Claimant lawyers had their worst fears confirmed today as the government proposed to press on with raising the small claims limit.
In a long-awaited response to last year’s autumn statement, the Ministry of Justice said it wanted to raise the limit in the small claims court for all personal injury claims from £1,000 to £5,000. The Law Society has responded by alleging that the plan will clog up the courts with litigants in person while also 'completely undermining the right of ordinary people to receive full and proper compensation'.
The full consultation admitted that litigants with claims under £5,000 will not normally need to appoint a solicitor to act on their behalf.
But it adds: 'It is the government's view that low-value RTA related claims are not so complex that claimants routinely require legal representation to pursue them.'
The government's position on the other element of George Osborne’s proposals, a ban on general damages for whiplash, appears more ambiguous. Today’s MoJ consultation proposes either scrapping damages or placing a cap of £425 for ‘minor’ whiplash injuries.
Other measures that have been added to Osborne’s ideas include a transparent tariff system of compensation payments for claims with more significant injuries: options being examined are for different amounts where the injury duration is greater than either six or nine months.
In news that will be welcomed by claimant lawyers, the government also proposes banning offers to settle claims without medical evidence, stressing that all claims would need a report from a MedCo-accredited medical expert to receive compensation.
Law Society president Robert Bourns said the government's proposals 'will completely undermine the right of ordinary people to receive full and proper compensation from those that have injured them - often seriously - through negligence'.
He added: 'This five-fold increase will stop people getting the legal advice they need in order to bring claims for the compensation they are entitled to in law. People may be tempted to try to bring claims themselves without expert advice.
'This will clog up the court system creating a David and Goliath situation where people recovering from their injuries act as litigants in person without legal advice – those defending claims can often afford to pay for legal advice. This undermines ordinary people's ability to access justice – especially if defendants refuse to accept liability forcing people to fight through the courts without legal help.
'Spinning this proposal as an attack on the "compensation culture" and claiming it will reduce premiums is misleading. If you are injured through no fault of your own you should be allowed to claim for that.'
The Society does however back the proposal to prevent claims being settled without medical evidence. 'This should curtail the practice of some insurers trying to persuade people to settle for less than their claims are worth without evidence of the actual value,' said Bourns.
Analysis – John Hyde
I’ve been writing about this sector for nigh-on five years, and I have yet to see such hostile rhetoric from any justice secretary – Chris Grayling included. Read more
Today’s ministry announcement repeated former chancellor Osborne’s assertion that the proposals will result in car insurance premiums being cut by £40 a year.
It goes on to describe a ‘predatory claims industry’ that encourages minor, exaggerated and fraudulent claims, meaning whiplash claims are 50% higher than 10 years ago despite a fall in the number of accidents.
Justice secretary Elizabeth Truss (pictured) said: ‘For too long some have exploited a rampant compensation culture and seen whiplash claims an easy payday, driving up costs for millions of law-abiding motorists.
‘These reforms will crack down on minor, exaggerated and fraudulent claims. Insurers have promised to put the cash saved back in the pockets of the country’s drivers.’
The MoJ said leading insurance firms including Aviva and LV= have pledged to pass on 100% of savings to consumers, although there still appears to be no way of enforcing this pledge.
The government’s consultation comes just a month after the Association of British Insurers had feared the reforms were not likely to happen.
Instead, they now appear to be progressing faster than most expected, with the consultation running until 6 January 2017. It is unclear whether any of the changes proposed would require secondary legislation.
The government leans heavily on ABI figures in its reasoning for the reforms, citing the insurance body’s premium index published last month which reported that premiums had risen 9% in the third quarter of 2016 compared to the same period in 2015.
The Treasury appears to be backing the MoJ’s intentions, with economic secretary Simon Kirby adding: ‘One whiplash claim is paid out every 60 seconds and it is unacceptable that responsible motorists have to pick up the tab.
‘We are tackling the incentives which have created this compensation culture so that all drivers can save money on their motor insurance policies.’
Labour has already publicly pledged to oppose both the small claims limit increase and any ban on damages.
MoJ set to impose £5k small claims limit
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MoJ will press on with £5k small claims limit