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Changes to the Small Claims Limit Explained

Chancellor Osborne recently announced plans to increase the small claims limit for personal injury claims from £1,000 to £5,000, which will in turn limit people’s ability to seek legal representation in a claim for compensation arising from a road traffic accident.

When you’re involved in a road traffic accident resulting in personal injury, the current small claims limit means that you are able to get representation from a solicitor to assist you in claiming your legally owed compensation, as long as your claim is worth more than £1,000. If the limit rises to £5,000, most standard whiplash claims will be “small claims”, which means that legal representatives won’t be able to recover their costs from the other side, therefore resulting in solicitors being unlikely to take on these types of claims. Consequentially, the majority of road traffic accident victims will be left without the ability to obtain legal representation to pursue to claim a compensation which they’re justly entitled to.

Since the proposal was announced in the Autumn Statement, there seems to be a definitive divide in whether the changes will be of benefit or hindrance to the general public. On one hand they are being told they can save money on insurance premiums, but on the other hand, their access to justice and legal representation will be restricted should they find themselves victims of a non-fault road traffic accident.

In his speech to the House of Commons Chancellor Osborne said: ‘We’re going to bring forward reforms to the compensation culture around minor motor-accident injuries. This will remove over £1bn from the cost of providing motor insurance…so motorists see an average saving of £40-£50 per year off their insurance bills.’

Why have these changes been proposed?

The changes have been proposed in a bid to crack down on the fraudulent claim culture typically associated with whiplash claims. The government alleges that the changes could reduce motor insurance policies by an average of £40 to £50 annually, saving the motor insurance industry £1bn a year.

While this is great news for insurance companies and their customers, there isn’t yet any clear evidence to support these statements and there hasn’t been any explanation to determine how the rights of genuinely injured victims will be protected. Promises regarding reduced motor insurance policies is something that we’ve heard in the past but are yet to see materialise.

What does this mean for personal injury victims?

If the small claims limit rises to £5,000, it will obstruct access to justice for many sincere personal injury victims. Although the government has outlined some of the potential benefits to the changes, it unfortunately means that genuine whiplash sufferers will be limited in obtaining legal representation in claiming for compensation they are rightly owed if injured in an accident that wasn’t their fault.

What the professionals said

For the change:

Huw Evans, director general of the Association of British Insurers, said: ‘This is a significant breakthrough in tackling the compensation culture and is good news for motorists.’

A spokesman for Aviva said: ‘These measures will directly address motor fraud like crash for cash, reduce the volume of nuisance calls, remove costly lawyers from the process and save motorists more than 10% on their premium.’

Stephen Gaywood, the AA’s director of counter-fraud said: ‘By giving successful personal injury claimants care such as physiotherapy, which compensation is supposed to pay for, those out to make a fast buck from an injury claim that may not have happened, will immediately be discouraged.’

Against the change:

Jonathan Wheeler, the president of APIL (Association of Personal Injury Lawyers) said: ’In 2012 the insurance industry promised the Government that if reforms to the way whiplash claims are handled were introduced, savings would be passed on to motorists through their premiums. All that has changed since then is that the insurance industry has failed to live up to its own promises. Since 2012 the portal [a streamlined system for dealing with personal injury claims] has been extended, medical reporting for whiplash claims has been completely overhauled, sharing of fraud data has been introduced and solicitors fees have been slashed. Government figures show whiplash claims have fallen by more than a third in the past four years. Yet still insurance premiums have increased.

‘Only two years ago the Government ruled out increasing the small claims court limit because there were no adequate safeguards to protect genuine claimants. There are still no adequate safeguards. If the small claims court limit is raised to £5,000 all that will happen is that genuine victims of injury will not be able to afford the legal help they need to bring genuine claims and there will be an epidemic of cold calling from claims management companies as they rush to take advantage of vulnerable people who won’t be able to afford legal representation. We need to remember that these are people who have been needlessly injured by the negligence of others. Removing the right to damages for pain and suffering would show a callous indifference to the suffering of people who were needlessly injured by the negligence of others.’

Law Society President Jonathan Smithers said: ’[The proposals] will completely undermine the right of ordinary citizens to receive full and proper compensation from those that have injured them through negligence.

‘These proposals will stop people obtaining legal advice for all personal injury claims below £5,000 and stop people claiming for often debilitating injuries arising from road traffic accidents if these injuries are considered minor.’

A petition has been set up calling upon the Government to review the proposed changes; if you think that the small claims limit should remain at £1,000 you can show your support here.

This was posted in Bdaily's Members' News section by Winn Solicitors Ltd .