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ARAG Q&A on The Civil Liability Bill
After years of debate, the Civil Liability Bill passed, somewhat quietly, into law at the very end of 2018. The implementation is scheduled for April 2020 following a pilot in October 2019. The impact for motorists who are unfortunate enough to be injured in an accident will be significant. We answer some key questions for brokers:
What is changing?
The Act creates a separate process for the settlement of soft-tissue injury or ‘whiplash’ claims resulting from a road traffic accident and will fix levels of compensation depending on the severity largely defined by how long the injury lasts.
The reforms also ban the practice of trying to settle such claims without first assessing medical evidence of the injury, as many insurers have in the past.
What about the small claims court?
While not mentioned in the Act itself, the government intends to increase the small claims court limit to £5,000 for injured motorists and their passengers and £2,000 for other injury claimants. This is likely to be implemented when the other reforms come into force.
How much will injured motorists get?
While the legislation explicitly defines “whiplash injury”, the compensation for different durations of injury will be set by the Lord Chancellor through regulations. However, the proposed damages tariff published by the government early in 2017 suggested that the victim of an injury lasting more than four months but less than six, whose injuries may well have prevented them from working for some of that time, would receive just £450.
A small concession was made to exclude the claims of “vulnerable road-users” not in a motor vehicle, such as cyclists, pedestrians, motorbike riders and their passengers.
When will this be in place?
While the reforms are now on the statute books, when they will come into force is not yet set in stone. The government stated that it plans to implement them in April 2020, which should allow plenty of time for the online claims process, on which the reforms depend, to be properly tested and rolled out.
However, because Motor Legal Expenses Insurance policies issued from April 2019 will still be in force after the reforms are due to be implemented, Motor Legal Expenses Insurance policies will have to be updated this year.
What about the 'discount rate'?
The subject of some heated discourse, Liz Truss tweaked this variable for adjusting lump-sum compensation payments to benefit very seriously injured accident victims, back in 2017. Two years and two Lord Chancellors later, the demands for a better mechanism by which to calculate the discount rate have been met and the clock has started ticking on their due date.
Who the Lord Chancellor may be come August is anyone’s guess, but he or she has until the 6th of that month to decide upon a new discount rate, which is likely to fall between zero and one per cent.
What does all this mean for drivers?
Aside from the obvious reductions in compensation for whiplash injuries and lump-sum payments for very serious injuries, the increases to the small claims limits mean that a lot of injury victims will find it difficult to challenge the minimal compensation they are offered, unless they have Motor Legal Expenses Insurance.
And for legal expenses insurance?
These reforms obviously make Motor Legal Expenses Insurance more important than ever to motorists. As the legal costs for challenging a contested claim will no longer be recoverable in 90 per cent of personal injury claims, these will have to be met by the policy, so premiums are likely to rise. However, motor insurers have assured motorists that these reforms should bring down motor premiums significantly, which should offset any increase in legal expenses premiums.
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