LEIG alert on EDM wording, 16 January 2007

Legal Expenses Insurance Group

News Release : 16 January 2007

LEIG alert on EDM wording

LEIG has written to Austin Mitchell MP and the 79 signatories of his Early Day Motion to welcome their support for no increase in the small claim limit but to express concerns at the wording.

The EDM initiative has the very best intentions but by inference the wording suggests that an increase in the small claim limit for road accident claims to £2,500 might be acceptable and also it does not recognise that all personal injury claims would be affected by a higher small claims limit.

The wording is:

That this House opposes any increase in the small claims limit for personal injury cases; notes the petition from 25,000 injured road accident victims delivered to Downing Street in November 2006 expressing their opposition to proposals for an increase in the upper limit on motor injury small claims to as much as £5,000; notes that the petitioners all stated that they would not have been able to cope with pursuing their claim for injury compensation through the small claims process on their own; and believes that it would be wrong to deny justice to victims of road traffic accidents in cases where claims for £2,500 or £5,000 would represent several months of lost earnings for an average injured motorist unable to work.

LEIG estimates that approximately 65% of all personal injury claims fall between £1,000 (the current small claims limit) and £2.500. 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 planned for the next year or two.

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.

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.

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.

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.

The public express similar concerns about any 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.

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.

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.

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.

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.

LEIG has prepared a detailed paper on the small claim limit and this has been sent to the 80 MPS. It aconsiders the issues and concludes it would be highly detrimental to claimants for the personal injury small claim limit to be increased. 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.

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