Insult to injury | Feature
The low down
When Tony Blair won the 1997 general election, legal affairs was a policy backwater. Then the new Labour prime minister appointed his one-time pupil master, Derry Irvine, as lord chancellor. Irvine declared war on the civil legal aid budget. Legal aid, he said, ‘must be made a tool to promote access to justice for the needy and not be seen by the public as something basically keeping lawyers in business’. The biggest shock was felt by personal injury lawyers. But with an eye on access to justice, achieved with little call on the public purse, Irvine and his deputy, solicitor Geoff Hoon MP, ushered in ‘no win, no fee’. The personal injury sector boomed – an outcome that successive governments seemingly in hoc to the insurer lobby have sought to reverse. Twenty-five years on, the repercussions of Irvine’s cuts are still playing out.
First, a little history. It is the morning of 2 May 1997. I do not know it yet, but as a Commons researcher for the Liberal Democrats amid this political ‘new dawn’ I am going to be a minor witness to a revolution of sorts. Later that day Tony Blair will appoint his old pupil master Derry Irvine, Lord Irvine of Lairg, as his first lord chancellor. The following Tuesday Geoff Hoon MP, a solicitor, will become parliamentary under-secretary, Irvine’s deputy.
The legal affairs brief, on which I worked, was something of a policy backwater pre-1997. But Irvine and Hoon were about to change that. Their plans were made public in a speech the lord chancellor delivered on 17 October. As the Independent reported, the speech signalled ‘a huge cost-cutting exercise which will result in the most severe reduction in access to civil justice since legal aid began in 1949’.
The plans, the paper continued, ‘will be seen as the biggest attack on the welfare state by the Labour government. Plans for privatisation of almost half the civil legal-aid scheme far exceed anything contemplated by the Tories. Only a relatively small number of cases involving social welfare, housing, immigration and possibly medical-negligence claims are to be spared the axe’.
In place of legal aid Irvine and Hoon promoted a solution whereby the market would provide – lawyers could for the first time agree conditional fee agreements (CFAs) in most civil cases. ‘No win, no fee’ arrived with the Access to Justice Act 1999.
The effect on personal injury cases was immediate and profound. The incentive for law firms to take cases on this basis was the uplift allowed where a case was won – recoverable from the losing party along with other costs. In theory, ‘successful’ cases could be used to cross-subsidise losing cases, while providing an incentive for firms to assess the likely success of claims, thereby winnowing out less meritorious claims. The more borderline the chances of success, the higher the success fee that could be claimed.
The market responded. Claims management companies (CMCs) proliferated, and with them TV and billboard advertising. The public were being cold-called on the off-chance they had had an accident they could claim for. This tawdry end of the market was far from the full story, but away from daytime TV ads personal injury firms were growing.
All this is worth recalling because CFAs and success fees were what some personal injury lawyers still refer to as ‘Hoon’s promise’ – a pledge that the market would provide access to justice, including, via costs awards, the maintenance of the principle of restitution for successful claimants. Firms were assumed to be a necessary part of such access to justice because their role in the market was to assume the commercial risks of the system. And risks need the prospect of reward if a business is to take them on.
‘Personal injury litigation has been a political football for as long as I can remember,’ says Bolt Burdon Kemp’s managing partner Jonathan Wheeler. ‘Successive governments have tampered with the funding of civil claims on a regular basis. Legal aid has gradually ebbed away as the Treasury looked to save money. The answer was conditional fees, with the profession taking the risk should client claims fail.’
But the focus of government policy since 2010 has been on containing the power and capacity of the market created by ‘Hoon’s promise’. A core bone of contention was the way success fees functioned. Where a CFA was in place, a losing defendant was paying more than the amount required for the claimant’s ‘restitution’.
The allegation was that some claimant solicitors applied a success fee that was too high by exaggerating the risk of the case. Whether that was true or not, as Wheeler recalls: ‘Recoverable success fees of up to 100% made millionaires of some law firm partners… the claimant personal injury solicitor’s image turned from the “white knight”, coming to the rescue of those injured through no fault of their own, to fat-cat ambulance chasers, willing to be a party to fraud if it means they’ll get paid.’
‘Personal injury litigation has been a political football for as long as I can remember’
Jonathan Wheeler, Bolt Burdon Kemp
The Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO) brought in non-recoverable success fees, justified on the grounds that this meant claimants had what one minister called ‘skin in the game’. Since then, Wheeler believes: ‘Successive administrations have bowed to powerful lobbying from the insurance industry to restrict damages and costs for low-value claims.’
Changes in the Civil Procedure Rules, taking effect in October, will weaken the ‘qualified one-way costs shifting’ regime introduced by Lord Justice Jackson’s reforms as a quid pro quo for abolishing the recoverability of success fees. Another lever is fixed recoverable costs, which are to be introduced for personal injury cases worth less than £100,000. Low-value road traffic accidents – including ‘whiplash’ claims – for under £5,000 have been required, with very few exceptions, to be made via the online portal since 31 May 2021.
John McQuater, president of the Association of Personal Injury Lawyers (APIL), says: ‘Damages for whiplash are now too low, and the battle is still going on to ensure people are properly compensated when they suffer a combination of whiplash and other injuries.’
Whiplash under scrutiny
‘The Justice Committee is beginning an inquiry into how whiplash injuries resulting from traffic accidents are processed following government reforms of the legal framework. Whiplash happens when your head is suddenly jolted backwards and forwards in a whip-like movement – typically in a car accident.
‘Whiplash reform was introduced in 2021 following when it was revealed that insurance claims for the injury were running at more than £2bn a year – adding an average of £90 to everyone’s car insurance policies. The Whiplash Reform Programme was aimed at roughly halving the overall cost of these types of insurance claims, and then passing on savings in premiums of between £40 and £50 a year per motorist.
‘As part of the reform programme, the Ministry of Justice asked the insurance industry to set up an online claiming system, or portal, known as the Official Injury Claim Service, which would deal with whiplash and claims for bruising or minor fractures. The reforms also required claimants to provide medical evidence of their injuries and introduced a financial limit on claims.
‘The inquiry will investigate the effects of the reform programme, including any savings, and how the claim service portal operates.’
Full details can be found here.
Yet, there is likely more change to come. While some areas of justice policy can struggle for political attention and parliamentary time, personal injury often seems to go to the front of the queue. The Forum of Insurance Lawyers expects further reform. Its president, DWF partner Nicola Critchley, tells the Gazette: ‘2023 is likely to bring significant reforms. Some will involve the tightening of existing rules but others will be more fundamental.’
Critchley says pre-action protocols (PAPs) will receive further attention. While there has been a steady increase in the number of PAPs which are intended to govern the behaviour of parties before court proceedings are issued, Critchley notes: ‘There has long been a feeling that these have done little to discourage proceedings.’ An ongoing review of PAPs ‘will hopefully see them given real teeth, with a requirement for far stricter compliance and with penalties for non-adherence’.
New PAPs may include a requirement for parties to engage in some form of alternative dispute resolution.
Even where fixed recoverable costs do not apply, says Critchley, existing costs rules will continue to be relevant – but here too there will be changes. The Civil Justice Council is carrying out a review of costs which includes guideline hourly rates (GHRs), budgeting, PAPs, the impact of digitisation, and the impact of the recent Court of Appeal decision of Belsner.’ (In Belsner, an RTA claim, the court decided that a firm was correct to seek deductions from damages to meet its costs.)
She mentions another route to address costs – the GHRs that inform the level of costs awarded to a winning party. The rates were frozen in 2010. In 2014, the CJC botched the resetting of the rates (poor data was blamed). In 2021 the master of the rolls accepted new rates which commanded wider respect.
But could the rates be reviewed down? Critchley says the 2021 update was done ‘by a methodology that attracted a great deal of criticism’. In addition, she argues, there was ‘concern that the review had failed to take into account changes in working practices – working from home and technology – which were already taking place, but which had been accelerated by the pandemic’.
FOIL is also urging changes to costs budgeting, which typically takes place when the court gives its first set of directions for the future conduct of the case. ‘It is felt by some that this process prolongs the case management hearing and that budgeting prior to directions is too early in the process and leads to nothing more than reasonable estimates, rather than accurate budgets,’ Critchley says. FOIL supports an amendment to the rules delaying costs budgeting ‘until the parties have had time to digest the directions given by the court’.
There is a date for another review of the discount (or ‘Ogden’) rate. This is supposed to reflect the fact that someone in receipt of a lump sum can invest their award. The projected return on that investment is then subtracted from the award to arrive at a figure that meets the claimant’s calculated needs.
In 2017, the then justice secretary Liz Truss gave insurers a nasty surprise by announcing the rate would change following a review – from 2.5% to -0.75%. (It was reset at -0.25% in July 2019). The change had a massive impact on the insurance industry, increasing awards and therefore the capital reserves for past claims not yet paid. ‘Negative discount rates have increased multipliers dramatically and thus the value of lump-sum settlements,’ Critchley says.
Of course, the issue looks very different from a claimant perspective, APIL’s McQuater argues: ‘The discount rate was too high for years and years, leaving catastrophically injured people struggling to make ends meet, and it took the threat of legal action to have it reviewed.’
Now the Ministry of Justice has published a call for evidence exploring the option of a dual/multiple rate, with a deadline of 11 April 2023. The lord chancellor must start his review of the discount rate by 15 July 2024 with a new rate (or rates) in force by 11 January 2025. The MoJ says: ‘It explores a variety of issues including whether different rates could be set for “heads of loss” or by “duration of injury”, as well as looking at dual/multiple rate models currently in operation in other jurisdictions.’
As such changes are considered, McQuater has an overriding concern about public policy affecting personal injury: ‘Injured people should be at the heart of the personal injury process, yet are consistently seen as somehow undeserving of full and fair compensation while, at the same time, those responsible for what are often life-changing injuries are not held fully accountable nor providing properly for people they have needlessly injured.’
Justice ministers may want to press on with personal injury reforms, but last week the justice select committee issued a call for evidence for a review of the whiplash reforms implemented in May 2021. (See above box).
The committee’s focus appears primarily insureds as consumers. It will consider: ‘To what extent have these measures met the government’s objective of reducing the cost of whiplash claims to the economy; and to what extent are any savings being passed on to motorists through lower insurance premiums?’
But it will also look at ‘whether the Official Injury Claim portal is accessible and easy-to-use for claimants and/or their legal representatives’. Claimant lawyers see an opportunity here.
Jonathan White, legal and compliance director at National Accident Helpline, says the call for evidence is ‘wholly unsurprising’. ‘While it is too early to make a detailed assessment,’ he says, ‘it is likely that the reforms will have failed in a number of key areas, partly due to misconceptions about the claims process and partly due to poor implementation.’
White points to ‘the lower than 10% uptake’ by unrepresented claimants as ‘an abject failure’ that ‘has not been helped by a failure to promote the process’. He argues: ‘Direct consumer use was misconceived from the outset. Most research confirms that consumers are fearful of the legal process and are incredibly reluctant to self-serve, particularly in a David v Goliath scenario like a personal injury claim. We have a system designed for people that were never going to use it.
‘If it was intended to tackle fraud – there is no evidence that the reforms have succeeded, and claimants and insurers need to work collaboratively to tackle fraud.’
As chancellor, George Osborne announced the government’s intention to end whiplash claims in 2015. ‘In the uproar that followed his plan was shelved,’ McQuater recalls. But the tariff set for a successful claim, White says, ‘requires urgent and immediate review’. He adds: ‘The levels of whiplash damages, which were written on a napkin in the MoJ, are woefully low and unfair – but to make matters worse they have been massively eroded by the impact of inflation.’
White is critical of the consultation process around the May 2021 reforms, which he says engaged the wrong stakeholders, resulting in ‘holes’. Absent, he argues, is ‘any concept of how to value mixed-injury cases, psychological injuries and exceptional circumstances. Important parts of the legal process remain outside of the scope. For example rehabilitation and credit hire, creating unnecessary and additional complexity to the process’.
White also argues that there are ‘obvious and significant process gaps’. One example is ‘the inability to transfer claims’ in the official injury claims portal ‘between law firms without starting from scratch’.
Claimant solicitors argue that the whiplash reforms ignore the complexity of soft-tissue damage – that they are not chasing ambulances, but the MoJ is chasing headlines. Complex and catastrophic injuries, including fatal injuries, are less well covered in the press.
Joshua Hughes, head of the complex injury team at Bolt Burdon Kemp, says: ‘The relentless PI reforms and now the promise of fixed recoverable costs down the road for PI cases worth less than £100,000 does and will increasingly mean we are turning down meritorious fatal accident claims – sadly some of the most tragic and serious cases – because most attract fairly modest damages. I would therefore want to see Fatal Accident Act claims exempted from these changes.’
This is also an area APIL is keen to draw attention to. ‘Our law on bereavement damages, with its language of “illegitimate” children, belongs in the dark ages, yet the government refuses to budge on reform,’ McQuater says. In general, he adds: ‘The apparent obsession on fixing costs for claimants, but not always defendants, can leave claimant lawyers operating in a straitjacket, while defendants are free to play the system… After all my years in this profession I do not understand why victims of negligence can be seen as less important than those who have injured them.’
As with any area of the profession, the financial viability of running personal injury claims affects access to justice. As Wheeler concludes: ‘Unless firms can attract high-quality and high-value work in sufficient numbers, or gear up to run lower-value work more cheaply and efficiently, they will leave this work behind.’ Personal injury claims have been on the decline since Covid, he points out: ‘And government reforms have combined to have a chilling effect on those who should be seeking redress for wrongs done to them. All of the changes being tabled by government currently create a less favourable environment for claimants. Over the long term, unless this changes, it will affect the kind of cases we can reasonably take on as a firm.’
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