January 15, 2019

Motor claims - 2018 in review

After the turbulence of 2017, legislative developments in the motor arena moved up a gear in 2018, providing motor insurers and legal representatives with much more certainty for the future in respect of large loss claims, and the volume motor sphere.

The passage of the Civil Liability Act implements a new methodology for calculating the discount rate in England and Wales, with application beyond motor claims. The first review of the discount rate has to be started within 90 days following Royal Assent. The Government has already published a Call for Evidence, and should the Lord Chancellor utilise the full periods available for review, we expect a determination in July or August of this year.

In Scotland, the review of the discount rate remains ongoing. Disappointingly for defenders, the recent Stage 1 report has not addressed or amended many of the areas of potential unfairness in the draft Bill, which may result in over compensation for some pursuers if carried forward into the Act.

Jersey also published proposals for discount rates of +0.5% and +1.8% which are dependent on whether the award period is greater than 20 years. It will be interesting to note whether a split tiered discount rate is something which will be considered as part of the review in England and Wales. 

Nonetheless, with predictions that Scotland, and England and Wales, will have differing rates of 0% and 1% respectively, it is arguably unhelpful for different discount rates to be established within similar common law jurisdictions. Forum shopping in applicable cases may become relevant.

As the Civil Liability Act will change the claims system in England and Wales, the introduction of the Civil Litigation (Expenses and Group Proceedings) (Scotland) Act will have wide ranging effects on motor claims in Scotland. Solicitors will now be able to offer damages-based agreements (DBAs) as a way of funding litigation, and the Act also introduced qualified one-way costs shifting (QOCS) subject to the exceptions of fraud, unreasonable behaviour and abuses of process. 

In the interest of ensuring that these changes are not claimant-centric, a reduction of claimant costs in low-value claims may also be part of an ongoing legal services review in Scotland.

The issue of low value claims forms part of the discussion around the Civil Liability Act which also advances the Government’s reform package in respect of whiplash claims following road traffic accidents to be introduced in 2020. The Act establishes a new definition of 'whiplash injury’ and also introduces a tariff system for those injuries. The tariff system will significantly reduce damages awards.

Amongst the further tranches of whiplash reform announced last year, was the inclusion of the creation of a new portal to handle expected increased numbers of litigants-in-person and changes to the small claims track limits for RTA PI claims to £5,000. Combined with the tariff system, the small claims changes would remove a claimant's costs entitlement, save for recovery of minimal small claims costs.

Whilst the Government has successfully pushed the Civil Liability Act to the finish line, its consultation on reforming the Road Traffic Act on the issue of compulsory motor insurance has stalled.

From a European perspective, consultations have accelerated. The European Commission published its response to the REFIT consultation on the Motor Insurance Directive, which was the subject of several decisions in the European Court of Justice extending its existing scope last year. Responding to the Commission, the European Parliament proposed that vehicles intended for use 'in traffic' should require compulsory motor insurance even "when outside traffic".This would mean that vehicles such as tractors used on the road, would need insurance even when used on private land. It was also suggested that motor sports events not be subject to compulsory motor insurance requirements under the MID.

Moving beyond vehicles now on the road, the next generation of insurance will revolve around the introduction of autonomous vehicles. To that end, the Automated and Electric Vehicles Act 2018, passed last year. The Act retains a single insurer model, where a motor insurer covers both the driver’s use of the vehicle and the autonomous vehicle technology.

In the expectation of large scale testing of autonomous vehicle technology, additional proposals to make exemptions to the Road Vehicles (Construction and Use) Regulations 1986 has also been tabled. This will allow remote control parking using hand held devices. Changes to the Highway Code reaffirming driver responsibility in automated vehicles were also proposed last year. Much like last year, there remains much to do in preparation for when these vehicles become commercially available, expected to be in 2021.

Claims involving autonomous vehicles remain an issue in the future. Case law progressed last year in existing claims streams, such as credit hire. In the case of Irving v Morgan Sindall, the High Court has found a defendant must pay credit hire charges even where the credit hire company assured the claimant she would not be pursued for the charges. The case can be distinguished from those where the claimant is not assured of a contingent liability to pay the hire charges only if they are successful in their case.