The government has argued that personal injury lawyers are making too much money from the claims process, as it seeks to justify further restrictions on marketing.
The Ministry of Justice today set out in parliament its plans to tackle ‘unjustified’ personal injury claims with a new raft of legislation.
Justice minister Lord Faulks (pictured) confirmed in a written statement to the House of Commons plans that were first leaked over the weekend and reported by the Gazette on Saturday.
They include a statutory ban on the offer of inducements by lawyers in personal injury cases.
Faulks said: ‘This encourages unnecessary claims, and suggests that lawyers are making too much money out of the process and seeking to offset the effect of the government’s much-needed ban on the payment and receipt of referral fees.’
He added that the MoJ had already banned claims management companies from offering cash inducements for claims, and a similar ban will come into force for lawyers ‘as soon as legislative time allows’.
The statement also promises legislation to require the court to dismiss ‘in its entirety’ any PI claims where the claimant has been ‘fundamentally dishonest’, unless it would cause them ‘substantial injustice’.
Faulks said these provisions are particularly relevant where a claimant has exaggerated a claim, and to cases where the claimant has colluded with another person to make a fraudulent claim.
‘Under the current law, the courts have discretion to dismiss a claim entirely for fraudulent behaviour, but will only do so in very exceptional cases, and will generally still award the claimant compensation in relation to the “genuine” element of the claim.
‘We intend to strengthen the law so that dismissal of the claim in its entirety should become the norm in such cases.’
A response from Association of British Insurers director general Otto Thoresen was included as part of the government’s press release circulated today.
Thoresen said: ‘These changes are a very positive development for the vast majority of honest insurance customers who end up paying for the fraud of the minority.
‘We applaud the decision to ban the distasteful advertising which offers cash or other inducements for personal injury claims. This only serves to reinforce to unscrupulous claimants that there is a compensation culture to exploit.’
The issue of incentives has divided the legal profession in recent months, with some firms insisting incentives do not encourage fraud, but groups such as the Motor Accident Solicitors Society suggesting incentives damage the reputation of the profession as a whole.
But there has been little evidence produced to link up-front incentives with fraud or exaggerated injuries. And firms involved in this marketing say the up-front payment can help to supplement lost earnings, while a free computer can help claimants’ get their lives back together.
Andy Cullwick, head of marketing at claims management company First4Lawyers, said the legislation over inducements should ensure a ‘level playing field’.
He added: ‘Inducements have only served to harm the claims industry by encouraging people to make claims for the wrong reasons.’