Small claims limit for personal injury Contents
In this report we consider the impact of raising the small claims limit for personal injury (PI) from £1,000 to £2,000, and to £5,000 for RTA-related PI claims—part of a package of reforms that includes separate measures contained in the Civil Liability Bill. We look at the reforms that have already been made to the claims process for personal injury; the Government and industry response to insurance fraud; the potential impact of raising the small claims limit on different types of personal injury claim; and the impact of doing so on the judiciary and the courts. We also examine the Ministry of Justice’s proposals for implementing the small claims reforms, and consider the impact of increasing the small claims limit on different organisations that assist claimants.
A central consideration is that claimants in the Small Claims track are unlikely to have legal representation, as they cannot recover their legal costs incurred in bringing their claim from the other side, if the claim is successful. We conclude that increasing the small claims limit for PI creates significant access to justice concerns. While the Ministry of Justice is making laudable efforts to develop an electronic platform supplemented by guidance and support for unrepresented claimants, we conclude that this ambitious project risks falling short of creating a claims process that guarantees “unimpeded access to the courts”, a principle upheld by the Supreme Court in its judgment in the Unison case.
Our other principal conclusions and recommendations—many of which relate to our concerns about the impact on access to justice—can be summarised as follows:
- We are troubled by the absence of reliable data on insurance fraud and we recommend that the Government work with the Association of British Insurers (ABI) to develop a more nuanced approach that avoids conflating unexpected consumer behaviour with fraudulent activity. The Government should also work with the ABI and the Prudential Regulation Authority or the Financial Conduct Authority to monitor the extent to which any reduction in insurance premiums can be attributed to these reforms, if they are implemented, and report back to us after 12 months.
- We agree that the £1,000 small claims limit for PI should be increased to reflect inflation, calculated from 1999. Applying the Consumer Prices Index, an increase to around £1,500 might be appropriate in April 2019.
- While fraudulent and exaggerated claims must be prevented, the common law right to compensation for negligence applies regardless of the value of the claim. We recommend that the Government should not increase the small claims limit for RTA PI claims to £5,000.
- We conclude that there is no policy justification for including vulnerable road users within the reforms proposed for RTA PI claimants and we recommend that they be excluded from any higher small claims limit that is imposed on other RTA PI claims.
- We are deeply unimpressed by the inability of the Ministry of Justice to quantify the impact of raising to £2,000 the small claims limit for employer liability (EL) and public liability (PL) claims; given the potential complexity of these claims and the role of litigation in maintaining safe and healthy workplaces, we recommend that they be subject to a small claims threshold of £1,500.
- The senior judiciary has reasonable concerns about the consequences for judges and the courts system of increasing the small claims limit and “wait and see” is not an adequate Government response. If the small claims limit is to be increased by more than the rate of inflation, then we recommend that the Ministry of Justice and HM Courts and Tribunals Service work with the senior judiciary to agree a framework for monitoring this impact so that monitoring can commence immediately and urgent steps taken to address any adverse impact.
- We recommend that, before introducing further changes to the PI claims process, the Ministry of Justice consider the learning from its post-legislative review of Part 2 of the Legal Aid, Sentencing and Punishment of Offenders (LASPO) Act 2012.
- While we commend the Ministry of Justice’s decision to work with expert stakeholders in developing the new electronic platform, a more realistic approach should be taken to the technical challenges that may be faced. We recommend that the national roll-out of the platform—and hence any changes to the small claims limit for PI claims—be delayed until at least April 2020, with EL and PL claims excluded. The new claims process should be independently evaluated after three years.
- We remain to be convinced that the electronic platform can overcome the inequality of arms between represented insurers and self-represented claimants. We recommend that, during its pilot phase, the Ministry of Justice give a central focus to securing financial help for claimants who cannot meet the cost of disbursements and ensure that online decision trees give effective support to claimants encountering defendant resistance.
- We are concerned about the potential deterrent effect of introducing online-only applications on particular population groups, together with the risk of discriminatory impact. We recommend that the Ministry of Justice closely monitor the effect on groups of claimants during the pilot phase and take steps to address any adverse impact—for example, by providing targeted face-to-face support.
- Availability of support and guidance, including face-to-face advice, is central to the success of the proposed electronic platform. As soon as its working group on support and guidance has reported, the Ministry of Justice should produce a stage-by-stage, costed plan for how it will fund and implement support and guidance, including any face-to-face support that the working group recommends.
- We conclude that the Government has under-estimated the impact of raising the small claims limit on providers of before the event insurance, with potentially adverse consequences for access to justice.
- We welcome the reforms to the regulation of claims management companies (CMCs) in the Financial Guidance and Claims Act, and we recommend that the Financial Conduct Authority impose a cap of no less than 20% on the proportion of compensation that CMCs can levy from PI claimants. We also recommend that the Government monitor the effectiveness of the Act’s restrictions on cold calling, and report to us within a year of the restrictions taking effect on progress made in using technical remedies to tackle loopholes that might be exploited by overseas operators. We think that an outright ban would be more effective.
- Given the risk of greater use of paid McKenzie friends by CMCs as a result of raising the small claims limit, we recommend that the senior judiciary conclude its examination of McKenzie friends as soon as possible.
- We regret that the Ministry of Justice did not consider it relevant at the consultation stage to estimate the potentially substantial impact of its proposals on the PI legal sector, and it is unclear to us why its final stage Impact Assessment has assumed that the sector will be able to replace PI work with work of equivalent value. We draw the Ministry’s attention to these important issues.