Small claims limit for personal injury claims, 08 June 2006
Legal Expenses Insurance Group
News Release : 08 June 2006
Small claims limit for personal injury claims
The Legal Expenses Insurance Group (LEIG) has voiced strong opposition to any increase in the small claims limit for personal injury claims.
Research by the Group concludes it would be highly detrimental to claimants for the personal injury small claim limit to be increased. The personal injury limit has not increased since 1991 and for very good reasons. The Group believes these remain even more valid today following the withdrawal of legal aid and compensation reforms introduced and planned for the next year or two.
Director of the LEIG, Tony Baker, commented:
Any increase from the current £1,000 limit would seriously prejudice the ability of claimants to pursue compensation claims. Now is not the time to experiment with the interests of people entitled to receive fair compensation for accidents and injuries that are the fault of others. The limit must remain at £1,000.
The Government is currently reviewing the small claims limit but LEIGs research concludes that any increase in the limit for personal injury claims would be likely to:
Make it more difficult for people to seek compensation; most personal injury claimants would be unrepresented and this will deter a large number from bringing claims.
Reduce the awards to many of those who do persevere: a survey of cases valued at up to £5,000 found that there was an uplift of around 50% on average from the first offer to final settlement. Without legal guidance and help most claimants are likely to be significantly under compensated.
Put claimants to the mercy of defendant insurers and reliant on them to deal fairly both in looking after the interests of their policyholders and those of claimants; far from the current level playing field, a higher limit would result in a system geared to restricting access to help and advice, medical investigation and legal representation. There would be reduced costs to insurers. They may increase their profits and/or reduce some premiums by a pound or two but it would be at the expense of the unfortunate small percentage of the public who are hurt or injured.
Leave claimants confused and unclear as to what compensation they should accept; a MORI survey found that almost 80% of respondents were not confident that an insurer in the pre-court negotiations would offer them the correct amount of compensation if they did not have a solicitor assisting them.
A copy of the Groups full research paper is available on request; the executive summary is attached.
The Group welcomes comments and contacts with other bodies including those with similar consumer objectives.
-ENDS -
Notes for Editors
1. The following companies have joined the LEIG:
Albany Assistance Ltd
Angel Assistance Limited
DAS Legal Expenses Insurance Company Ltd
FirstAssist Group Limited
LAMP Group Ltd
MSL Legal Expenses Ltd
ULR Norwich
It is estimated that members represent in excess of eight million motor legal expense policyholders and over 16 million policyholders in general.
2. Tony Baker has been appointed as Director of the LEIG tasked with setting up and establishing the Group. He is an independent consultant and non-executive director and a former Deputy Director General of the Association of British Insurers. His contact details are:
Tony Baker
Tel: 01920 465000
Mobile: 07725 462528
Email: thetonybaker@gmail.com
3. Website: www.leig.org
Issued by:
Martin Francis
PRassist
Enclosure
(Executive summary of the LEIG paper on the small claims limit for personal injury claims)
Legal Expenses Insurance Group
Legal Expenses Insurance Group views on the small claims limit for personal injury claims
Executive summary
1. In 1991 the small claims limit was set at £1,000 for personal injury claims (and housing repair) and has remained at that level ever since. The Better Regulation Task Force has recommended a review of the limit.
2. The review should take account of the Task Forces conclusions. They noted that the compensation culture is a myth; but the cost of this belief is very real. It was also accepted that a fundamental principle of English law and justice that people who have suffered a loss or injury through someone elses negligence should be able to claim redress. Central to everything must be the injured party the victim the most important person in the process. This central positioning needs, however, to be placed in the context of the changes in attitude and process of the legal system over the last decade or so.
3. Calls to increase the limit ignore completely the changes to compensation arrangements that have taken place over the last decade. The changes were against the background of a £1,000 personal injury small claims limit.
4. For a variety of reasons, many linked to cost to the Government of legal aid and the desire to have a fairer and more open system, legal aid was withdrawn for virtually all personal injury claims. This was embodied in the Access to Justice Act in 1999 which introduced the move from legal aid to a system of no win, no fee conditional fee agreements (CFAs) to fund legal advice and representation. The private sector has responded to the challenge and to ensuring that genuine claimants, especially those on limited means, have access to the opportunity to receive fair compensation.
5. Implementation of the Act has not been completely faultless but the issues that have arisen have generally been addressed to ensure there is a balance between the interests of those providing legal services, those using them, those paying for them, claimants receiving compensation and insurance policyholders meeting the costs.
6. The number of personal injury claims has not risen since CFAs were introduced. The Department for Constitutional Affairs has noted that between 2000 and 2005 there has been a 5% reduction in accident claims.
7. There is a fine balance that needs to be borne in mind in ensuring access to justice for claimants. Claimants are faced with dealing with experienced insurance claims handlers with very significant resources at their disposal. They have a duty to their employers to minimise the amount paid out in claims. As such claimants do need medical and legal help to pursue claims: these services must be paid for just as insurance claims handlers are paid by their employers.
8. If the small claims limit was increased so that claimants had to act essentially for themselves many would be deterred from claiming at all. Of those that did most would not know what could or could not validly be claimed for let alone understanding what was the appropriate evidence to substantiate the claims and properly value the claim. Claimants would be required to construct and manage their own claims essentially in their spare time and usually represent themselves against big business or defendant insurance companies, who inevitably have legal representation in court. There would be a totally uneven playing field.
9. The Law Society has concluded that any increase in the current small claims limit would mean that most personal injury claimants would be unrepresented and they believe that this will deter a large number from bringing claims.
10. A higher limit would mean that in order for a fair settlement to be achieved by claimants they would need to rely to a great extent on those paying the compensation to treat them fairly and pay the correct levels on redress. This is contrary to the obligations that insurers have to their shareholders. It would be foolhardy to expect this to happen. Indeed all the evidence is against this. Claimants deprived of legal advice would almost inevitably be persuaded to accept far less than the true value of their claim.
11. The Association of Person Injury Lawyers (APIL) conducted a survey of cases valued at up to £5,000 and found that there was an uplift of around 50% on average from the first offer to final settlement. Without legal guidance and help most claimants are likely to be significantly under compensated.
12. The public express similar concerns about an increase in the limit. A MORI survey found that almost 80% of respondents were not confident that an insurer in the pre-court negotiations would offer them the correct amount of compensation if they did not have a solicitor assisting them.
13. The main and by far the strongest lobby for a higher limit is from defendant insurance companies. They argue that the need for lawyers in personal injury cases is not required. They wish to tilt the legal balance in their favour.
14. Quicker and cheaper disposal of cases is central to the arguments for a higher limit. Insurers themselves are already under obligations under pre-action protocols and can do a great deal more to speed up settlements and reduce legal costs.
15. If a higher small claim limit did lead to some speeding up in settlements and reduced costs, what would be the price paid? The comments above indicate it would likely be at the expense of fewer genuine claims being processed and claimants being significantly under-compensated.
16. Initiatives are already in hand to keep down and indeed reduce administration and legal costs; examples include the Legal Services Bill and Civil Justice Council initiatives to create a better balance in damages/costs with predictable fees and limitations on success fees. These should be given time to bed-down.
17. Far from the current level playing field, a higher limit would result in a system geared to restricting access to help and advice, medical investigation and legal representation. There would be reduced costs to insurers. They may increase their profits and/or reduce some premiums by a pound or two but it would be at the expense of the unfortunate small percentage of the public who are hurt or injured.
18. It is argued that the £1,000 limit was set in 1991 and inflation alone would suggest a figure of around £1,500 as more appropriate. This fails to recognise three important points.
19. First, the many changes to the compensation system since then and also the changes announced for the immediate future. These have paid regard to the £1,000 limit and may have been very different with a higher limit.
20. Secondly, the limit was last fully reviewed in 1998 and an increase was rejected; RPI since 1998 has been just 20%. In addition, applying RPI assumes that personal injury damages have in fact kept pace with inflation. Research has shown that they have significantly failed to do so since the 1960s.
21. Thirdly, the reason for a low limit is to enable claimants to have access to medical and legal help and advice which is important for the great majority of personal injury claims.
22. The Civil Justice Council, the trade unions and the consumer groups all maintain that there should be no increase whatever.
23. Any increase in the UK personal injury small claims limit would also be totally at odds in a European context and introduce a second class status to UK personal injury claimants as compared to the rest of the EU. It may also be an infringement of Article 6 of the European Convention on Human Rights, which provides the right to a fair trial, because injured people faced with the might and resources put up by the insurance companies will not get a fair trial.
24. An increase would likely reduce access to compensation for many people and reduce the awards to most of those who do persevere. Many claimants would find themselves at the mercy of defendant insurers and reliant on them to deal fairly both in looking after the interests of their policyholders and those of claimants. This is a step too far.
25. The personal injury limit has not increased since 1991 and for very good reasons. These remain even more valid today following the withdrawal of legal aid and compensation reforms introduced and in train for the next year or two. Now is not the time to experiment with the interests of people entitled to receive fair compensation for accidents and injuries that are the fault of others. The limit must remain at £1,000.
[The Legal Expenses Insurance Group (LEIG) was formed in April 2006 by a number of leading legal expenses insurers and intermediaries.]
Tony Baker
Director, LEIG
Email: thetonybaker@gmail.com
Tel: 01920 465000
8 June 2006
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