The War on Whiplash

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On April 1st 2013 the law surrounding civil litigation, and in particular the schedule for personal injury claims, changed with the aim of reducing the number of (alleged fraudulent) claims for whiplash injury. This month Jason summarises the main changes to legislation and the implications for all concerned.

Overview

Due to the multifaceted nature of whiplash injuries there are few people lacking a dispassionate opinion on the subject, and this is perhaps unsurprising given the range of competing interests, e.g.:

  • insurance companies wishing to mitigate their settlement losses
  • the legal profession and intermediary claims handling companies wishing to obtain the details of, and/or represent an injured claimant
  • the client suffering in acute (or potentially chronic) pain, disability and potential lost earnings
  • the average motorist witnessing an inexorable rise in their premiums year-on-year as a consequence of alleged whiplash fraud

‘Whiplash’, or the range of injuries associated with rapid acceleration-deceleration of the spine (and one could also include the shoulder girdle) is a hugely contentious subject and, having worked in the rehab field of this area for over a decade, it’s one in which I could pen an almost Tolkein-length tome.

Through my membership of the Medico-legal Association of Chartered Physiotherapists (MLACP) I also have more than a passing interest in the legal aspects of whiplash, and try to keep abreast of potential changes to legislation in this area.

It is now three years since Lord Jackson was tasked with an inquiry into costs relating to civil litigation, including the law related to personal injury. At the beginning of April reforms arising from this review will come into force under the newLegal Aid, Sentencing & Punishment of Offenders Act’, or LASPO.

The way we used to be….

Most people have heard of the colloquial term ‘no win, no fee’ and this expression relates to what are known as ‘conditional fee arrangements’, or CFAs. CFAs, as the name suggests, are monies received by a legal representative on the condition that they win a case for their client.

Pre-April 2013 this fee was paid by the losing side (or insurer) in litigation and the amount may have been equivalent to the actual compensation amount received by the claimant. Just as important is the fact the claimant did not have to pay anything to their representative regardless of whether they won or lost the case (hence ‘no win, no fee’).

There also used to be payments known as ‘referral fees’. Referral fees are those monies received by third parties (see below) simply for passing on the contact details of those involved in accidents. These fees would be paid to third parties by claims management companies, the likes of which you’ve seen advertising on television or from whom you’ve probably received a call or text message.  

So what went wrong?

One of the reasons why LASPO has been introduced relates to CFAs and referral fees. It is felt by some that the huge rise in the number of people claiming for injuries sustained in road traffic accidents is as a direct consequence of claimants having no potential loss were they to lose that claim.

Simultaneously huge profits from the receipt of referral fees by third parties from claims handling companies saw an indiscriminate rise in the number of details passed on to the latter, even if those involved in the accident were not actually injured.

Those involved in accidents were then encouraged to claim by claims handlers (even if their injury was spurious) on the basis that they had nothing to lose and everything to gain financially from taking a case forward. A vicious circle was therefore created in theory, and the purported outcome of the above has been a rise in vehicle insurance premiums for everyone as insurance companies covered their losses.

Changes to the system under LASPO

To précis:

  • referral fees can no longer be paid to third parties by claims handling companies to obtain the contact details of those involved in accidents 
  • CFAs have been eradicated and must now be paid to legal executives from the claimant’s compensation, but at no more than 25% of the final settlement 

The above applies to any agreement entered into after 1st April 2013, regardless of when the injury occurred. Claims which have been signed up prior to 1st April 2013 will be covered by the old rules, whether they are settled out of Court or at trial.

There is also the possibilty in the future that those wishing to claim for whiplash injuries will have to be assessed by official medical boards for their case to proceed beyond the initial stage, though the government is still consulting on this aspect.

Heads I win, tails you lose…?

As one can imagine the legal profession and the insurance industry are diametrically opposed in terms of opinion on LASPO. While acknowledging that there are some bogus whiplash claims The Law Society feels the changes are ill thought through, that their introduction is being rushed, and also that they will deny representation and necessary redress to those genuinely injured in accidents in which someone else was at fault. 

Echoing the outspoken views of the Canadian psychiatrist Andrew Malleson that medicine and law have worked in tandem to create the whiplash problem for their own financial and hegemonic ends, insurers feel that 'enough is enough' and they are paying out ever increasing amounts for whiplash claims despite the number of vehicle accidents falling in recent years. They believe claims handling companies and legal firms are behind this phenomenon and if it were prevented they would be able to reduce motorists’ insurance premiums.

So who’s right?

Whiplash is big business and if some of that is curtailed then inevitably some legal firms whose business models are largely predicated on personal injury work may go to the wall. Possibly some insurers would say that is not before time.

However one could argue that some insurance companies are being slightly disingenuous by assuming the moral high ground here. Particularly so when many of the big players in the market have been engaged in an almost Faustian pact, and have themselves been receiving referral fees for some time it appears.

Indeed some would say LASPO is simply the outcome of political lobbying by a powerful insurance industry, and that premiums will not fall as forecast when whiplash compensation and legal fees are reduced. In addition The Law Society feels that those on low incomes will be denied access to the legal system as the reduced success fees will see fewer solicitors offering such work.

So, in summary, whether the change in law is viewed as good or bad possibly depends on the category with which you personally identify in the 'Overview' section above.

As ever, thanks for reading, Jason.


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