The Civil Liability Bill was proposed by Lord Keen of Elie and formally announced by the Ministry of Justice on 20 March 2018. It is a bill intended to, according to the parliament website, “make provision about whiplash claims and the personal injury discount rate.”
More specifically, the Bill sets out reforms relating to low value claims and the discount rate. The Bill proposes to increase the small claims limit for road traffic accident claims to £5,000 and, for all other claims, to £2,000. The bill also proposes to introduce a tariff system for whiplash injury claims, which will reduce the amount of damages available to those suffering such injuries. One of the main justifications for such reforms is that it will enable a saving on insurance premiums for consumers, where the costs saving for the insurer will filter down (a story articulated before and, that I have argued, is of questionable veracity).
With regards to the discount rate, the Bill looks to make changes to the way in which the discount rate is calculated. The discount rate was lowered to -0.75% from 2.5% last year, coming into force on 20 March 2017. The discount rate refers to the percentage by which a lump sum awarded in compensation is adjusted to take account of the likely net rate of return from investing the lump sum. Almost as soon as the new rate was announced, which is a fairer rate for claimants as it reflects their position as risk-averse investors, the Ministry of Justice announced that they would reform the way that the discount rate was calculated. The proposed reforms include a review of the discount rate every three years. Part of the reasoning for this reform was that claimants do no invest as the law assumes they do; a rationale which is flawed according to a recent article by Ian Peters, a partner at Anthony Gold.
The Bill had its second reading in the House of Lords on 24 April 2018 and goes to the Committee stage on 10 and 15 May 2018, where it will be debated again. On both readings, numerous concerns were raised about the Bill. Of particular note were concerns that genuine claimants who suffer with more minor injuries will not have recourse to legal representation; that the bill lacks detail and clarity, including no set definition of “whiplash”; that the pace of the review of the discount rate is too slow (an insurer’s concern), and that there is no means of ensuring that savings to insurers would actually be passed on to consumers. Caroline Bowden describes the development of the bill to the second reading here.
Following the second reading of the Bill, Lord Keen submitted a letter to the Lords commenting on some of the concerns raised during the first two readings. He wrote that the Bill is not intended to deny genuine claimants legal representation, where lawyers will be expected to adapt and provide “unbundled” legal services and low cost advice on specific parts of the claim to claimants. Lord Keen also explicitly excludes all road users other than motor vehicle users from the whiplash tariff reforms, though the increase in the small claims limit to £5,000 will apply to all road users. It is questionable how this exclusion is justified, where the fairness of distinguishing between accident circumstances rather than the severity of the injury seems to lack logic.
Lord Keen also addressed the concern about the insurers passing on the benefit, indicated at £35 per policy holder, to consumers and said, “if the industry as a whole sought to avoid passing on any savings this would signal the competitive nature of the market had changed. If this was to happen the Financial Conduct Authority and the Competition and Markets Authority would investigate and take appropriate action and the Government would encourage them to do so”. Lord Keen’s comments regarding insurers are helpful, though whether the insurers will declare their true savings, whether this this will be reflected in insurance premiums and whether the various financial authorities will actually investigate this remains to be seen.
Regarding the review of the discount rate, Lord Keen emphasised that preparatory work considering a review of the discount rate can be completed before Royal Assent, but that an expert panel cannot be appointed until there is the power to do so. It seems that this will push the decision for the new discount rate to 2019 despite the insurers best efforts to speed things up. Interestingly, Lord Keen highlights in his letter that the courts retain the power to apply a different rate than that which is set should it deem it more appropriate to do so. He goes on to say that he does not expect courts to regularly deviate from the prescribed rate, but mention of this is noteworthy and it remains to be seen how the courts will proceed following the new rate being set.
Finally, a draft Order of the Bill put before Parliament on 8 May 2018 defines the term “whiplash” and sets out the proposed tariff rates, at a maximum of £3,725 for an injury lasting up to 24 months. Lord Keen highlighted in his letter that judicial discretion will remain where there is the possibility to apply an uplift of 20% in specific circumstances, including where psychological injury is suffered or there is a higher degree of pain, suffering and loss of amenity.
Whatever one’s view on the Bill, it is steadily making its way through Parliament and, whilst some of the concessions are welcome, it seems unlikely that this Bill will be the end of reforms for injury claims.