Personal injury (PI) claims have come under considerable scrutiny in the last few years and 2014 looks set to be a vital year for PI reform.
Following the implementation of the civil justice reforms last year, momentum has built to further improve the procedure for PI claims. As a consequence there has been a late but significant addition to the Criminal Justice and Courts Bill.
The Criminal Justice and Courts Bill is presently before Parliament and is expected to become law by January 2015. Clauses 49 to 53 deal specifically with PI claims. Significantly the whole claim has to be dismissed by the courts if there is any element of ‘fundamental dishonesty’ and the bill also proposes to disallow PI law firms from offering incentives.
Establishing Fundamental Dishonesty
Under clause 49 of bill a defendant, usually insurance companies, can apply to the court to have the Claimant’s claim struck out if the Claimant has been fundamentally dishonest in relation to any part of the claim. This should be much easier than proving fundamental dishonesty in relation to the primary aspect of the claim.
If successful in proving dishonesty, the defendant will then be able to seek an order for costs but only for the amount of its costs over and above the amount of compensation the claimant would have been awarded but for the finding of fundamental dishonesty.
The court must dismiss the claim unless it is satisfied that the Claimant would suffer ‘substantial injustice’ if the claim was dismissed. In these circumstances, the court cannot find in favour of the claimant but can reduce or eliminate damages.
Offering Inducements to Potential Personal Injury Claimants
Clauses 50 to 53 of the bill address the questionable practice of offering inducements to make personal injury claims. An inducement is an offer of a benefit which is intended to encourage a person to make a PI claim using their firm and includes cash and free gifts such as iPads.
Clause 50 (rules against inducements to make a personal injury claim) will apply to regulated persons including as lawyers and law firms to ban inducements. Claims companies were banned from offering inducements over a year ago.
Offering a discount, or the popular ‘no win, no fee’ agreements, or offering to pay disbursements are examples of what do not amount inducements and will still be allowed if the bill is passed.
Clause 51 states that the Solicitors Regulation Authority (SRA) must ensure that it implements systems in place for monitoring and enforcing the breaches of inducements explained in Clause 50. Clause 51 also empowers the SRA to impose sanctions for the use of inducements.
Clause 52 of the bill is an interpretation section related to inducements. Clause 53 states such regulations relating to inducements are to be made by way of statutory instrument.
The Ministry of Justice is aiming for the dishonesty rule to act as a deterrent and are promising to legislate for the changes to be implemented next year. The effect of fundamental dishonesty in future personal injury is yet unknown; mainly due to the debate over the standard of dishonesty required. We will have to wait to see how many fraudulent claims are affected.