Whiplash injury” is defined in s.1 CLA 2018 as “an injury of soft tissue in the neck, back or shoulder” that is “a sprain, strain, tear, rupture or lesser damage of a muscle, tendon or ligament in the neck, back or shoulder, or an injury of soft tissue associated with a muscle, tendon or ligament in the neck, back or shoulder.” Under s.2 of the Act this definition is subject to reasonable amendment and review by the Lord Chancellor.

Some of the key changes to whiplash claims include:

  • Removing pre-medical assessment settlement offers (s.6 CLA);
  • Introducing a tariff for low value whiplash claims, where the injury lasts no more than 2 years; and
  • Adding minor psychological injury/injuries that occur alongside the whiplash injury to the s.1 definition (s.3 CLA) and to the amount of damages awarded. The tariff is to be set in regulations by the Lord Chancellor, in consultation with the Lord Chief Justice.

The Discount Rate in Personal Injury Claims

Since 2001 victims who suffer life-changing injuries and accept a lump sum of compensation, rather than periodical payments, have had the sum adjusted. The adjustment is effectively a reduction based on the interest that the victim would earn if they were to invest it in a low-risk way. In 2017 the Discount Rate changed from 2.5 % to -0.75%. This was thought to better reflect the reality of returns were the claimants actually to invest the money.

The post 2018 rate is likely to be in force in the week commencing 5 August 2019 and the consultation to obtain evidence to inform the decisions to be taken by the Lord Chancellor in the first review of the discount rate closed on 30 January 2019. The rate will be amended by the Lord Chancellor every 5 years (s.10 CLA).

Small Claims

With the exception of vulnerable road users such as pedestrians, cyclists and motorcyclist, a new limit for road traffic accident claims will increase from £1,000 to £5,000 and to £2,000 for all other injury claims. In addition, successful claimants will no longer be able to claim legal costs from defendants as more claims will fall within the small claims track.

The expectation is that claimants will be encouraged to submit the claim without a solicitor through an online portal, funded by the insurance market. This will result in more unrepresented claimants than before, which has been criticised as having the potential consequence of increased internal court costs due to claims taking longer to resolve.

Commentary

This 2018 Act effectively shakes up the claims/compensation culture that has arguably crept in to British society over the last decade. The changes to regulation in this area may be advantageous for reducing unjustified or fraudulent claims for compensation but it also disadvantages smaller personal injury law firms. By removing the costs recoverability for any whiplash claim worth up to £5,000, many small firms have had to affect a rapid departure from the market or face significant financial difficulties.

It also remains to be seen whether the new IT portal will be able to effectively and efficiently manage all of the relevant claims tasks such as engaging experts or obtaining basic legal advice relevant to the complexity of the matter; however, the 2018 Act gives power to the Treasury to introduce regulations obliging insurers to report any costs savings made by the reforms to the Financial Conduct Authority, so we may all have the opportunity to assess whether the changes have been worth the effort or not.

If you would like any more information regarding the provisions in the 2018 Act please click here. If you would like assistance regarding any of the topics discussed in this article, please do not hesitate to contact our Actions against Police and Public Bodies team.

Rhea Taylor-Broughton 
Trainee Solicitor

Posted on Monday, 24th June 2019