Wheels for Personal Injury Reform Set in Motion

What will the Civil Liability Act 2018 mean for personal injury claims? The Act was passed last December paving the way for significant reforms to the personal injury market. It deals with changes to whiplash injury claims and the discount rate - but there are many unknowns.

Whiplash Reforms

Reforms to whiplash claims are a wholesale attempt to combat what many see as a claims culture in the UK. The date on which whiplash reforms will come into effect is not yet known, but government has indicated that they will come into force in April 2020. The reforms will include the introduction of a fixed tariff of compensation for minor whiplash injuries to the neck, back and shoulder lasting up to two years.

A whiplash injury is clearly defined by the Act 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." The definition specifically excludes an “injury of soft tissue which is a part of or connected to another injury, and the other injury is not an injury of soft tissue in the neck, back or shoulder of a description” as above.

Offers to settle claims before a medical expert has issued a report on a claimant will no longer be allowed, in an effort to stamp out fraudulent claims. It is important for practitioners to note the clear rules against settlement before a medical report set out in the Act.

Regulations are yet to be introduced to set the tariff amounts for whiplash compensation. Though figures are not yet known, it is thought they could be much lower than the damages currently awarded at common law. These regulations must be kept under review every three years.

Regulations may also be made so that in exceptional circumstances, the court can apply an uplift to the tariff under the regulations (probably up to 20%). The court could, for instance, be required to take into account the degree of pain, suffering or loss of amenity caused by the whiplash injury or injuries in question which makes it appropriate to use the greater amount

Note that the small claims track limit for PI cases will be increased to £2,000 (£5,000 in the case of road traffic accident claims) except for injured vulnerable road users, such as cyclists and pedestrians, who will not be bound by the increased limits. The result will be more PI claimants being unable to claim their costs from defendants if they win. It could also mean more PI firms unable to continue representing victims in lower value claims.

The Discount Rate

In cases of serious injury compensation, a discount rate (currently -0.75%) is applied by way of adjustment to account for interest on investment of a lump sum compensation payment. Under the Act, a new discount rate will be fixed. The Government is expected to fix a new rate of between 0–1%.

The reason for this is that the discount rate changed in 2017 from 2.5 % to -0.75%, and government has been concerned this is unrealistic, and insurers are complaining that more money is being paid out to personal injury claimants than is necessary.

The initial review must start on or before 19 March and will be conducted by reference to the new process set out in the Act (not by reference to Index-Linked Government Securities). Once the review is completed, the Lord Chancellor will publish the new rate by way of an Order. The new rate will be reviewed for the first time by 6 August 2019 and then at five-year intervals.

The Court will be able to take a different rate of return into account if a party to the proceedings shows it is more appropriate in a particular case.

You can see the text of the new Act here.



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