Thursday, June 27, 2019

Civil Liability Act Update

Significant developments have taken place in relation to the Civil Liability Bill since we last reported on this in August 2018.

The Bill received Royal Assent and completed the Parliamentary process on 20th December 2018, when it became the Civil Liability Act 2018. This triggered the phased introduction of the Act: the first part, which requires a review of the discount rate commenced straightaway and the second part, which deals with the controversial whiplash reforms is expected to come into force in April 2020.

The main changes can be summarised as follows:

Review of the discount rate

Following completion of the first review on 19th March 2019, the Lord Chancellor has 140 days i.e. until 6th August 2019 to determine what the new rate will be before publishing an Order which sets out his decision. The expectation is that the review will deliver a higher rate than the current rate of minus 0.75%. The Act requires the discount rate to be reviewed every 5 years thereafter. Both Claimants and Defendant insurers are likely to be anxiously awaiting the decision due to its potential to have a significant impact on the value of high value PI claims, particularly for younger Claimants, with substantial claims for future losses.

Whiplash reforms

The Lord Chancellor will also introduce a set tariff of damages for low value whiplash injuries to the neck, back and shoulder of up to 2 years duration, which will stand for 3 years before it can be reviewed or amended. The damages awarded under the tariff are expected to be significantly lower than the current level of common law damages. Claims by vulnerable road users such as motorcyclists, cyclists and pedestrians will be excluded from the tariff system.

In an attempt to reduce fraudulent claims, the Act will make it mandatory for an independent medical expert to examine the Claimant in all claims and pre-medical settlement offers will be banned.

Changes to the small claims limit

The small claims track limit for PI cases will increase from £1,000 to £5,000 for RTA claims and to £2,000 for all other injury claims. Given that the majority of PI cases fall within these brackets and legal costs will not be recoverable from the Defendant, a higher proportion of litigants in person are expected to bring claims in their own right. The intention is to introduce a more user-friendly portal system to address this change, with large scale testing proposed to commence in October 2019, although no progress on the new portal has been reported for some time.  

As we stand today, due to the Act being in the early stages of implementation, the full impact of the reforms on PI claims is still to be seen. The PI market has been hit hard in recent years by the introduction of the LASPO reforms and is expected to be hit further when the full effects of this Act are felt next year. Some firms have made the decision to discontinue PI work, due to the area no longer being seen to be commercially viable and to instead focus on other areas, whilst others have taken the opportunity to diversify into new specialisms, such as Professional Negligence. The further looming reforms are a reminder of the need for firms to be flexible and adaptable in today’s ever evolving legal landscape and to keep their Business Plan under regular review.

Author: Siân Riley