27 June 2013Print This Post

A return to the Dark Ages?

Posted by Tony Walton, managing director of Litigation Futures sponsor Questus
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Walton: small claims should be through the portal

Have you ever been to a six-a-side Masters Football tournament? Retired professionals turn out for their former clubs, still recognisable, but a few years older, a couple of inches on the waistline and with more huffing and puffing than you remember.

The tackles still fly in, though. You’re never sure whether the ones that really hurt are caused by innocent clumsiness, or whether they’re a long-anticipated, much-rehearsed opportunity to avenge some never-to-be-forgiven injustice dating back to the 1990s.

Bearing no resemblance whatsoever to that, of course, the oral evidence session of the transport select committee on the cost of motor insurance and whiplash took place on 17 June. On a couple of occasions, the witnesses were asked about the possibility of “a new market” being created to handle road traffic accident (RTA) claims valued below £5,000 in the event that the small claims limit (SCL) rises to that figure.

Some said no such market will arise and that access to justice will suffer as a result. An equal number said that all the current players – insurers, solicitors and claims management companies (CMCs) – would seek to represent those claimants in return for a share of damages.

What united the otherwise partisan witnesses and their committee inquisitors was the hope that legitimate whiplash victims would continue to be entitled to pursue claims and receive compensation (to some degree) for proven injuries. In announcing the reduction of the typical RTA portal fee to £500, the government stated that it felt the lower fee to be enough to permit “efficient and effective claimant solicitors” to continue to represent those claimants to a satisfactorily high standard.

For those who now take 25% of damages to fill the gap left by the reduction, a typical pre-April fee of £1,350 including a success fee has dropped to about £917 on a typical £2,000 claim. A heavy blow, but, it seems, not fatal to the majority of personal injury practices. The second blow of removing £500 of recoverable costs from that figure by raising the SCL to £5,000 may well prove fatal for many more.

The government now needs to be asked whether this second slash at lawyers’ fees will still permit “efficient and effective” representation. Everyone will have their own answer to that question. One key contributor to the improved handling of low-value RTA claims in the last three years has been the claims portal. Without forgetting its early teething troubles, it has undoubtedly, with laudable effort on the part of those responsible, achieved its intended aim, namely to streamline the processing of this category of claims.

During the course of the hearing on 17 June, there was only the briefest of references to one major consequence of raising the SCL to £5,000. Doing so will remove at least three-quarters of all RTA claims from the value band captured by the portal. The introduction of employer’s and public liability claims, which are, at least for now, not affected by the proposed rise in the SCL, will go nowhere near making up the numbers.

Assuming a degree of sincerity in insurers’ stated wish to continue to pay compensation to genuine victims and a commensurate wish on the part of the government to support whoever seeks to assist claimants in this field to be “efficient and effective”, surely provision must be made to ensure these hundreds of thousands of claims a year continue to be handled in the portal?

Anticipating numerous intakes of breath at what would be required, let us acknowledge the need for:

  • An amendment to the Civil Procedure Rules (although this will be required in any event to increase the SCL);
  • An adjustment to the workings of the portal itself to ensure that the correct sum of costs, or no costs at all, are paid depending on the sum of damages agreed, (although a comparable exercise is already in hand with the introduction of EL/PL claims into the portal); and
  • A review of how the portal is funded, anticipating future users may be a more diverse congregation than claimant solicitors and insurers alone.

In some quarters, simply to give consideration to these issues might be seen as some sort of admission of defeat to those in favour of the increase to £5,000. But at a time when the future and quality of representation of claimants in the overwhelming majority of personal injury claims is, for some, at stake, it seems only good common sense that plans are made now to ensure that claimants, in person or via a new market of representatives continue to benefit from exactly the kind of modern, hi-tech solution so often wished for by those dealing with lawyers and insurers. A return to the Dark Ages beckons as the alternative.