Osborne's removal of general damages is 'callous', says APIL

Lawyers have begun to hit back at the chancellor's 'callous' plans to raise the small claims limit for personal injury claims and scrap general damages for 'minor' whiplash injuries.

Presenting the Autumn Statement to the House of Commons, George Osborne announced the government's intention to remove the right to general damages for soft tissue injuries and increase the small claims limit to £5,000.

In his speech earlier today, the chancellor said: 'We're going to bring forward reforms to the compensation culture around minor motor accident injuries.

'This will remove over £1bn from the cost of providing motor insurance. We expect the industry to pass on this saving, so motorists see an average saving of £40-£50 per year off their insurance bills.'

The government said it was 'determined' to crack down on the 'fraud and claims culture'.

'Whiplash claims cost the country £2bn a year, an average of £90 per motor insurance policy, which is out of all proportion to any genuine injury suffered,' said the Treasury statement.

'The government intends to introduce measures to end the right to cash compensation for minor whiplash injuries, and will consult on the details in the New Year. This will end the cycle in which responsible motorists pay higher premiums to cover false claims by others.'

Huw Evans, director general of the Association of British Insurers (ABI), said the government's reforms were a 'significant breakthrough in tackling the compensation culture'.

'Insurers have long called for meaningful reform in reducing costs in the compensation system, including increasing the small claims track limit,' he added.

Insurance industry failures

Responding to the spending review, the president of the Association of Personal Injury Lawyers (APIL), Jonathan Wheeler, said that the insurance industry had failed to live up to its previous promises to pass savings on to motorists.

'Since 2012 the portal has been extended, medical reporting for whiplash claims has been completely overhauled, sharing of fraud data has been introduced, and solicitors' fees have been slashed.

'Government figures show whiplash claims have fallen by more than a third in the past four years. Yet still insurance premiums have increased,' said Wheeler.

'Only two years ago the government ruled out increasing the small claims court limit because there were no adequate safeguards to protect genuine claimants. There are still no adequate safeguards.'

Wheeler argued that raising the small claims limit would lead to an 'epidemic of cold calling' from claims management companies rushing to take advantage of vulnerable people unable to afford legal representation.

'We need to remember that these are people who have been needlessly injured by the negligence of others,' he added. 'Removing the right to damages for pain and suffering would show a callous indifference to the suffering of people who were needlessly injured by the negligence of others.'

Special damages

'We sincerely hope that the Chancellor's announcement today will not prohibit people's right to justice,' Andy Cullwick, head of marketing at First4Lawyers.

'We expect that the move to increase the limit for PI injuries from £1,000 to £5,000 will result in more claimants going for "special damages", including treatment for any injury if required and any loss of earnings,' said Cullwick.

'Clearly, any attempts to reduce rising motor insurance premiums is to be welcomed. We hope that the government consults far and wide to prevent unintended consequences, such as clogging up of courts due to more claimants seeking special damages.'

First4Lawyers said that future regulation must prohibit insurers from passing on leads to claims management companies, which encourages the public to make claims for non-fault accidents.

'We suspect that this is surely one of the main reasons for insurance premiums increasing,' added Cullwick.

A spokesperson for the Chartered Institute of Legal Executives (CILEx) said: 'Transferring personal injury claims of up to £5,000 to small claims courts will lead to injured people going without the legal representation they need. Government should consider the merits of penalising innocent injured parties, rather than ensuring the insurance market works better for consumers.

'Removing compensation for general damages, including pain and suffering, goes against the principle that if you are harmed you are entitled to compensation. If this is to be proposed, it should be subject to full parliamentary scrutiny.'

John van der Luit-Drummond is deputy editor for Solicitors Journal
john.vanderluit@solicitorsjournal.co.uk | @JvdLD