Ministers finally sought to get a grip of holiday sickness claims today with the confirmation that fixed recoverable costs are to be extended to the sector.
As of Monday, civil procedure rules will be amended to bring sickness claims into line with other personal injury claims and clamp down on what the government describes as an ‘epidemic’ of litigation.
The travel industry has campaigned in recent years for immediate action to stem the number of claims and estimates the increase is as much as 500% since 2013.
Justice ministers say they are convinced that uncontrolled legal costs for claimant representatives have encouraged operators to settle holiday sickness claims out of court. This in turn has emboldened rogue lawyers to bring dishonest claims knowing they are unlikely to be challenged.
Justice minister Rory Stewart said: ‘This damages the travel industry and risks driving up costs for holidaymakers. This behaviour also tarnishes the reputation of British people abroad. That is why we are introducing measures to crack down on those who engage in this dishonest practice.’
The government asked the Civil Procedure Rule Committee last year to look at bringing package holiday claims within the fixed recoverable costs regime.
Tour operators will now pay prescribed costs depending on the value of the claim and length of proceedings, the amounts in line with existing costs for employer and public liability claims.
If parties reach a settlement of between £1,000 and £5,000, fixed costs are £950 and 17.5% of the damages. For claims worth up to £10,000, this increases to £1,855 and 10% of the damages over £5,000. Where claims exceed £10,000 in value, lawyers can claim £2,370 and 10% of damages over £10,000.
If the claim is disposed of at trial, costs are fixed at £3,790 plus 27.5% of the damages agreed or awarded and the trial advocacy fee.
The campaign by the tourism industry, led by the Association of British Travel Agents, has taken on a similar feel to that mounted by the insurance industry in response to an apparent increase in whiplash claims.
ABTA has said 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.
The association has blamed a ‘legal loophole’, which encouraged claimant lawyers to seek out cases stemming from foreign jurisdictions that were not subject to fixed costs.
The Law Society has urged the government not to restrict genuine claims in efforts to clamp down on fraud and said insurers should not pay out on claims which are either fraudulent or which lack legal merit.
Sarah Hill, partner and head of fraud at insurance law firm BLM, said it was right to take uncertainty out of the process for all parties involved.
She added: 'Ultimately, the MoJ does not want to discourage genuine claimants. However, it is high time that unscrupulous claims management firms and those knowingly putting in false claims, who exploited a space that was ripe for large pay-outs, are sent the message that this is criminal activity that cannot continue.'