The Ministry of Justice expects to impose fixed fees by early next year to tackle what it calls the ‘epidemic’ of false holiday sickness claims. Ministers confirmed today that the Civil Procedure Rule Committee is drawing up rules for fixed recoverable fees in sickness claims, ready for them to come into force in early 2018.
The costs restrictions, the government expects, will go some way to deter bogus claims, but further action was signalled with the issuing of a call for evidence. The MoJ wants greater insight into the reported rise in suspected false insurance claims brought by British holidaymakers for gastric illnesses like food poisoning.
The government is clear, even ahead of the review, that this is a problem ‘damaging Britain’s reputation overseas’ and pushing up holiday costs.
The travel industry has already told ministers the UK-wide upsurge in holiday sickness claims could be as high as 500% since 2013. The MoJ believes the disparity with claims figures in other European countries suggests the UK has a problem with the scale of bogus claims.
Justice minister Dominic Raab said: ‘Bogus claims against tour operators risk driving up the price of summer holidays abroad for hard-working families who have earned a break. We’re taking action to deter these claims, and protect holiday-makers from being ripped off.’
The call for evidence, which lasts four weeks, asks the industry and others involved in the process to give views on the volume of claims and the level of damages awarded.
Ministers believe fixed costs will give travel operators more incentive to challenge sickness claims rather than settle them out of court. Legal costs are currently not controlled as they are for personal injury claims suffered at home.
The Association of British Travel Agents says the average value of a gastric illness claim is £2,100, and claims cost on average £3,800 to defend. The projected total cost of claims to the industry in 2016 (including damages paid) was estimated by ABTA to be more than £240m.
ABTA bosses say a ‘legal loophole’ is allowing claims firms to unduly profit from running these cases. But the courts have shown they are willing to compensate people when they can show that hotels are failing to meet reasonable standards of cleanliness.
The Law Society today urged the government not to restrict genuine claims in efforts to clamp down on fraud. Vice-president Christina Blacklaws added there should be an onus on insurers not to pay out on claims which are either fraudulent or which lack legal merit. 'If tour operators or hotels have a concern a claim is fraudulent or exaggerated, it is essential the claim is investigated,’ she said. 'Sometimes claims are settled when they are fraudulent and defendable. We are concerned that this may actually encourage more fraudulent claims and will increase the cost of holidays. If a claim lacks merit it should be defended.’
The Solicitors Regulation Authority has previously said it is investigating more than a dozen law firms over potential links with claims management companies and referral fees paid for work.
James Dalton, director of general Insurance policy at the Association of British Insurers, said: 'Claims firms and lawyers can make completely disproportionate sums of money from encouraging bogus sickness claims overseas, meaning the compensation cowboys have turned their attention to holiday resorts. All British holidaymakers will pay the price in the long run as this activity pushes up costs. Although there is still work to do, the government has shown it is ready to crack down on compensation rackets in the UK and it is very good news that steps are now being considered to also prevent these abuses overseas.'