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MOJ has announced small claims limit changes: £5,000 for whiplash and £2,000 for other injury claims

24 February 2017

Following consultation on reforms relating to low-value injury claims, the government has today published its intentions. 

The headline which will attract most attention is an increase in the small-claims limit for personal injury claims.  For road traffic accident related personal injury claims the limit will increase to £5,000, and for other personal injury claims to £2,000.  This will be seen as a success for many defendants who have been campaigning for an increase to the limits, which have not been reviewed in recent years, despite having fallen behind claims inflation. 

The government will also introduce a tariff of damages for soft-tissue injury RTA claims (whiplash claims, including those where there is an element of minor psychological injury).  The tariff runs from £225 for a 0-3 month injury up to £3,725 for a 24 month injury.  The revised figures amount to a significant decrease on industry figures for RTA accident compensation, particularly at the lower end of the scale.

 A discretionary uplift of 20% will be available to claimants in exceptional circumstances.  The government will not give guidance on what is considered ‘exceptional’, which is a cause for some concern, given that in the course of the consultation examples ranged from a liability dispute to circumstances in which there was an impact on the claimant’s ability to live independently.  Satellite litigation is the likely outcome of the uncertainty in this area, or defendants may find themselves frequently settling at up to 20% above the tariff figures so as to avoid litigation costs. 

It is recognised that the reforms are likely to increase the number of litigants in person, and the government proposes a programme of work with stakeholders to improve support for self-representing individuals, as well as analysis of the potential impact on court resource.  Work with MedCo and Claims Portal Limited is proposed, suggesting that an online solution will be an important part of this work. 

The consultation invited views in relation to a prohibition on pre-medical offers, which are seen as encouraging more claims (including some which may be fraudulent), and as risking under-compensation of claimants.  Steps have already been taken to reduce the effectiveness of such offers in whiplash claims, but the government now proposed more robust measures in the form of a regulatory ban on making, soliciting, accepting or receiving such offers in RTA-related whiplash claims. 

The package of reforms which is proposed will undoubtedly reduce the sums paid in damages and costs in relation to RTA claims.  Whether the number of claims will reduce is far less certain.  While acting for claimants in these cases will become significantly less attractive for traditional providers, and in particular solicitors, other businesses are likely to find models which will allow them to process large volumes of claims in a cost-effective manner, likely through agreements under which they take a percentage of damages. 

Recently published research has shown an increase in the use of rehabilitation in claims, and it has been suggested by government that this may be a means of claims companies bolstering their profits.  Rehabilitation costs will continue to be recoverable and, unless separate action is taken on this front, this is likely to be part of the model that is increasingly adopted in the future. 

The risks associated with an upsurge in litigants in person should not be underestimated.  Self-represented litigants are more demanding for defendants to deal with, more likely to commence court proceedings, and more likely to go to trial.  This has an impact on overall claims spend, as well as on court resource.  It is to be hoped that the government will take prompt action in order to address the challenges posed by an increase in KIPs, and courts will need to be willing to treat LIPs more robustly than is often the case at present where they fail to follow relevant guidance and procedures. 

In introducing the Prisons and Courts Bill, the Ministry of Justice has indicated that the intended reforms will cut car insurance premiums by around £40 per annum.  Whether this ambition will be achieved is likely to depend on the detail of implementation, and the manner in which the market responds to the reforms proposed.  

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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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