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Whiplash reforms spring into action: a costs perspective

11 March 2021
The whiplash reforms come into force on 31 May 2021. Anna Poynton considers how the reforms will impact on costs recovery in whiplash claims.

Introduction

The whiplash reforms will come into force on 31 May 2021 (the spring bank holiday) with the new rules and practice direction being published at the end of February. The aim of the reforms is to save motorists money by reducing claim frequency and costs. The reforms are being implemented by way of:

  • an increase to the small claims track (SCT) limit for personal injury claims in road traffic accidents from £1,000 to £5,000;
  • a tariff for the valuation of whiplash injuries;
  • the creation of an online portal for SCT value injury claims arising from road traffic accidents.

This seismic shift in approach to whiplash claims will not only have a significant impact on the level of damages that are paid, but it will, to all intents and purposes, eliminate the payment of costs in most of these cases. Anna Poynton considers how the reforms will impact on costs recovery in whiplash claims. 

What does this mean?

Most adult personal injury road traffic accident claims with an injury element that is worth up to £5,000 will, if litigated, be allocated to the SCT rather than the fast track. Crucially, this will impact on the costs that are recoverable, as any legal costs in these SCT cases will no longer be recoverable from the defendant. 

Cases that proceed through the existing RTA portal are subject to Fixed Recoverable Costs being paid by the defendant / insurer and these costs can often exceed the damages in modest injury claims. For example, a claimant with a 0-3 months whiplash injury would currently recover in the region of £1,500 damages together with their costs which could be over £4,000 depending on when the case settles. 

With compensation for whiplash injuries with a prognosis of less than 2 years to be valued by reference to a tariff (see below), claims that could previously have attracted damages awards of anything up to £6,000 or £7,000 will now be worth less than £5,000 (the maximum tariff valuation is £4,215 for a whiplash injury with a prognosis of more than 18 months but not more than 24 months). A small amount is added to cover "minor psychological injuries" suffered on the same occasion as the whiplash injury which takes the maximum sum recoverable on the tariff to £4,345. These cases will fall below the new SCT limit. 

 Whiplash Reform - Summary of Changes
 
So our claimant with a 0-3 months whiplash injury after 31 May 2021 will recover £240 damages, and costs will not be payable by the defendant (with the limited exceptions of medical fees and court fees). These claims are not likely to be attractive to claimant lawyers or claims management companies. 

The court will be permitted to award a maximum uplift of 20% on the tariff in "exceptional circumstances". The court must be satisfied that the degree of pain, suffering or loss of amenity caused by the injuries makes it appropriate and the injury is either exceptionally severe or where the claimant's circumstances increase the pain, suffering or loss of amenity. The threshold for "exceptional" will remain high and it is unlikely that the exceptional uplift will take many whiplash claims out of the SCT and into the costs bearing fast track. 

Injuries not covered by the tariff will be valued, as they are now, by reference to common law and the Judicial College Guidelines.

The introduction of a new small claims injury portal will facilitate the processing of these claims with claimants being guided through the process, in theory removing the requirement for legal representation. 

We envisage that the majority of qualifying whiplash claims will fall within the new SCT limit and will change from being costs-bearing to non-costs bearing. This reduction in costs will have a considerable impact on many claimant personal injury firms currently dealing with motor claims. 

Costs in claims that are not affected

Non-injury claims
The new rules only affect injury claims so claims for vehicle related damages will be dealt with outside the new protocol. A claim for £11,000 vehicle related damages would be allocated to the fast track and will remain costs bearing. Costs in that claim would continue to be payable on the basis of hourly rates. 

Vulnerable road users
Claims by vulnerable road users are not captured by the new pre-action protocol. It does not apply to claimants who are:

  • Motorcyclists / pillion or sidecar passengers on a motorcycle;
  • Wheelchair / powered wheelchair users;
  • Mobility scooter users;
  • Cyclists;
  • Horse riders;
  • Pedestrians. 

The SCT limit for personal injuries for these road users remains at £1,000 and costs will be recoverable in these cases in the same way as they are now. 

Infants and protected parties
Claims by infants and protected parties will be subject to the whiplash tariff, however, they will not be subject to the costs limitation. These claims will be dealt with through the existing portal where appropriate so the current Fixed Recoverable Costs regime may apply (subject to the level of damages recovered and whether the claim started in the portal). These claims cannot be allocated to the SCT and the normal track will be the fast track for whiplash claims. These claimants will be able to instruct a legal representative and their costs will remain recoverable. Non-whiplash claims will be subject to the SCT limit of £1,000 for personal injury. 

Other excluded categories of claimant
The current exemptions for deceased parties, bankrupts, accidents involving vehicles registered outside the UK so these claims will continue to be dealt with outside the portals but will be subject to tariff valuations. Again, the SCT limit for personal injuries in these cases will remain at £1,000. A summary of the exceptions to the increase in the SCT limit is set out below.

Exceptions to the increase in the SCT limit - where RTA occurs on or after 31.5.21

Vulnerable Road Users
They are:

  • Motorcyclists/pillion or side car passengers on a motorcycle;
  • Wheelchair/powered wheelchair users;
  • Mobility scooter users;
  • Cyclists;
  • Horse riders;
  • Pedestrians

- The Small Claims Pre-Action Protocol does not apply.
- The Small Claims Track limit is £10,000.00 for the overall claim and £1,000.00 for any claim for personal injuries. 

Personal Representatives
When the Claimant or Defendant acts as a personal representative of a deceased person:

- The Small Claims Pre-Action Protocol does not apply.
- The Small Claims Track limit is £10,000.00 for the overall claim and £1,000.00 for any claim for personal injuries.

Foreign Registered Vehicle
When the Defendant's vehicle is foreign registered:

- The Small Claims Pre-Action Protocol does not apply.
- The Small Claims Track limit is £10,000.00 for the overall claim and £1,000.00 for any claim for personal injuries.

Children
When the Claimant is a child:

- The Small Claims Pre-Action Protocol does not apply.
- If it is not a whiplash claim - the Small Claims Track limit is £10,000.00 for the overall claim and £1,000.00 for any claim for personal injuries. 
- If it is a whiplash claim – it will always be allocated to Fast Track regardless of value.

Protected Party
When the Claimant is a protected party:

- The Small Claims Pre-Action Protocol does not apply.
- If it is not a whiplash claim - the Small Claims Track limit is £10,000.00 for the overall claim and £1,000.00 for any claim for personal injuries. 
- If it is a whiplash claim –– it will always be allocated to Fast Track regardless of value.

Bankrupt
When the Claimant is bankrupt:

- The Small Claims Pre-Action Protocol does not apply.
- The Small Claims Track limit is £10,000.00 for the overall claim and £1,000.00 for any claim for personal injuries.

Summary

Excluded categories of claimants will continue much as they do now, subject to tariff valuations of whiplash claims. Cases involving those claimants that do not automatically result in allocation to the fast track will need to have whiplash injuries with a prognosis of more than 9 months to take them out of SCT and into a costs bearing environment. 

The tariff will bring certainty to some claims, but those claims falling outside the tariff may become more complicated to deal with and valuation will be far from certain. The increase in the SCT limit will impact on a significant number of whiplash claims resulting in the majority of costs no longer being recoverable in those cases. 

It remains to be seen whether these reforms will bring about the much hoped for reduction in claims volumes or will we see a change in claims demographic with more claims being brought by and on behalf of the excluded categories of claimants. Those involved in dealing with motor injury claims will be on the lookout for the introduction of non-tariff injuries which could take the value of the personal injury claim beyond £5,000 (or a reasonable belief that the claim was worth more than this) or higher value special damages such as credit hire and repairs so total value exceeds £10,000 and into the familiar territory of costs recovery. For those representing defendants, a robust approach to claims handling will be key to ensure that claims do not creep out of SCT into fast track and that costs are minimised in every appropriate case. As with any major reform on this scale that has come before, there will be areas where it will be necessary for the courts to adjudicate and it will be some time yet before the overall impact and benefits of the reforms can be measured. One thing we can be sure of is that costs will remain a key focus in every claim for some time to come. 

For further information please contact Anna Poynton.

Read further commentary on Whiplash Reforms here.

Further Reading

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