A Ministry of Justice consultation to consider raising the small claims limit in the UK has now been unveiled, revealing reforms in personal injury claims and the value of claims that will be processed through the small claims court.
On 1 October 2018, the small claims limit will be raised to £5,000 for whiplash claims and £2,000 for all other personal injury claims. Both of these will be increased from the current small claims limit of £1,000.
This ruling means that any whiplash injury claim that is valued under £5,000 will need to be processed through the small claims court without a lawyer, as will other personal injury claims that are valued under £2,000.
If a solicitor was instructed on these cases, their costs would no longer be recoverable from the defendant’s insurance company, no matter what the outcome of the claim.
UK insurers look to increase margins
These reforms have been pushed by the UK insurance industry to increase their margins and make savings on legal fees. However, most people believe these changes will result in genuinely injured people not having access to the legal representation they require, ultimately leading to a reduction in access to justice.
The reforms will leave a great many people who have sadly been injured, due to no fault of their own, not understanding how to proceed and where they can turn to for help.
People will still be able to apply for compensation through the small claims court; however, very few people understand this process and know how to successfully bring about a claim. Further, someone who has never experienced the process may be completely overwhelmed by the prospect with little understanding of the amount of evidence which needs to be collected and disclosed, the different court forms which will require completion and not to mention the rules surrounding limitation (which is the amount of time you have to make a claim).
Also, they will be facing the Defendant’s Insurers on the opposite side.
When these changes are introduced, they will have a dramatic impact on many injured people by not only restricting their access to justice and expert legal representation but most importantly, have a detrimental effect on their recovery, as rehabilitation will also be limited.
Increasing the small claims limit also assumes that because a claim is less valuable, it must also be less complicated. This is very rarely the case, and fighting to establish liability or blame for an accident can be extremely difficult, no matter what the value of the claim is.
Insurance companies are set to save £1.2bn each year in costs with the reforms and have promised that these savings will be passed on to their customers. The UK government claims the changes will cut approximately £40 a year from each motor policy, however, premiums have been on the increase in recent years. In the past year alone, premiums have risen by a mind-blowing 14%, despite previous changes in 2013 which reduced legal fees on lower value claims.
According to researchers at Capital Economics, 35,000 jobs within the personal injury industry will be put at risk when the reforms go ahead next year. It has been estimated that overall, 14% of all legal sector jobs in England and Wales could be lost, with Manchester, Liverpool and surrounding counties likely to be hit the hardest.
No win no fee reforms
Manchester based no win no fee claims solicitors, Freeclaim Solicitors, agree that it is important to quash fraudulent claims. But it is also important that genuinely injured people have access to expert legal representation to help them when they need it most.
“We have been campaigning for many years and agree there needs to be a stop in cold calling people to encourage them to make unscrupulous claims. But that shouldn’t be at the cost of hard-working people who have found themselves injured in an accident through no fault of their own and with no access to the rehabilitation they need to recover and get back to work and normal family life.
“We saw major reforms to personal injury claims introduced in April 2013, which affected ‘no win no fee’ agreements for compensation claims. These reforms stopped success fees being recovered from the defendant’s insurers and put the onus on the injured party to pay these fees out of their compensation.
“The success fee was the element of a claim that allowed solicitors to offer ‘no win no fee’ and not charge for claims that were lost. This gave greater access to justice for a great many people who simply could not afford legal fees.”
Campaigners, Access to Justice (A2J), who commissioned the Capital Economics Report, say the reforms are wrong for several reasons. Primarily, the changes will drastically restrict people’s access to justice, a great many working people will lose their jobs and the UK government will see a significant reduction in tax revenue.
According to A2J, the consequences for victims of negligence will be disastrous. If the reforms had been in existence in 2014, up to 95% of the 759,763 road traffic accident victims awarded compensation would not have been able to claim for their injuries at all.
The financial risk and the stress for victims of negligence will mean many will simply not pursue justified claims, meaning the insurers again increase their profits on the back of injured victims.