13 December 2016

By Andrew Moretta, World of Work PhD student, The University of Liverpool

The government appears intent upon saving the insurance industry costs in excess of £1 billion a year – a saving which is believed likely to result in a £200 million increase in profits for the already stupendously rich insurance companies.

It proposes to achieve this by imposing severe restrictions on the compensation recoverable in Road Traffic Accident whiplash claims, and by increasing the upper limit on other personal injury small claims for pain, suffering and loss of amenity from £1,000 to at least £5,000. The government's consultation paper is called Reforming the Soft Tissue Injury (‘Whiplash’) Claims Process; A consultation on arrangements concerning personal injury claims in England and Wales, but the small claims limit proposal also poses a grave obstacle to workers' access to justice.

This is a step on from the massive legal aid cuts and attacks on 'no-win no-fee' costs imposed by the Coalition's 2012 Legal Aid and Sentencing of Offenders Act. An extraordinary attack on a key tenet of civil law has been proposed.

Where small claims are concerned the general rule is that the successful litigant is not awarded legal costs, while in cases involving larger sums costs are said to 'follow the event' - the general rule is that costs are awarded. Costs awards in small claims are said to be 'disproportionate', meaning that costs are likely to approach or exceed the value of the claim, and claimants are expected to represent themselves. It is argued that small claims are simpler, and the injured party does not require expert help, although, of course, it is necessary to present medical evidence and show that the defendant has been negligent, whether the claim is for £500 or £100,000.

The reality is that the small claims limit of £1,000 is there to discourage minor injuries becoming a matter for litigation. If that limit is increased to £5,000 as the government intends then, as some 80% or 90% of personal injury awards are for less than £5,000, the vast majority of public liability and employer liability claims, as well as lower-value clinical negligence claims, will be affected. Many claims will no longer be worth bringing. Lawyers' fees will have to come out of the compensation awarded, so essentially the insurance industry will be handed a very large amount of money extracted from the pockets of the 'ordinary and hardworking' people the government is at such pains to claim they represent.

Trade union solicitors Thompsons subsidises the cost of legal advice and representation in largely 'costs neutral' employment claims brought on behalf of trade unionists with the profits made from personal injury cases. If the threshold on small injury claims increase, the firm will be faced with some difficult choices. Many PI cases will no longer be financially viable. The income from PI claims will plummet, and the ability of the firm to advise and represent members in employment cases will be affected. If Thompsons suffers, trade unionists will suffer.

Those who represent themselves, or are represented by 'no-win no-fee' firms - so often happy to take their cut of the first offer from the insurer and move on to the next case - will be likely to find themselves settling for sums well below the actual worth of the claim.

Just as employers, since the imposition of employment tribunal fees in 2013, are able to 'call the bluff' of employees or ex-employees who they know will be very reluctant to stump up a four-figure sum to take their cases on to tribunal, insurers will similarly be able to buy off with derisory settlements those who would previously have been prepared to go to court.

The imposition of the tribunal fees system was largely engineered by employers' organisations and their allies in Parliament, who claimed to have identified a 'Tsunami' of fraudulent employment tribunal claims. There was no wave of 'vexatious' claims, but the credulous and the corrupt, both inside and outside Parliament, on radio and in the newspapers, parroted the phrases and the apocryphal stories, eventually persuading the Coalition government that the effective withdrawal of employment rights for a vast swathe of the working population was politically feasible. Hefty fees were imposed, and such was the obvious blow to access to justice that it caused considerable political embarrassment to the hapless Liberal Democrats, and very likely cost them a few seats in the 2015 election.

A similar campaign against Health and Safety legislation has been conducted since the late 1990s. Strenuous attempts have been made to coax us into believing that workplace safety standards are absurd examples of needless red tape while, with remarkably little publicity, workplace inspections have been withdrawn and prosecutions have plummeted. Health and safety compliance has become a commodity bought by filling out forms and posting cheques.

Having apparently learned the value of a well-presented misinformation campaign, the Association of British Insurers has convinced many in Parliament that fraudulent whiplash claims in Road Traffic Accidents, rather than insurance industry greed, are responsible for recent exponential rises in motor insurance premiums. Insurers, Parliamentarians and their friends in the media, talk of a 'compensation culture', and claim that the insurance industry is 'in crisis'. There is no crisis, but there is a 'compensation culture' at the heart of the industry, and behind this fresh attack on access to justice. The insurance industry makes huge profits, pays out billions of pounds in dividends, and compensates its CEOs with multi-million pound salaries. It is this wealth which turns the heads of the politicians. Aside from the millions the industry has donated to the Tory Party over the last decade there are consultative and lobbying opportunities, and non-executive directorships to be snapped up.

I would ask you to examine the comprehensive pieces on this matter to be found at the Access to Justice action group's website and urge you to write to your MP referring them to the 'A2J' pages and demanding they that fight the proposals.

Andrew is the author of IER publication Access to Justice: Exposing the Myths, now available for just £6. Click here to read more and purchase