The Civil Liability Bill was passed for referral to the House of Commons by the Lords last week following the conclusion of the Third Reading stage.
Since its introduction earlier this year, the Civil Liability Bill has been subject to some amendments and clarification both in respect of the whiplash reforms and the discount rate, which are set out below. The Government defeated amendments proposing a reduction in the value of whiplash claims dealt with under the new tariff system and alterations lowering the proposed increase in the small claims track limit.
Nonetheless, the move to the House of Commons is likely to intensify the debate on the Bill and associated personal injury reforms. The Labour peer Lord Beecham made clear during the Third Reading that the proposed increase in the small claims track limit for personal injury will continue to face significant opposition. It is expected that lobbying by both claimant representatives and the insurance industry will markedly increase.
With this in mind, the Government's response to the critical report issued by the Justice Committee earlier this year is keenly awaited.
The Civil Liability Bill proceeded through the First Reading in the Commons last week, and parliamentary scrutiny will take place during the Second Reading, after the summer recess ends in September.
Once the Second Reading is concluded, this will be followed by the Committee Stage. The best case scenario of a smooth passage would result in the Bill receiving Royal Assent by the end of the year with the newly approved discount rate being in place within the first half of 2019.
- The full whiplash definition, originally produced within draft secondary regulations, is included with the Bill and has now been extended to include injuries to the shoulder;
- In line with the adoption of a periodic review system per the discount rate, a further clause provides the Lord Chancellor with appropriate powers to redefine the scope of what is a 'whiplash injury' provided appropriate consultation with defined experts are undertaken;
- The proposed tariff system remains in place but the Government conceded that the Lord Chancellor will be required to consult the Lord Chief Justice when setting the tariff amounts;
- Further conditions for subsequent reviews of these tariffs were also included within the draft Bill.
- The introduction of the Bill earlier this year prompted the restatement of promises of lower insurance premiums for consumers on the back of reduced whiplash claims. Lord Keen recently pledged to hold insurers to their pledges to pass on savings made as a result of the reforms. It is unclear how the Government intends to legislate for this and ensure compliance with competition law.
- The commencement date for those provisions relating to the discount rate will be brought forward to the day that the Act receives Royal Assent;
- An amendment requiring the first review to be carried out without the expert panel under the guidance of the Government Actuary was agreed to expedite the setting of a new rate;
- Subsequent reviews of the discount rate undertaken with the expert panel will now be carried out within a maximum of 5 rather than 3 years. As we have previously discussed, the review period of 5 years may reduce or contain 'gaming' tactics from those seeking to use a pending review to their advantage in the context of a settlement negotiation.
- The changes to the discount rate review period from 3 to 5 years in England and Wales might prompt a change in proposals for similar reviews in Scotland following after the Damages (Investment Returns and Periodical Payments) (Scotland) Bill set out proposals for a new formula in setting the Discount Rate in Scotland.
- It was reported recently that analysis for Aon showed that insurers are pricing in for a 1% discount rate, with the majority of large loss motor claims believed to be settling at rates of more than 1% despite the current rate being -0.75%. This indicates that the current market position is one of pragmatism.
- The same analysis showed that the take up rate of periodical payment orders (PPOs) had fallen by up to 50% in 2017, with evidence they were becoming confined to the very young and the elderly, where a structured approach to settlement was more justifiable. Against this backdrop, the Government has stated that increased guidance on PPOs should be provided, in order to encourage their use.