Insurers are likely to have a stronger means to tackle dishonest personal injury claims in future.
The Criminal Justice and Courts Bill includes Clause 45, which addresses personal injury claims where the court has found fraudulent or inflated claims for compensation.
If the claims are based on ‘fundamental dishonesty’, Clause 45 allows the court to dismiss the case entirely, including any genuine underlying claims. An exception may be made for the genuine claims if the claimant would suffer ‘substantial injustice’ in the face of a complete dismissal.
Furthermore, in the event of a finding of fundamental dishonesty, a court may order the defendant’s costs to be paid by the claimant. As well as aiding insurers in the fight against dishonest claims, this should also go some way towards disincentivising the claimants that make them.
Fundamental Dishonesty Clause Invites Controversy
The addition of such a clause has been the subject of significant debate amongst the legal community since the Supreme Court heard Fairclough Homes v Summers .
The claimant had sought more than £800,000 to compensate for an injury suffered at work but the Court awarded £88,000 in compensation, greatly reducing the claimed amount to match actual injuries proved to the Court. Zurich, the defendant insurance company, moved for a complete dismissal of the case due to the dishonest claims.
The Court reserved the right to completely dismiss a claim containing highly fraudulent inflation even in the face of an underlying genuine claim but refused to do so on grounds of disproportionality in this case.
Striking a Balance Between Proportional Compensation for Personal Injuries and Unjust Payouts
Clause 45 seeks to address imbalances between proportional compensation for actual injuries suffered and claims which may contain dishonest assertions that would unjustly inflate payouts for insurers.
However, the Association of Personal Injury Lawyers (APIL) has cautioned that Clause 45 may trigger a rash of ancillary litigation concerning ‘fundamental dishonesty’ and ‘substantial injustice’ by deceitful insurance companies looking to avoid claim payment entirely.
Additionally, lawsuits for genuine compensation for injuries may be chilled as the prospect of burdensome legal proceedings and accusations of dishonesty could deter claimants from pursuing legal action.
The Importance of Genuine Personal Injury Claims
For personal injury claimants, Clause 45 underscores the importance of claiming only genuine injuries and accurate costs.
If the court finds a claim based on fundamental dishonesty, it has the power to dismiss all attached claims, which could leave a claimant without any compensation at all.
This possible unintended consequence of Clause 45 has concerned some personal injury lawyers as genuine claims may go without redress should there be a finding of fundamental dishonesty.
For insurance companies, Clause 45 coupled with Fairclough indicates that the courts are willing to substantially decrease payouts to claimants. However, highly inflated claims, even based on fundamental dishonesty, will not be a guaranteed dismissal for the genuine underlying claim.
Nevertheless, Clause 45 provides legislative backing for significantly reducing payouts if insurance companies can demonstrate fundamental dishonesty in the claim.