MoJ set to ignore insurers’ concerns over impact of 10% increase in damages

Clarke: insurers urge him to act

The Ministry of Justice has indicated that it will not take action over the Court of Appeal’s ruling to uprate damages by 10% next April, despite the concerns of defendant insurers.

Last month’s ruling in Simmons v Castle is seen as a key part of the Jackson reforms, but has been criticised for the unfairness and confusion it potentially causes.

The court said the 10% will apply to all cases begun before 1 April 2013 but settling afterwards, raising the prospect of claimants dragging their heels until after that date and then receiving ‘double bubble’ as they will still also be able to recover their success fee and after-the-event insurance premium.

It is also not clear how the ruling will interact with part 36 where an offer is only beaten because of the uprating.

The Association of British Insurers (ABI) has written to Lord Chancellor Ken Clarke following the decision. A spokesman said: “Our concern is that the judgment creates an imbalance by the retrospective impact of 10% uplift without the implementation of fixed costs, and as such could cost motorists in higher premiums and others, such as the NHS.

“The judgment upsets a carefully balanced package of reform and we have raised the implications of this judgment with the government.”

The ABI is understood to have urged Mr Clarke to obtain legal advice on the impact of Simmons and consider measures to manage its impact, including bringing forward other reforms contained in the Legal Aid, Sentencing and Punishment of Offenders Act 2012.

It warned that unless he acts to ameliorate the effects of the change, the cost of motor and liability claims could rise by hundreds of millions of pounds, with corresponding pressure to increase insurance premiums.

However, a Ministry of Justice spokesman indicated that the government sees the issue as one for the judiciary to deal with. He told Litigation Futures: “The government has prioritised reforming the costs of civil litigation, and in particular no-win, no-fee conditional fee agreements. The reforms will rebalance the costs of civil litigation, and have major benefits for defendants who will face reduced costs as a result.

“We have always said that the increase in damages for claimants was for the judiciary to take forward, in line with a Court of Appeal ruling in 2000 [Heil v Rankin].”

See feature: Things fall apart – Jackson, 10% and the Court of Appeal