Civil Liability Bill [HL]

Baroness Berridge Excerpts

2nd reading (Hansard): House of Lords
Tuesday 24th April 2018 Lords Chamber

[Baroness Berridge (Con)]

My Lords, it is a pleasure to go down memory lane to the nine years I spent as a personal injury and licensing barrister at Kings Chambers in Manchester. During my time as a junior barrister, dealing with road traffic accidents seemed to be compulsory basic training, rather akin to the traffic list in a magistrates’ court for the criminal Bar of this era. I should state that I was a member of the PIBA, and I am grateful for its briefing, as well as the advice of the now head of the personal injury department at my old chambers, who happens to be my former pupil mistress, Fiona Ashworth.

As is the nature of the independent Bar, I represented both claimants and defendants, the latter being legally represented through insurance companies as a result of the statutory obligation for drivers to have third party, fire and theft insurance. It is important to note at the outset that it is claimants who are legally unrepresented, unless they have fully comprehensive insurance or free-standing legal expenses insurance. Of course, a claimant may be a passenger, who is obviously under no duty to be insured. This statutory obligation of third party, fire and theft created a huge market of customers for insurance companies, and the quid pro quo of creating this market at that time was the Motor Insurers’ Bureau, which the insurance companies paid for to deal with claims when the defendant driver was uninsured. Underlying all of this is the foundational principle that if you drive your car deliberately or negligently so that you damage someone else, in terms of their property or personal injury, you must compensate them. How sad it is that the term “compensation culture” has come to be seen only as derogatory. It is an important plank of any mature justice system. I must state at the outset that I agree with the tenor of the comments of the noble Lord, Lord Monks, and I ask my noble and learned friend the Minister to comment. In my experience, the overwhelming majority of claimants are genuine.

The mischief that the Bill seeks to address seems twofold regarding whiplash claims, and it is to Part 1 that I will limit my comments. Her Majesty’s Government have two laudable desires: to reduce insurance premiums and to reduce exaggerated and fraudulent claims. While I believe, along with other noble Lords, that the obligation to obtain a medical report will serve the useful purpose of ensuring that claims are dealt with thoroughly and will help to reduce the possibility of fraudulent claims, I currently have reservations about the introduction of the Lord Chancellor as the creator of a new tariff, the separation out in the personal injury system of compensation of one discrete form of claim, and the proposed levels of the new tariff. I also mention the oddity of the codification of the duty to mitigate.

First, I will address the separation out of one type of claim. I spent more hours than I care to remember poring over what was then the Judicial Studies Board guidelines to assess the value of someone’s personal injury claim. After a while, it was described to me that you get a feel for cases, but it is important to remember that the guidelines do not seek to compare apples and pears. There is no mystery to the assessment. These guidelines are based on reasons and analysis as to why certain injuries merit more compensation. Importantly, they enable claimants—perhaps chatting about their injuries in, say, the office or the pub—to have confidence that they can compare, for instance, why a visible scar is worth more than one that is not visible; or why, in general, a fracture will merit more compensation than a soft-tissue injury.

The guidelines hold together as a body of reasoned assessment, and it these guidelines that the Bill seeks to substantially change. It is important to remember, as the noble and learned Lord, Lord Judge—who is not in his place—stated in Simmons v Castle, that the Court of Appeal has the power and a duty to review the guidelines. I would be grateful for confirmation from the Minister of whether the insurance companies maintain that these tariffs are too high for this type of injury, have raised these arguments in the courts and have been unable to persuade them.

I note that my noble friend used the word “proportionate”, which is a legal term that could be subject to test in our courts, to challenge these guidelines. Is it that the courts have said that the guidelines are a matter for Parliament to legislate on—to take one section of injuries out of the guidelines as they decided they were unable to do so? Is that also why we have the Bill? Also, am I correct in my reading of the Bill that a whiplash injury to a cyclist, motorcyclist or pedestrian falls outside the tariff? Does a whiplash injury fall outside the Bill if you fall over in the street or are a passenger on a train that stops suddenly? Even a motor vehicle accident on a private road might be treated differently. These would then be assessed on the Judicial College guidelines, not the Lord Chancellor’s fixed tariff. This matters enormously as the amounts of compensation that Her Majesty’s Government are proposing in the tariff, in the consultation and the impact assessment, are so much lower than the Judicial College guidelines. How can this be just to a claimant?

I had the privilege, mainly due to court listing procedures on the northern circuit, to sit in waiting rooms for hours talking to genuine claimants. So often, the few thousand pounds of compensation for pain, suffering and loss of amenity was going to have a substantial effect on their finances, enabling them to buy a car, pay off a debt or pay for education, as well as make windfall purchases such as holidays. Why does a car passenger not deserve the same whiplash compensation as a cyclist for the same injury? I could perhaps understand this part of the Bill more if the savings to the insurance companies of reducing motor car whiplash claims had to be passed on through insurance premiums. A mere pledge is just not good enough. Why do Her Majesty’s Government think that genuine claimants should not get this compensation and that the insurance company should have the money instead? As the Personal Injury Bar Association briefing states:

“Further, if a claimant is going to be fraudulent or exaggerate a claim, there will be a large incentive to describe symptoms lasting for longer than the tariff provides so as to bring their claim out of the tariff and more than double the amount of compensation they receive. The greater the disconnect between the tariff amounts and the judicial college guidelines and court awards, the greater the incentive to exaggerate the duration of symptoms. Such an approach would undermine the stated goal of the Bill”.


Of course, if the tariff is to be the same as the Judicial College guidelines, the statute is superfluous.

Surely such irrational differences between the tariff and the Judicial College guidelines will somehow be justiciable. Maybe someone will now say that the European charter, on which I so happily voted with the Government yesterday, might be the solution. I am not in principle against a tariff system: we currently have one called the Judicial College guidelines and we also have one for the criminal injuries compensation scheme, but the tariff has to apply to all cases so that people can readily understand the fairness of their compensation. Also, why does the government tariff say that a 10-month injury and a 12-month injury merit exactly the same amount of compensation? There is not even a bracket of figures in the examples of the tariff I have seen. How can this be just?

There are other, more complicated, cases that we also need to consider. While the overwhelming majority of soft-tissue injuries caused to the neck, shoulder and back by the forces of deceleration on impact recover within six to 12 months, a small minority of claims—perhaps around 5%— leave permanent damage. Long-term effects can range from ongoing twinges, to accelerating the onset of arthritis, to the more complicated but well-recognised fibromyalgia and chronic pain syndromes. The latter will command substantial levels of compensation. Although these will, of course, fall outside the new tariff outlined in the Bill, it is important to realise that pressure may be put on unrepresented claimants to settle their claim too early, relying on only a basic GP’s medical report. Such a report does not even require a GP to have seen previous medical records. People will often need advice to wait and see. I sent back so many claims, saying, “Don’t settle now. Wait.”. However, we all know of the type of pressurising phone calls that can be made. Are Her Majesty’s Government going to make the quid pro quo of these savings to insurance companies that those companies must provide legal advice to an unrepresented claimant? How else will there be equality of arms?

In relation to the Lord Chancellor as the creator of the tariff, I would be grateful if the Minister could clarify whether the Lord Chancellor will have to consult the Lord Chief Justice on Clause 2(2), or even have to consider the Judicial College guidelines when deciding on this tariff. It is hard to imagine that the tariff, if at the levels outlined in government consultation, will not impact on other forms of compensation. Is it the Government’s intention to bring down compensation on a whole range of injuries by the use of this statute? Will not insurance companies be able to raise non-tariff injuries and use this legislation to say the Judicial College guidelines are too high overall, trying for a revision of the whole system?

I turn briefly to the duty to mitigate, outlined in Clause 2(1)(b)(ii). It refers to,

“the claimant's failure to take reasonable steps to mitigate its effect”,

thereby bringing their case in the two-year period. It seems this might encourage defendants routinely to argue that earlier treatment would have led to lesser injuries so they would be in the tariff, and that is a difficult argument for litigants in person to meet and argue against. I would be grateful to know why the Government are putting the common law duty to mitigate on a statutory footing only in this area and inserting a section that will lead to an increase in the complication of litigation, which I was pleased to see in its briefing that the PIBA did not want to encourage.

In conclusion, the Minister said that three-quarters of the insurance companies have signed up to a pledge. I am surprised that it is not more. Why are we relying on only three-quarters? Will there be a strategy to ensure that the entire industry signs up to pass on these savings? In relation to the abuse correctly outlined by the noble and learned Lord, Lord Hope—I practise in this area—yes, there is an abuse, but the intended, not unintended, consequence of the Bill is to have a significant effect on genuine claimants. Is that a fair balance to strike? There will be an effect on genuine claimants: they will not benefit from the Bill. I fear we are hearing too loudly from the lawyers and the insurers, and I have yet to see any representation purely on behalf of genuine claimants from an organisation with no other vested interests. I hope the Minister will be open to listening and meeting to deal with the concerns that I have outlined.

Civil Liability Bill [HL]

Baroness Berridge Excerpts

Committee: 1st sitting (Hansard): House of Lords
Thursday 10th May 2018 Lords Chamber

[Lord Ribeiro (Con)]

My Lords, I agree entirely with that last point. I too searched on Google and Wikipedia and saw the rather extensive definition of the diagnosis. That makes the point that none of these claims should be accepted unless a medical opinion has been sought and a report given. It is for the physicians to make the diagnosis. This Bill is very clear about confining the list to motor vehicle accidents rather than all the other ways in which whiplash injuries can occur. In the context of a motor vehicle accident, the very injuries that have been described and the mechanisms and consequences relating to those injuries can be defined only through a proper medical assessment. As explained in the Minister’s letter to us all after Second Reading, it is essential that a medical report is provided before taking this matter further.

[Baroness Berridge (Con)]

My Lords, I have added my name to the amendment in the names of the noble Lords, Lord Sharkey and Lord Marks. I agree with the comments of the chairman of the Delegated Powers Committee, although obviously I cannot comment on the legal qualifications of the person who telephoned him. As I outlined at Second Reading, I have practised in this area and have dealt with these claims, and I know that it has become something of a fashion to be quite derogatory about the role of advocates and lawyers. When I joined the Bar, it was one of the proudest moments of my life. People becoming lawyers and acting as advocates so that someone is not a litigant in person is an incredibly valuable part of our system, and as we discuss further amendments we should all bear that in mind. Having an advocate when you are an ordinary person—potentially with three part-time jobs on the London living wage—so that you do not have to deal with such calls is valuable, and I implore us to look at our lawyers in a better light than is often the case in our culture.

[Lord Judge (CB)]

Perhaps I may add a few words. Of course the definition of whiplash has to be made by doctors—that is how the world works—but we are engaged in legislation. This word must have a legal meaning and it must be enshrined either in a statute or in regulations. The Bill approaches the problem by putting the legislative cart before the legislative horse. If we are being asked to enact legislation in which we do not know precisely what the word means, we are being asked to do something that we should not be asked to do.

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[Baroness Primarolo (Lab)]

My Lords, I rise to speak briefly to Amendment 21, which is tabled in my name. I draw attention to my interests as set out in the register.

I shall follow the theme in the point made by the noble Earl, Lord Kinnoull, with regard to physiotherapy and psychological treatments in claims under this clause. The debate at the moment is with regard to probing amendments, and I hope very much that the Minister, in his reply, will be able to give us a little more explanation on how he sees this particular section of the Bill operating.

I should also say as a caveat that, while I accept the very strong point continually made in the Chamber, and rightly so, about the creativity of some claims management companies—the ones making the telephone calls—to find ways into this area and to cause considerable difficulties, I hope that we will not lose sight of the genuine claims of individuals and the hardships they suffer when they seek to make a claim but cannot represent themselves and whose access to finance for such a claim does not exist. In our rush to deal, quite rightly, with unwanted claims, I hope that we will not undermine and damage the very valuable claims that are necessary for individuals—not just adults but children as well.

With regard to my proposed amendment, Clause 2(6) states:

“Regulations… may provide”,


that a person has taken,

“reasonable steps to mitigate the effect of … whiplash injury or minor psychological injury”.

As I have said, I want to talk about physiotherapy as well.

The reason I ask the Minister to give us more information is in the background of the very public debate about, for example, the provision of mental health services and, in particular, where such services are provided and how the claimant would get access to them and therefore have taken reasonable steps not to undermine a subsequent claim. The King’s Fund, in its analysis of NHS trusts, clearly identifies, through their financial accounts, that approximately 40% of mental health trusts have received a reduction in their funding and therefore in their services.

The type of claims made that require psychological support may involve children who, having been with their parents in a car accident, have problems with nightmares, so they need access to proper support and therapy. Such a claim may involve, and has involved, parents travelling in a car where the mother is pregnant and therefore suffers stress as well as physical injuries. Again, where is the access to psychological injury and, reasonable steps having been taken to mitigate that, given the connection between pain and one’s mental health well-being?

I am not a lawyer, and if my comments are considered ill-informed I will not be embarrassed by being corrected by the very many experienced noble and learned Lords in this Chamber. At the heart of this, and the objective that the Government seek to achieve, is how to stop those who are using the system in a way that, frankly, undermines the rights of good, honest people who are not making fraudulent claims. How to correct that system without preventing worthy, correct and needy claims is a huge challenge. At the moment, while I understand why the ABI talks in its briefing about the need for it to have flexibility to adjust and evolve as the industry does, I see nothing in the Bill that puts that same flexibility into protecting the rights of legitimate claimants in this area of physical damage.

I very much look forward to hearing what the Minister has to say on this whole area, because I fear that otherwise we may need to return to this. There is not enough protection at the moment for the individual legitimate claimant.

[Baroness Berridge]

My Lords, I shall speak to Amendments 8, 10 and 49A in this group. I join with the comments made by the noble Baroness, Lady Primarolo, in relation to genuine claimants. As I understand it, even the insurance companies accept that the majority of claimants in this area are genuine. It is a high burden on your Lordships’ House to ensure that the Bill hits the target of fraudulent claims as accurately as it can without the shrapnel hitting genuine claimants. Fundamentally, someone with a bruised knee, as the noble Earl, Lord Kinnoull, mentioned, may find themselves with more compensation when assessed under Judicial College guidelines than someone who has genuinely incurred a potentially six-month whiplash injury.

Amendments 8 and 10 relate to reducing the length of the period of these symptoms from two years to one. It is important to remember that while, yes, there is a portal, which the noble Earl, Lord Kinnoull, referred to, and the small claims track, even today 35% of claims are outside the portal. These are the nuts and bolts of people’s access to justice through the small claims track, but that is without legal representation.

The important reason to reduce the scope of the Bill to a year is that the overwhelming majority of whiplash cases, even including those that the insurance companies maintain today are fraud or suspected fraud, are resolved within a year. However, a bulk of cases—15%—last longer than that, and of those there are about 5% where someone has a long-standing chronic condition as a result of the whiplash injury. They might have an early onset of osteoarthritis, a chronic pain condition or fibromyalgia—these are cases that I have seen—which are seriously long-term disabling conditions. It is very important for those people that there is representation, perhaps more in-depth medical reports looking at what has happened to their symptoms, and legal advice so that they are not pressurised into settling a claim too early and getting a sum of money within the first year when actually the prognosis is not definite. If we reduce the scope of the Bill—the Government’s stated intention relates to minor injuries and fraud—down to one year, it would give protection to those people who, hopefully, if they were advised properly, would wait to settle their claim to ensure that their symptoms had resolved.

I hope this is not going to be a complicated amendment. It would do a lot to protect genuine claimants. We do not seem to have evidence of people who are exaggerating and claiming to have fibromyalgia, chronic pain or early-onset osteoarthritis as the result of a fraudulent claim. At the moment the Bill does not do sufficient to protect claimants in those categories, and reducing the limit from two years to one would deal with the fraud problem but also give them some protection.

Amendment 49A is one that I was given advice on by USDAW. The policy reason that Her Majesty’s Government have given for creating this section of claims is that we are aiming at fraud where they will not be covered by the Judicial College guidelines. That will lead to ordinary people not necessarily understanding why claim X merited much more than their own claim. This is serious in people’s fundamental understanding of compensation and justice.

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[Lord Faulks]

My Lords, the noble Lord, Lord Monks, makes a good point: the insurance industry has its share of responsibility for what has occurred in its eagerness to settle claims which may not have been genuine to save the cost of going to court to argue the matter, but to describe this as an insurers’ Bill may be to overstate the case. In the Bill, we are all concerned to stamp out what has been a widespread fraud—not at the expense of genuine claimants, of course, but I do not think anyone looking at the statistics could deny that there has been a serious and long-standing problem that needs a solution.

The noble Lord, Lord Beecham, mentions the Chief Medical Officer in one of his amendments. Of course, the definition of whiplash and the approach to it should be informed by medical opinion, but I respectfully suggest that, ultimately, we as a legislative body have to grasp that definition and approach, bearing in mind medical evidence but nevertheless seeking to identify what is going on in the real world, rather than simply tying ourselves to a medical definition which may of itself be imprecise.

As to where the cut-off should come—whether it should be 12 months or two years—it will always be somewhat arbitrary. However, there seems to me a risk that if we reduce it to 12 months rather than two years, we can anticipate a number of medical reports suggesting that matters should resolve themselves in, say, 18 months—not the more reputable medical experts, but, I am sad to say, not all of them have in the past been in that category.

The point made by the noble Baroness, Lady Primarolo, about the availability of therapy in various contexts is good but, as I understand it—my noble and learned friend will correct me if I am wrong—we are concerned here with damages for pain, suffering and loss of amenity. That does not preclude damages for loss of earnings or for the cost of medical expenses, whether for therapy or otherwise, which can be recovered in addition to the tariff claim. I hope that that is some answer to the question of whether those matters can be attended to following an accident.

As to the argument about whether employment should be an accepted category, while that might have some initial attraction, I would counsel against that approach. I can imagine a revision to the standard message following any such amendment. It would be, “We understand you have recently been involved in an accident while you were driving in the course of your employment”. That would inevitably follow if we narrow or exclude incidents arising from employment. Whether you are driving in the course of your employment, recreation, or whatever the reason, you are equally likely to—

[Baroness Berridge]

I hate to interrupt my noble friend, but in principle, what is wrong with a call saying that? If someone is driving in the course of his employment, it is in a different category because the employer will have to give evidence that he was indeed driving in the course of his employment. There is a danger that we are saying all these calls are a bad thing, or that all claims management companies are a bad thing and all insurance is a good thing. What in principle is wrong with a call of that nature that can be substantiated by evidence, and would need to be from the person’s employer?

[Lord Faulks]

I am grateful for that intervention. My point is that if someone has been genuinely injured, whether in the course of employment or not in the course of employment, they are entitled to make a claim, and nothing should preclude that, regardless of whether they receive a message in the current form or in an amended form. It seems to me that it would be inappropriate to make a distinction between the circumstances in which you may or may not suffer a whiplash injury. My point was simply that if there is an amendment to the law, those seeking to encourage not the genuine claimants—of which there are certainly some—but those who are not genuine may revise their message to take into account the revision that we make in the law. Of course I am not against genuine claims. On the amendment tabled by the noble Earl, Lord Kinnoull, and my noble friend Lord Hodgson, although I understand the disaggregation that lies at the heart of their amendment, I am not for the moment persuaded that this is not a matter that is catered for under Clause 2(3) and (4). I shall listen with interest to what my noble and learned friend says.

--- Later in debate ---

[Lord Keen of Elie]

With great respect, if the claimant is driving, his claim will be against the third-party driver whose negligence caused the claim. There is no reason why, in those circumstances, you should distinguish between a claimant who is in the course of his employment and a claimant who is not. They are both liable to suffer the same injury in the same circumstances as a result of the negligence of the same party. The distinction is one without a difference, with great respect. There is no justification for making such a distinction. I recollect discussing this with the noble Baroness, and she talked about the distinction between motor insurance and employers’ liability insurance, but there is no question of the claim being directed against the employer’s liability insurance in such circumstances.

[Baroness Berridge]

That is not the point that is being made here. I would be grateful if my noble and learned friend could address the question. We are all, I believe, in your Lordships’ House working on the assumption that the target of the Bill is fraud, not genuine claimants. So the specific question is, where is the evidence that people who are claimants when they drive in the course of their employment and are injured by a third party’s negligence—the claim is not against their employer but against the other driver—are fuelling any of the calls or the fraud that is the underlying principle of the Bill? Because that is an injustice.

[Lord Keen of Elie]

With the greatest respect to my noble friend, there is no basis for distinguishing between the cohort which is driving in the course of employment and the cohort which is not driving in the course of employment when an injury is suffered due to the negligence of a third-party driver. I am not aware of any examination, study or evidence that would seek to distinguish, or of any conceivable basis for distinguishing, between those two cohorts. So, with the greatest respect, I would suggest that it is a distinction without a difference.

Civil Liability Bill [HL]

Baroness Berridge Excerpts

Committee: 1st sitting (Hansard continued): House of Lords
Thursday 10th May 2018 Lords Chamber

[Lord Keen of Elie]

With respect, a judgment had been made having regard to all the information available as to what level should be set for the tariff to address the very problem that we are attempting to deal with. It is not based on some mathematical formula or percentage.

[Baroness Berridge (Con)]

I refer my noble and learned friend to his previous comment which, fairly, recognises that all parties are to blame, which is something that I think he conceded at Second Reading—that the insurance industry shares part of the blame. May I clarify? When he says that all parties are to blame for this, may I clarify that he was not including the genuine claimants, who have become a focus in this House: that they are not to blame for an industry, a racket or whatever created by others?

[Lord Keen of Elie]

Everybody readily acknowledges that point but, with respect, you cannot take 650,000 claims and identify 300,000 that happen to be fraudulent, or 200,000 that happen to be exaggerated. A policy decision has to be made, acknowledging that there are within that very large body of claims perfectly genuine claims, perfectly fraudulent claims, exaggerated claims and minor claims that would never have been brought but for the encouragement of a claims industry that sees the financial benefit of ensuring that people take these claims forward. That is part of the culture that has developed. I noticed that when the noble Lord, Lord Beecham, suffered an unfortunate accident on the Tube and mentioned it in this House, he was asked if he intended to make a claim and said no. One was encouraged by that. People tend to consider that these events can happen; they may be able to point the finger of blame at someone, but they feel that life goes on and it is unnecessary to be distracted by such issues. We have a claims management culture that goes out of its way—many noble Lords have noted it—to encourage people who would otherwise think nothing of a minor injury to come forward and join the bandwagon. Let us emphasise: this is a matter of policy that we are addressing in these circumstances.

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[Lord Marks of Henley-on-Thames]

My Lords, I have three amendments in this group: Amendments 27, 47 and 52. Amendment 27 seeks a review of the small claims limit. We say that the provisions of the Bill cannot be satisfactorily considered unless at the same time the Government are prepared to discuss what will happen with the small claims limit.

The proposal is that the small claims limit will rise to £10,000 and to £5,000 in these cases, and that will effectively exclude all the whiplash claims on this tariff, with the claimants being unable to recover costs, apart from the very limited fixed costs. If that goes ahead, there will be no legal representation in respect of nearly all whiplash claims. Of course, that will not be limited to fraudulent claims; it will penalise genuine claimants as well.

The reason why there will be no legal representation is that, essentially, the vast majority of these claims are dealt with on conditional fee agreements whereby no fee is paid unless there is recovery. If there can be no costs recovery, even the fixed costs allowable under the protocol, there will be no legal representation. It looks very much, therefore, as if the purpose of the damages sections of this legislation is to wipe out these claims indiscriminately—fraudulent or genuine. There are two swipes. We dealt with the last swipe—cutting the damages to a level whereby, in many cases, it is simply not worth claiming—and changes in the small claims limit would effectively remove the chance of getting a lawyer to work on a conditional fee agreement. We believe that there should be a review of the small claims limit, and we said in our Amendment 27 that the provision may not be brought into force until the Civil Procedure Rule Committee has reviewed the limit of the small claims track for personal injury whiplash claims and published its decision.

Amendment 47 comes back to the question of recoverability of medical reports. It ought to be perfectly obvious that a successful claimant can recover the cost of securing a compulsory medical report or what is termed in the Bill,

“other appropriate evidence of an injury”,

even in the absence of a rule that the claimant can recover other fixed costs. When I raised this point at Second Reading, the Minister said that there would be such recovery. I quoted the impact statement showing that all successful claimants would have to pay the £216 for the medical report. The Minister said no, that was not right and the savings calculated that formed the basis of what I alleged were calculated on the basis of claims avoided, not of all claims. The Government were assuming that a successful claimant would recover the £216—which is £180 plus VAT—in respect of medical reports. At the moment, I can see no provision for that. The Civil Procedure Rules relating to small-claims track cases restrict awards of costs, but by exception they permit, at the discretion of the court, an award of limited costs for experts; but that does not make such costs payable as a matter of course, only as a matter of concession. We seek to have this matter made clear and Amendment 47 is a simple and secure way of ensuring that.

Amendment 52 is a further probing amendment: probing in the sense that, at Second Reading, the Minister expressed considerable sympathy with the idea of having a new protocol for small claims. The existing pre-action protocol for low-value personal injury claims in road traffic accidents came into force in 2010, and it has been kept up to date since. It introduced a simple low-cost way of pursuing claims, generally through lawyers acting on conditional fee agreements—often “CFA lite”, as they are called—whereby lawyers effectively guarantee that there will be no liability on their clients at all to pay fees, because under the existing protocol they will recover the fixed costs from the defendant’s insurers, which they are able to do. The protocol has its faults, not least—some would argue—that the protocol has of itself increased the number of whiplash claims, including the number of fraudulent claims. That is partly because it is very computer-based. It works on the basis of the portal: generally speaking, everyone has to use the portal; the claims are notified and the insurers respond through the portal. There is very little personal checking of what is in fact happening to such claims.

It is also suggested that, arguably, the number of claims settled by insurers without proper investigation has increased. That is for the simple commercial reason that insurers prefer to pay small claims and fixed costs rather than contest cases outside the protocol. That is a danger in relation to all of these proposals. The Government have not sufficiently considered that insurers will find it easier to settle smaller claims under the tariff than to settle larger claims under the Judicial College Guidelines, as they do now, a point made by the noble Baroness, Lady Berridge.

However, for all its faults, the protocol has increased access to justice for genuine claimants. The concern that this amendment is designed to address is that because the protocol does not apply below the small claims limit and the small claims limit is going to rise, there has to be a parallel protocol for unrepresented claimants that is easy to navigate. Our amendment describes that as having,

“the objective of ensuring that the procedures for claimants pursuing such claims are simple and readily understandable for claimants who are not in receipt of legal advice and representation”.

That is the purpose to which the amendment is directed.

[Baroness Berridge]

My Lords, I have added my name to Amendments 27, 47 and 52, to which the noble Lord, Lord Marks, has referred, which relate to some of the most fundamental points in the reforms. They involve the procedure which will exist for genuine claimants through the small claims track and/or the portal.

I am saddened but grateful to my noble and learned friend the Minister to learn that it is not an unintended consequence of the Bill that genuine claimants will be caught. It is an intended consequence of the Bill, so there is a high onus to ensure that access to justice is ensured for genuine claimants.

The noble Lord, Lord Marks, referred to no legal representation but, having worked in what was then called small claims arbitration I know that defendants are usually legally represented. In Scotland personal injury claims, which are generally more complex, are outside its equivalent of the small claims procedure because of the asymmetry of the relationship in the small claims track between the claimant and the defendant. Having represented defendants in those circumstances more times than I care to remember, I know that although district judges go out of their way to try to ensure that there is fair procedure, they cannot step outside the boundary of their judicial role. Invariably, therefore, as the legal representative of the defendant, you know that you are at an advantage.

It is important to remember that, on the figures I have been given, 40% of people who buy fully comprehensive insurance do not also buy legal expenses insurance. Therefore, in order to recover their personal injury losses, their uninsured losses, and their often considerable excess losses—which can be about £500—genuine claimants pursuing personal injury losses, more often than not, will be litigants in person using the small claims track or the portal.

On the claims portal which has been mentioned, I know that a working group at the Ministry of Justice is looking at the new portal which will ensure that litigants in person have access to a streamlined procedure.

At the moment, however, you are within the claims portal only if liability is admitted. Some 75% of insurers have apparently signed up to pass on premiums so, like claims management companies and lawyers, we have good, exemplary and not-so-good companies. Unfortunately, with unrepresented claimants, there is now an incentive for certain insurers to deny liability because once they do so, the case comes out of the portal. It is then for a defendant insurance company to deal with a claimant—precisely the asymmetry of the Scottish situation. We have talked a lot about cold calling. Imagine being in that situation as a claimant trying to recover personal injury losses and an excess. You are busy, you are working and nobody is there to advocate between you and the defendant insurance company. That is a worry in relation to how the current portal operates.

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[The Earl of Kinnoull]

My Lords, my own solution to the problem of the promise that the insurance industry has given is contained in Amendment 46. I am very grateful for the support and advice that the noble Lord, Lord Hodgson, has given me in considering this problem. The promise made by the insurers—percentages are a dangerous game, as there is a question of whether you are counting numbers, premium volume or whatever; but in premium volume terms—represent 90% of the market. The promise says that,

“the signatories to this letter today publicly commit to passing on to customers cost benefits arising from Government action to tackle the extent of exaggerated low value personal injury claims”.

In considering how one should attack that problem, I ask myself two simple questions. First, does the person who accepts the data understand it? Having spent a lifetime in the insurance industry, I can say that claims presentations are phenomenally complicated. I will not even start to use some of the jargon. It is extremely complicated to know whether you are talking about an accident year or the date year, as it were, and to understand certain things such as how the claims coding works, loss triangles, reinsurance effects and so on. But a regulator is someone who can do that.

The second question I ask myself is: will the person who has it have a mechanism for ensuring compliance? Are they good policemen? That is why I have centred on the FCA. I have criticised the FCA in the past but I have never criticised its competence. I have only ever said that it has been heavy handed. It will certainly have people who understand the approximately 250 returns that come in from the participant companies that have motor insurance licences in Britain. We can see who they are on the Bank of England website, and they certainly have the power, not least under the regime of treating customers fairly, but they also have plenty of other soft power. The chief executives of insurers have to be approved, as does the chief risk officer. I seem to recall that even the chairman of our audit committee ended up having to be approved. An insurer cannot afford not to have a good relationship with the regulator, because the insurance industry is much more scared of the regulator getting annoyed than of the court. The regulator can move overnight and do something to your business, whereas a court will take a period of time to do that.

Accordingly, I advance my structure for solving the problem, which I think is proportionate. It would be possible for the FCA to report on it in some way—I had not really considered that part. I am asking for the trigger to be fired twice because, by the end of 2020, this legislation will either have been a terrific success, and we will be absolved of this particular problem with the claims industry, or it will have not been a great success; they will have found a way around it, so we would not need to have the report rolling on for ever. On that basis, I ask for my amendment and that of the noble Lord, Lord Hodgson, to be considered.

[Baroness Berridge]

I rise briefly to speak to the amendments I have in this group, which refer to a report by the FCA as well as a report being laid before Parliament.

It is important in this context to look back at Second Reading and the Government’s confession that the insurance industry had not done all it could to get on top of the issue of fraud. In some respects, on Second Reading one could have been forgiven for thinking that the problem of fraud was so great for the insurance companies that they were teetering on the brink of bankruptcy as it was such an urgent issue. Nothing could be further from the truth. A report from Direct Line Group, which is the largest insurance group that we have, shows profits for financial year 2017 of £610.9 million—a leap of 51.4% on 2016. Dividends were up 40.2%. In its interim report in 2017, one of the reasons it gave for that was fewer than expected bodily injury claims. We might argue for a long time about CRU figures, but Direct Line attributes its increase in profits to a decline in personal injury claims.

It is disappointing to those of us who are saddened and troubled by the effect on genuine claimants that there is no proper mechanism in the Bill to ensure that the £1 billion of savings from claimant payments will actually go to the motorists. The Government are saying that that is the Bill’s overall intention. In light of the scale of the fraud that the insurance industry would like us to believe, it is disappointing that it has not invested more of its resources into controlling this fraud because it is a societal issue that affects culture, as opposed to the profits that I have just outlined.

There is a particular legal problem, though, on which I hope the Minister can help us. Many insurance companies are no longer mutuals; they are listed on the stock exchange, with all its reporting requirements and requirements for directors to take into account their shareholders in the payment of dividends. How is that circle going to be squared? You have directors with an obligation to shareholders. They make cost-benefit savings, but they are under pressure either to pay down debt, as some have with some of their profits, or to pay out dividends rather than decrease the premiums they are charging to motorists.

There is a further issue with insurance companies, which is that they have enjoyed bumper savings from the implementation of the Jackson fixed-cost reductions and the LASPO changes that were introduced in April 2013. I am grateful to a fee earner from the Vale of Catmose—and to Thompsons Solicitors—who pointed out to me that insurers have saved at least £8 billion in claims costs between 2010 and 2016; the figure to date is around £11 billion. In spite of this, premiums have continued to increase relentlessly. She said the average premium has gone up from around £385 in the second quarter of 2013 to £493 in the last quarter of last year, according to the ABI’s own premium tracker—an increase of 28% since the LASPO changes.

There have been inordinate savings before that insurers have not passed on as reduced premiums. It may be as a result of being legal entities, as I have described, that they are under pressure from their shareholders to pay out bumper dividends instead of reducing premiums. There needs to be something more effective in the Bill to ensure that, after the Government introduce these changes, insurance companies will be held strictly to account and will pass on the savings they will undoubtedly make.

There is a laissez-faire attitude that, as half the market uses price-comparison websites, these savings will be passed on, but it does not always come to pass. It is ironic that, after the Second Reading of this Bill, we received the message that the Commons had passed the Domestic Gas and Electricity (Tariff Cap) Bill for meters. That clearly shows that, in some circumstances, the market does not provide the savings to consumers that we envisage. The Government need to ensure that savings are passed on and there is a strict mechanism in the Bill to that effect.

[Lord Marks of Henley-on-Thames]

My Lords, I first speak to Amendment 53 in this group, which deals with passing savings to insurers on to the public. Our amendment seeks an annual review by the Lord Chancellor of the extent to which insurers are passing on those savings to their policyholders. It is common ground that the purpose of this part of the Bill is to reduce fraudulent claims and to reduce the cost of all claims. This has become particularly apparent here, for claims both fraudulent and genuine. Savings are to be passed on to insurers that will pass those savings to their policyholders. The Government rely on the letter written to the Lord Chancellor in March, in which the insurers said that they would,

“publicly commit to passing on to customers cost benefits arising from Government action to tackle the extent of exaggerated low value personal injury claims”.

At Second Reading, my noble friend Lord Sharkey pointed out that it did not define precisely what “cost benefits” were, nor did it commit to passing on all savings or even all cost benefits made.

We want to see that all savings are in fact passed on. Our amendment is intended to ensure that the Government do better than simply relying on that letter. Far be it from me generally to accuse the Government of naivety but, generally speaking, a letter of intent in that form would not convince many in commerce that the intent was in fact going to be carried out. I believe that a review by the Lord Chancellor and an obligation to report to Parliament would increase greatly our chances of having that stated intent carried out. The reason that we press for the involvement of the Lord Chancellor is that this is a political decision and political action and it seems to me that a political response is required. The purpose of this group of amendments—and ours is consonant with that purpose—is to encourage the insurance industry to stick to its promise, and indeed to do better, to make sure that all savings are passed on; and, because of the report to Parliament, to enable the Government and Parliament to consider reviewing the legislation and/or penalising the insurance industry by imposing some kind of levy, tax or other measures if it fails to keep up to the mark on this.

I will also speak to Amendment 54 in this group, which is directed at cold calling. If the real mischief at which this part of the Bill is directed is fraudulent and exaggerated claims, then cold calling is undoubtedly the chief instrument by which that mischief is done. Sometimes, in discussing this, we have not looked at the fact that these fraudulent and exaggerated claims in fact come at three levels. At its worst, perhaps, it involves faked or staged accidents. These calls that say, “We understand that you have had an accident that was not your fault”, when no such accident has ever happened, are an invitation to the practice that is most invidious, and which we know happens, of accidents being deliberately staged, sometimes by people who develop a real accident involving innocent motorists crashing with them in order to mount claims. The second is fake injuries, where there is a real accident but the injury is faked altogether and a claim is made. The third is exaggerated injuries. The practice of cold calling makes all three types of dishonesty worse and we really have to get on top of it.

The first part of our amendment would mandate the Lord Chancellor to carry out an annual assessment of the effect of cold calling on the prevalence of fraudulent whiplash claims. The second part would compel the Lord Chancellor, if he were satisfied that it would significantly reduce such claims, to ban cold calling and to ban the commercial use of any data obtained by cold calling. That second part is directed at the fact that it is very difficult to legislate against cold calling from abroad but that, if you legislate against the commercial use of data, you do catch UK corporations or individuals who are using such data to pursue these fraudulent claims. The amendment is not specific to claims management companies. I mentioned earlier the interest that car hire companies and car repair companies have in pursuing these claims. They can offer to pursue personal injury whiplash claims as an add-on to sell their other services.

This is a probing amendment in a sense in that the Financial Guidance and Claims Bill, as mentioned by the noble Lord, Lord McKenzie, covered claims managers and defined claims management services quite widely. However, we are not convinced that that would achieve our object of banning the use of cold calling for other purposes or by other outside companies or that it would cover the use of cold calling in its widest sense.

Civil Liability Bill [HL]

Baroness Berridge Excerpts

Report stage (Hansard): House of Lords
Tuesday 12th June 2018 Lords Chamber

We also have to think about the other aspects of this matter. One of the difficulties for insurance companies faced with fraudulent claims is that they require the assistance of the person insured to challenge the claim. People do not care to be required to do that, but it is required if you are going to contest the claim. I do not suggest for a minute that that should not continue. There is nothing in the Bill to prevent the insurance company, if it wants to, from contesting the claim altogether. This is only settling the quantum of the claim by a system that is very like the judicial system of doing it. I know of no better way of deciding this sort of pain and suffering claim than to see what has been done in other cases already. Therefore, in my submission to your Lordships, this is a perfectly reasonable way of dealing with a large problem—a very large number of cases at the same time—and I sincerely hope that your Lordships will support the principle of the Bill in the way that it has been set out.

[Baroness Berridge (Con)]

My Lords, I have spoken at every stage of the Bill and I first thank the Minister for his time discussing matters with me.

For those who have been in your Lordships’ Chamber for the entirety of this debate, it is interesting to note how blame has been passed around like a squash ball. Is the fault that of the Government for not acting quickly enough, the insurance companies, those dastardly claims management companies or the judiciary for not getting a handle on this earlier?

While there is undoubtedly a problem with fraudulent claims, the one group not to blame is those people who are genuinely injured in this manner in an accident. Some of these cases indeed reach court: I have the privilege of representing those people.

Before I proceed, let me also comment on the matter of low-end claims or minor claims. I have met many a claimant for whom the difference in damages now proposed by the introduction of the tariff, taking some damages from four figures—£1,200 or £1,400—down to the likes of £470 is a significant matter for many people’s incomes up and down this country. I cannot have it portrayed that this might not make a great deal of difference to many ordinary people in the country.

From my experience in your Lordships’ House, we are in an unusual situation. We have so often spoken of the scrutiny of legislation needed here to avoid unintended consequences. But in this Bill, the intended consequence—whether that is the conscious intention of the judge or the virtually certain consequence of the legislation—will be to affect that group of people. Therefore, we are in the unusual situation where an amendment is laid on Report that is like a Second Reading point, because it is a point of principle about the Bill. It is also affects a point of principle that, as a law student, was the DNA of our justice system. It was taught to you from the moment you entered your lecture theatre—where, I have to say, I was taught by some amazing people.

I have thought much since Second Reading about how these genuine claimants might respond—the hundreds of folk who I have had the privilege of sitting with in waiting rooms on the northern circuit when I was a barrister—bearing in mind that they also, of course, care about their premiums and the societal implications of fraud, which is alleged to be so prevalent. It is these people to whom the justice system and the amount of compensation must be explained and make sense.

In my view, a genuine complainant might respond: “Her Majesty’s Government say that the insurance companies are to blame as well. Have you made them do everything possible before depriving me of my compensation?”. In fact, we know that insurance companies have often made commercial decisions to pay out for possible claims just to get rid of a claim at an earlier stage because it is cheaper—even suggesting to people that they might have been injured although they themselves have not mentioned it. Her Majesty’s Government have not asked the insurance companies to stop this behaviour first. The insurance companies have paid out without medical reports, so would it not be fairer to genuine claimants to have a period with the medical reports that the legislation will make mandatory before reaching for such a drastic policy solution?

Secondly, a genuine claimant might respond: “Was this situation so dire for the insurance companies that insuring everybody was really at risk? How are their profits doing?”. A report from Direct Line Group, the largest insurance group, shows profits for the financial year 2017 of £610.9 million—a leap of 51.4% on 2016. Dividends were up 40.2%. In its interim report in 2017, one of the reasons it gave was fewer than expected bodily injury claims. It is not the only insurance company to give this reason at the moment. I quote from the Insurance Times of 24 May this year:

“Fewer whiplash claims have helped Sabre Insurance Group’s gross written premium return to 2017 levels. Sabre said: ‘Pricing action was taken in early March to reflect the improving claims trends, specifically lower whiplash claims frequency’”.


Could the insurance companies not be asked to use perhaps a fraction of these profits to fight the fraud before genuine claimants have to be affected by such a policy decision? I could not help but notice that genuine claimants might actually see the flaw in the system: if, for example, Harry Kane were to get injured in a road traffic accident and was unable to captain England, that would probably merit more in compensation than my having a whiplash injury.

Genuine claimants might respond to the Government and ask, “With those enormous changes that you made as a result of the Jackson review and LASPO, introduced in April 2013, what happened then to premiums and savings made?” I repeat the figures I outlined in Committee. Insurers have saved £8 billion in claims costs between 2010 and 2016. The figure to date is £11 billion. But premiums have gone up from £385 in the second quarter of 2013 to £493 in the last quarter of last year, according to the ABI’s own premium tracker—an increase of 28% since the LASPO changes. Would not a genuine claimant ask, “Can the Government just make sure that the premiums will actually come down so that my compensation that I should have got will in fact be reallocated in lower premiums to everybody else, and not in higher profits for the insurance companies”?

Unfortunately, the legislation at the moment is unable to ensure that. There is nothing wrong with higher profits. Pension funds need them—I recognise that. But this is genuine claimants’ compensation that we are asked to redistribute in this way. I agree with the principle mentioned by the noble and learned Lord, Lord Brown of Eaton-under-Heywood, that this is a policy decision. For the reasons I have outlined, I do not think that we have reached the point—although the time is fast approaching—to so affect genuine claimants and their understanding in the waiting rooms of our courts throughout this country of what a justice system should deliver. More can be done, so unfortunately, at this time, I cannot support the Government.

[Lord Sharkey (LD)]

My Lords, I will speak briefly in support of Amendment 18, in the name of the noble and learned Lord, Lord Woolf, and, as a consequence, I will not be speaking to my Amendments 9, 10 and 17.

As this Bill has progressed, I have repeatedly pointed out that the tariff levels proposed by the Government lack any substantive justification. It remains entirely unclear why these specific amounts have been chosen. What is clear, of course, is that they are very substantially lower than the amounts currently awarded. What is also clear is that they require genuine claimants to suffer a very large reduction in damages in order to try to reduce the incidence of alleged fraud or unmeritorious claims. The incidence of such claims is highly contested and relies, in part, on data that unhelpfully categorises dropped claims as probably fraudulent.

The noble Lord, Lord Faulks, if I heard him correctly, asked if there can be any doubt about the incidence of whiplash claims. The answer is yes; such a doubt exists, for example, in the House of Commons. The House of Commons Justice Select Committee discussed the question in its report of 15 May this year. Paragraph 2 of its conclusions and recommendations states that,

“we are troubled by the absence of … data on fraudulent claims and we find surprising the wide definition of suspected fraud that is used to collate the ABI’s statistics. In particular, the failure by the ABI to break down their figures by the nature and type of claim, and to isolate RTA PI claims broken down by type of road user, is a significant and regrettable omission that weakens their evidence base”.

The committee went on to recommend that,

“in the interests of accuracy, the Government work with the ABI to develop a more nuanced approach to avoid conflating innocent—if unexpected—consumer behaviour with fraudulent activity”.

It seems wrong in principle to look to genuine claimants to pay for what may reasonably be characterised as, at least partially, a failure of the insurance industry’s own practices. The long-standing practice of no-med settlements springs to mind here.

The Government’s proposals would also create serious anomalies, as mentioned at Second Reading and in Committee, and as the noble and learned Lord, Lord Woolf, has again mentioned today. A whiplash injury of 24 months’ duration suffered at work would attract damages of up to £6,500. Under the Government’s proposed tariff, that injury would attract £3,725 in a road traffic accident, which is obviously undesirable and unjust. Finally, as far as I can see, the Government’s forecast reduction in the cost of fraudulent claims takes no account of dishonest claimants trading up. The Government’s proposed tariff may well deter small claims, but it may equally encourage dishonest claimants to attempt to move up the duration ladder to compensate.

I believe that we should remove Clause 2, which would leave the determination of damages where it currently is, with the judiciary. It would give the Government and the insurance industry time to reflect further on how better to assess the level of fraud and time to work out how to reduce it without unreasonably burdening genuine claimants, creating unacceptable and unjust anomalies in awards and creating incentives for larger dishonest whiplash claims.