Catherine Baksi takes the pulse of a personal injury sector squeezed by tariffs, costs curbs and court delays
The low down
Unlike crime, civil justice struggles to command the attention of government. Yet elements of both systems are in crisis. Many personal injury claimants, for example, wait years to get to court, including people who have suffered life-changing injuries in accidents that were not their fault. When ministers do take notice, this is often at the prompting of a powerful insurance lobby whose focus is on reducing its exposure. Making claims harder has had the knock-on effect of cutting the number of personal injury lawyers, as well as impeding access to justice. Is a Civil Justice Commission the way forward?
The overall number of personal injury and clinical negligence claims has almost halved in the past decade. Law firms that remained in the market have had to absorb the impact of backlogs and delays, which affect cashflow, and the widening scope of fixed fees, which has reduced profit margins.
IRN’s 2024 Personal Injury Market Report, published in July last year, revealed that there were then 3,637 firms undertaking personal injury work, a 4.3% fall since 2021. There were 1,317 firms offering clinical negligence advice, a 5% drop in three years.
The report suggested that the exodus could have been worse if fixed costs for low-value clinical negligence claims had come into force as planned in April 2024. At the time of writing, fixed costs for clin neg seem to have fallen off the Civil Justice Council’s agenda amid speculation that the proposal has been quietly shelved.
Small, local law firms have been hardest hit by the sharp contraction in the market. They do not benefit from economies of scale and lack the capital to invest in technology to increase efficiency.
Discount rate
This is all background to the government’s ongoing review of the personal injury discount rate, which is used to help calculate how much defendants have to pay in damages to claimants in serious, life-changing personal injury cases. Legislation provides for the lord chancellor to review the rate every five years following consultation with HM Treasury and an expert panel chaired by the government actuary. A decision is due by 11 January.
In England and Wales, the rate currently stands at -0.25%. In Scotland and Northern Ireland, the rates were changed last month to 0.5% from -0.75% and -1.5% respectively. The impact of that will be to reduce damages awards, on the basis that claimants will get a greater return on their investments before they spend the money.
A government factsheet declares that lump-sum awards are designed to ‘put the claimant in the same position as he or she would have been in but for the injury’ and that the injured person is assumed to be a ‘very cautious investor’. Yet claimant lawyers argue that there is no legitimate reason for political involvement in the setting of the discount rate, stating that it should be a purely actuarial matter or be set using a formula set in legislation – as happens in Scotland.
'Despite the discount rate being set by the lord chancellor, it’s important that it is not driven by a political agenda and is always underpinned by the principle of justice and restitution'
Ann Houghton, Anthony Collins
Kim Harrison, president of the Association of Personal Injury Lawyers (APIL), stresses: ‘Injured people should have 100% compensation. No more, no less.’ She is concerned that the government’s review ‘could fail to make this happen’.
The last time the rate was reset, she adds, the Government Actuary’s Department said that a third of injured people would not be expected to be able to meet their needs. ‘This review must put that right,’ says Harrison.
Other PI lawyers concur.
‘Despite the discount rate being set by the lord chancellor, it’s important that it is not driven by a political agenda and is always underpinned by the principle of justice and restitution,’ says Ann Houghton, a partner at Anthony Collins. Houghton suggests that the government ought to consider ways to speed up the review process to remove the uncertainty faced by claimants and defendants. She argues that this is sometimes exploited to press the injured person into accepting a lower figure as compensation.
Stuart Hanley, director of legal practice at Minster Law, says the key is not whether the rate is set by legislation or by the lord chancellor, but that it is ‘based on solid and independent analysis’ and ‘ensures that severely injured people and their families get the compensation they need’.
APIL’s Harrison suggests that more could be done to facilitate and encourage offers of periodical payment orders where appropriate. This would remove substantial risks faced by injured people, including market fluctuations.
An 'industry' challenging fees
A recent Supreme Court case, Oakwood Solicitors Ltd v Menzies [2024] UKSC 35, explored a client’s right to request an assessment of legal fees, based on the interpretation of ‘payment’ in section 70(4) of the Solicitors Act 1974. The justices ruled in favour of the client, reinforcing protections that allow clients to review and negotiate billed costs.
Dean Menzies suffered serious injuries as a result of a road traffic accident in November 2015. He instructed Oakwood Solicitors to act for him in a claim for damages under a conditional fee agreement, meaning that they would only be paid if his claim was successful.
The claim settled in March 2019 for £275,000 and the solicitor retained 25% of the damages pending recovery of £73,000 in costs from the defendant. In July 2019, the solicitor recovered £38,000 from the defendant resulting in a shortfall of £35,000, which the solicitor deducted from the amount they had retained on account. Oakwood then paid the remainder to Menzies.
In April 2021, Menzies brought proceedings to request an assessment of the final bill. At first instance, the costs judge found that the claim was time-barred as it had been brought more than 12 months after payment of the bill.
The High Court allowed his claim, but the Court of Appeal overturned the decision. In a unanimous ruling, the Supreme Court said clients must have been informed of their solicitors’ bill and agreed to it before payments can be taken.
James Green, managing director of JG Solicitors, acted for Menzies in the challenge. He said the judgment ‘provides the vital clarity we have been seeking for both clients and solicitors on this issue’ and ‘is a victory for consumer rights’.
While some lawyers suggest that the case will mean more challenges from clients on bills, others expect most firms will simply review their processes for issuing statutory bills and obtaining client consent for the deduction of fees from damages.
An industry of law firms has sprung up in recent years to challenge legal fees. Daniel Easton at Leigh Day says: ‘It is a growing industry and I’m afraid I don’t see it going anywhere.’
Whiplash and the claims portal
For less serious, lower-value claims such as whiplash, governments have long sought to reduce both costs and claims. They have largely accepted the insurance industry narrative that doing so reduces motor premiums, though there is no evidence that this has happened. In reality, car insurance quotes have risen by 82% since 2021, when the Civil Liability Act 2018 brought in tariffs for whiplash injuries.
As part of the same reforms, the Ministry of Justice asked the insurance industry to set up an online claims system, or portal, known as the Official Injury Claim (OIC) service. The intention was that injured people would be able to make and settle claims without lawyers.
In the first three months of the portal’s operation, however, more than 90% of claims were registered by lawyers. A report published last September by the cross-party Commons justice committee raised concerns that only ‘just over a quarter’ of the claims had reached settlement, while the average time taken to settle was 251 days.
Many law firms, notes Andrew Bradley, a partner at Leigh Day, have been hit by a massive resultant decline in road traffic accident work. This was once the ‘lifeblood’ of some law firms, he adds, and its disappearance has created a huge access to justice issue.
The latest data from the government’s Compensation Recovery Unit shows that in the third quarter of this calendar year, the number of motor injury claims registered fell to 76,678. This was 11% down on the same quarter of 2023 and the lowest number ever recorded. Such claims were 53% below pre-pandemic levels, according to Hanley, even though traffic volumes were 4% higher. The divergence coincided with the reforms.
Some consumers are even reluctant to instigate claims for fear of it having an adverse impact on their already rocketing motor premiums. Harrison says ‘the system is fundamentally flawed, not least because the concept of full and fair compensation was abandoned’ when the portal was introduced.
For every 10 claims submitted by unrepresented individuals, Harrison adds, more than six calls are being made to the portal support centre. ‘This suggests that unrepresented claimants are struggling to grapple with the system and that the process is not the easy-to-use one promised by the government,’ she notes.
Claimants can apply for an uplift on the tariff amount to be paid if they can demonstrate their injuries or circumstances are exceptional. Earlier this month, the government announced that the whiplash tariff is set to increase by around 15%, mirroring inflation since 2021 and forecasts to May 2027, which is the likely date of the next review.
APIL has welcomed the uplift, but said a 15% increase is not enough. Insurers and their lawyers wanted no increase at all.
A Ministry of Justice spokesman told the Gazette that claimant lawyers’ analysis of the RTA data was ‘extremely misleading’. He insisted: ‘The number of road traffic accidents dropped significantly in 2020 as a result of the pandemic.’
As for the reform feeding through to lower premiums, the spokesperson stated that a report will be laid in parliament next year.
In addition, the government claims that the portal is ‘operating well’, with over 920,000 claims registered and 291,000 settlements made between May 2021 and October 2024.
So what of the defendant perspective? Howard Dean, vice-president of the Forum of Insurance Lawyers, wants to see ‘more output data’ before evaluating the performance of the portal. But he claims its introduction ‘was no doubt positive’. Without it, consumers ‘would have likely seen more significant increases to their motor premiums’.
The Association of British Insurers, meanwhile, has this year been lobbying for even tighter curbs on claims, including new caps on damages for injuries beyond whiplash. As ever, the promise is that this will reduce premiums.
Recoverable costs
'It can never be right that claimants have their budget set by ministers, while the defendants, mostly large insurers or other corporations, are free to set whatever budget they choose'
Richard Clark, CFG Law
To reduce what was regarded as the disproportionate number of cases subjected to costs budgeting and assessment, the legal costs that a winning party could recover from a losing party were fixed in many cases under reforms outlined in 2021 and in force from October 2023.
Since that change, fixed recoverable costs were extended across the fast track for cases of up to £25,000 in value, and in a new intermediate track for cases valued at between £25,000 to £100,000.
The rates, say claimant lawyers, are too low in many cases to enable firms to take them on. Solicitors are forced to pick and choose. Daniel Easton, a partner at Leigh Day, says: ‘Firms are becoming more selective in what they can take on because it is harder to make cases profitable.’
His colleague Andrew Bradley adds that it is vulnerable clients, including children, non-English speakers and people without access to email, who are most likely to suffer, because the fixed fees take no account of those complications.
'The civil system must not be forgotten. Victims of negligence need the same due consideration as victims of crime'
Kim Harrison, APIL
The rates, says Richard Clark, chief executive of serious injury firm CFG Law, are ‘unrealistic and unfair’. CFG has restructured the way it runs cases to adjust to the new fixed-cost regime. But Clark adds: ‘It can never be right that claimants have their budget set by ministers, while the defendants, mostly large insurers or other corporations, are free to set whatever budget they choose.’
All of these hurdles are exacerbated by the attendant access to justice crisis for individuals and small businesses as the county courts battle delays. Cases are taking 50-plus weeks to go to trial. Analysis by APIL, says Harrison, found that in some parts of the country people are waiting almost three years. APIL members have even reported hearings being cancelled on the day they were due to go ahead because no judge was available.
As Clark reaffirms, the delays ‘stem from systemic underfunding and inefficiencies, creating a “postcode lottery” where some regions face years-long wait times’. He calls for an industry-wide commission to find ways to improve the state of civil justice.
‘Justice delayed is justice denied,’ says Richard Atkinson, president of the Law Society. ‘These shocking figures lay bare the crisis at the heart of our justice system.’
Harrison concludes: ‘We know the focus is currently on improving the state of the criminal justice system, but the civil system must not be forgotten. Victims of negligence need the same due consideration as victims of crime.’
Catherine Baksi is a freelance journalist
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