It is fair to say there is a lot going on with regards to the personal injury claims market. We are starting to see the final flick of the tail of UK government reform although not everything is going to plan. If you then throw Brexit into the mix there appears to be a lot of uncertainty but this may be slightly misleading. We will now take a look at a number of issues such as the North-South divide, new online portal, NHS claims and Brexit.
NHS negligence claims
It has been reported that the NHS is currently in receipt of medical negligence compensation claims totalling a staggering £83 billion. There are now 10,000 new claims per year and the cost of compensation continues to rise as do the legal costs. As a consequence, NHS England has put aside a whopping £4.3 billion to cover legal fees to settle outstanding negligence claims. It is safe to say this is placing huge pressure on the NHS.
When you consider that the NHS England budget for 2018/19 was £129 billion, outstanding compensation claims of £83 billion would blow a huge hole in future funding. Many people will not be aware but the £4.3 billion in legal fees is actually funds diverted from overall NHS England funding. This has created a very difficult scenario in which:-
- Pressure is building on existing staff as a consequence of funding issues
- Due to the NHS “self-insurance” system, all legal fees and compensation payments are self-financed
- Training budgets are being put under pressure
- Equipment maintenance/replacement budgets are being stretched
We also know that the UK population are living longer in general with Scotland facing the tightest squeeze on NHS funding. The added pressure of an ageing population and ever tighter budgets will ultimately lead to a situation in which an increase in future compensation claims would likely be inevitable. It is simply the fact that resources are being stretched to the limit, NHS employees are overrun with work and the life of medical equipment is likely to be extended to save expenditure.
Can the NHS afford to fight compensation claims?
The NHS are looking at around 10,000 new complaints of medical negligence each year and this figure is set to grow. There must be a temptation to pay out on more obvious/borderline claims and even those where there are mitigating circumstances which could, in a perfect world, reduce claims payments. Some CMC’s and legal firms might be encouraged to pursue “borderline” legal action if, as we saw with whiplash claims in years gone by, there is little appetite to challenge these actions in court. A very tricky scenario!
England and Wales/Scottish personal injury compensation laws
Those who follow the personal injury claims market will be well aware of the historic differences between laws in England/Wales and Scotland. In this article we will look to address two very basic differences which can have a significant impact upon compensation payments and indeed in some situations the dismissal of cases.
Personal injury discount rate
The UK government has been under intense pressure to address what is known as the “Ogden rate”. This is the rate used to calculate lump sum payments while taking into account likely investment returns going forward. As a consequence of investment returns going forward for example a £2 million compensation payment covering numerous years would be less than £2 million if paid in one tranche today. This is because of the assumption that at least part of the funds received today would benefit from a positive investment return going forward – prior to their use.
In February 2017 the UK government announced plans to reduce the Ogden rate from +2.5% down to -0.75%. This would effectively mean an increase in compensation payments as a consequence of perceived negative investment returns going forward (UK base rates are near historic lows). While the government did adjust this rate up to -0.25%, after pressure from the industry, it was still a bold and ultimately controversial move. The new rate came in on 5 August 2019 but if we look north of the border, the rate in Scotland was set at -0.75% as of 1 October 2019.
As a consequence, compensation payments north of the border for identical cases of negligence could differ significantly where long-term medical care is required. It is also worth noting that periodical payment orders in England and Wales allow courts to impose compensation in instalments. There are plans to replicate this in Scotland but so far there have been no changes to the Scottish statute books and all compensation will be paid when the award has been finalised. These are subtle differences but they can have a huge impact on larger compensation awards.
The way in which dishonesty by a claimant is addressed in the English/Welsh courts and those of Scotland is very different. For example, English/Welsh courts regularly dismiss cases where the claimant has been found to be dishonest in just one area of their evidence. The assumption is that if they have been dishonest with one element of their evidence then this casts reasonable doubt on everything else. It is different in Scotland, with claimants still potentially able to continue a claim for personal injury compensation even if they have been proven to be dishonest with their evidence. There are numerous examples where claimants have reduced their compensation claims as their case weakens with many receiving just a fraction of their initial claim.
Quite why there are such discrepancies between English/Welsh and Scottish laws will surprise many people. The fact that these very two different legal systems have been around for hundreds of years means we are unlikely to see any side giving way. So, these relatively subtle but potentially telling differences are likely to be around for many years to come.
New RTA portal goes live
On 6 April 2020 a new portal for low value road traffic accident claims will go live. This system is in the hands of the Motor Insurers’ Bureau (MIB) and will be known as the “Official Injury Claim” portal. In many ways the new system will encourage swift settlement of road traffic accident claims with a value less than £5000. It has been introduced under the Civil Liberty Act which will also contain a new range of tariffs for successful compensation claims.
The MIB is confident that the April launch will go smoothly with industry parties now able to register their interest and test the platform ahead of the official launch. Unfortunately, there appear to be a number of challenges which have yet to be addressed including how the service will work for unrepresented claimants, the publication of civil procedure rules regarding use of the portal and the integration of third-party elements such as credit hire and rehabilitation services.
Historically, many personal injury claims companies have created significant income streams by claiming legal costs for relatively small road traffic accident claims. Amid suggestions this was being abused by certain parties in reality the UK government was forced to act. There are concerns that under the new system some claimants will not receive the appropriate level of advice and may ultimately lose perfectly viable claims or receive less compensation than they should have. It will be interesting to see how the system works, the integration of various elements and ultimately the simplicity/timetable for claiming compensation.
The reality is that no new personal injury claims platform would ever run smoothly because there are various parties with very different agendas. The proof will most certainly be in the pudding and we await the official launch with anticipation.
Addressing the issue of Brexit
The UK political system literally ground to a standstill towards the end of 2019 with the government unable to push through Brexit legislation because of resistance from opposition parties. Ultimately this led to the calling of a general election in which Boris Johnson managed to secure a healthy majority in the Houses of Parliament. As a consequence, the UK will leave the European Union on 31 January 2020 and trade talks are likely to continue until at least the 31st December 2020. However, how will Brexit impact personal injury claims where the accident/negligence occurred on the continent?
As a consequence of EU legislation, UK claimants are currently able to pursue compensation from overseas third parties through the UK courts. While the cases would be considered under legislation from the state/country in which the incident occurred this has not stopped numerous claims by UK victims. There appear to be two options open to the UK government at this moment in time:-
- A stand-alone legal system which would see UK/EU compensation claims treated in the same manner as those which occur in non-EU countries
- Enabling legislation which would allow the current arrangements to continue indefinitely to the benefit of UK/EU claimants
It does look as though Boris Johnson is seeking a greater retreat from the EU than many had previously expected. We have already seen concerns raised regarding future UK employment laws with many of them originating from EU directives. While nothing has yet been confirmed, many believe that EU employee protections will be diluted under new UK employment laws. Whether this is scaremongering, something we have become accustomed to, or a real concern remains to be seen.
Many people will be surprised by the four issues we have addressed in the above article. The difference in laws between England/Wales and Scotland has been a bone of contention for centuries. Even though many elements of the personal injury claims market were initially receptive of the new road traffic accident portal, there is criticism even before the official launch date. We have also seen speculation and counter speculation with regards to Brexit and how this might impact personal injury claims between Europe and the UK going forward. The current system works for all parties, is relatively swift and simple, why change it?
The more surprising element of this article relates to the extreme pressure placed upon the NHS budget. Management are stuck between a rock and a hard place. They need to divert more funds to cover legal costs and compensation payments even though this will increase the likelihood of more compensation claims going forward. Current claims total in excess of £80 billion with more than £4 billion put aside for legal fees. The annual budget for NHS England is currently £129 billion although it seems inevitable that more and more funding will be diverted to address the ever-growing number of compensation claims.