Sunday, January 21, 2007

The Personal Injury small claims limit - £2500?

For those not too well versed in the key issues within the personal injury market, this year could be quite interesting for one simple reason. The "small claims" limits for personal injury claims is currently being reviewed and is subject to quite an intense debate.

To give you a bit of background, in order to have an entitlement to costs you must firstly achieve damages for pain and suffering that exceed £1000. This is not a considerable amount of money and with an average two to three month period of pain and suffering fetching around £800 to £1250, its is fair to say that insurers probably pay out more than they would like at the lower end of the market.

It must however be said that the average claim for soft tissue injuries will usually involve a period of pain and suffering that extends beyond three months and one could generally expect damages in the region of £1500 to £2500. I would be confident in saying that around 60-70% of the claims that my particular firm deals with, fall into this category.

Now defendant insurers obviously are not happy at having to pay costs on what they consider to be moderate to minimal personal injury claims. They would much rather put the legal representative out of the loop completely and deal with the injured claimant a personal level. They argue that the claimant will end up with the same result with or without a solicitor and the whole process will be quicker, more efficient and ultimately more rewarding for the injured party.

This frankly is complete nonsense.

I have great knowledge of the workings of personal injury claims departments within insurance companies. I know personally many people who work in such departments and have done for quite a few years. To say that insurers will treat claimants "fairly" really is stretching it.

Defendant insurer departments have various techniques to ensure that they pay as little as possible to injured accident victims. Many claims departments work according to strict rules in terms of reducing the cost of claims and every payment is made, generally is very tightly controlled. A "reserve" is put on each file and the case handler is expected to settle the claim UNDER the value of the reserve. Severe bollockings are dished out in some cases if they fail. They also use computer software to "value" claims and there is little or no room for negotiation. That is of course unless you are legally represented. With such representation, if the offer is unfair, you have the right to sue.

The insurers would make mincemeat of your average member of the public in this particular environment. Whilst they wish to reduce costs and save time, from their point of view this can only happen by removing the role of the solicitor from the process.

The Association of British Insurers (ABI) have made a recommendation that the small claims court limit for personal injury claim should rise to £5,000. To put this into perspective, this would take in all claims for moderate to severe soft tissue injuries, minor fractures such as wrist fractures uncomplicated arm fractures and even simple like breaks.

The DCA who are currently reviewing the personal injury process proposed a figure of £2500 as a compromise. Whilst this is much more reasonable than the rather ridiculous £5,000 suggested by the ABI, it is still far too high.

The figure of £2500 probably represents around 60% of the personal injury market. Many law firms would go out of business and there would be far less availability for legal representation. In addition to this, there would be extreme difficulties for claimants trying to recover appropriate damages should their case fall within the £2500 limit. The level of personal injury damages which has remained unchanged for many years at the lower end, would reduce still further and the only winners here would be the insurers.

The debate continues and I could go on forever about the benefits of retaining legal services even at the lower end of the personal injury market. This is a completely biased view but I have had many years of experience in dealing with insurer claims departments and they really do only have one objective. That is to save as much money as possible on each and every single claim that they deal with. I have no problem with insurers saving costs and trimming processes to meet objectives but what is at stake here is the issue of fairness and justice for individuals that have suffered an injury.

As you can always tell I feel quite strongly about this subject and will write further updates during the course of the year. If there are any personal injury practitioners out there or any insurer friendly practitioners /staff, I would welcome your informal views on this.


Mark said...

I have to say that so far as my personal opinion is concerned you're blogging to the converted on this one. Over the 14 years I've practiced PI (I'll get it right eventually I swear) I've seen the insurance industry attempt to undersell claims on any number of occasions when clients have initially tried to deal with matters on their own. One particular lady came to see me after she had received a full and final settlement offer from the third party insurers and wished me to advise as to whether it was reasonable. Their "technical claims manager" had advised her that using the "latest" computer aided assesment method (that'll be that lying, coal powered toaster which is colossus then) her claim was worth £1275. The lady in question had suffered a simple colles fracture of her dominant right wrist. She was a hairdresser. Now whilst it is true to say that this is not a major injury as injuries go; its still bloody painful and took 2 months to settle down. Further the claims mishandler at said insurers had neglected to mention that she was entitled to claim the difference between the SSP she was paid during her absence from work and her normal wage, prescription charges etc and they hadn't even diclosed to her a copy of the GP!! report they'd obtained in respect of the injury. Needless to say we were able to rectify the various "oversights" yes, thats what they called it and the claim settled for an acceptable sum. Nevertheless, this ably demonstrates the type of behaviour they'll get up to if they're allowed to control the lower value claims themselves.

legalspy said...

Hi Mark

Many thanks for your comments

Your example is a good one and I can think of a few very similar cases myself.

Recently we sent a rule 15 to a client who had an RTA 2 weeks previously, fairly bog standard whiplash injury but receiving physio etc. The insurers - wont name names but lets just say their name "sparkles" and they only insure women - decided to make an offer of £1000 initially and then increased £1500 more or less immediately.

Faced with 12 months of being without her £1500 the client decided to accept because the carrot was big enough and the stick wasnt required. Whether she ever physically recovered I'll never know.

The insurer on the other hand couldnt give a damn.

Without flogging this too much and I realise that you at least are singing from the same sheet, here is one final example of sharp practice from our friends on the other side.

Old lady fractures hip in shop. Hip replacement required after initial metalwork failed. Immobile after long period of recovery where she perhaps didnt approach physio too actively (at 79 years - that can happen)

Her daughter decides to claim without representation. After 18 months the insurers make a final offer of £7500! (This would just about cover her private hip op)

We got involved and settled it for 6 figures. the lady now has adaptions, aids etc to help her and can enjoy life more knowing she has been properly compensated.

Now this last case is not a "small claim" but it does perfectly illustrate the shoddy practices that exist. Its the reserve that counts - not the claimant so far as the defendant boys are concerned.

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