Keoghs Insight

Author

Don Clarke

Don Clarke

Partner

T:01204 677216

Market review

AWARE05/07/2019
PI Aware - July 2019

Well our politicians never cease to amaze us but at least we now know it’s Boris or Jeremy who’ll be Prime Minister in a few weeks. Surprisingly whilst the political turmoil keeps the headlines, there continues to be progress in many civil justice areas. Recently we have seen a much needed consultation on MedCo (in relation to whiplash reform implementation) a consultation on the extension of fixed costs and a decision is due any day now on the Lord Chancellor’s review of the discount rate.

The Prime Minister has even had time for a reshuffle at the MOJ with the Prisons Minister, Rory Stewart, moving to become Secretary of State for International Development and being replaced by Robert Buckland QC. Whilst the personnel have changed, we don’t expect this to impact on civil justice reform as the major changes affecting the insurance sector have already been passed and are now being implemented and the major decision maker in respect of the Discount Rate, the Lord Chancellor, David Gauke, remains in post. We still however, keep a close eye on the barometer that signals the possibility of a general election.

A change in Government prior to the passing of the Civil Liability Act statutory instrument that will bring affect to the whiplash tariff, small claims track changes and the new protocol could have potential ramifications. Parliamentary time is running out to make this threat real but we continue to track the turmoil in Westminster closely.

The recent MedCo consultation on the Future Provision of Medical Reports in RTA related PI claims acted as a timely reminder of the difficulty of ensuring that litigants in person using the newly-built portal can access MedCo in a straightforward and sensible way, thus avoiding the very wide search criteria currently being used by claimant solicitors.

These types of issues are by no means insurmountable but are numerous and illustrate why the April 2020 implementation target date, whilst achievable, remains challenging. However, whilst the reforms should be brought in as quickly as possible, it is essential that implementation avoids the unintended consequences that we saw with the LASPO reforms and once the reforms are implemented it will be critical to monitor claimant solicitors’ behaviours and to reassess Know Your Opponent strategies to take account of the new environment.

We were pleased to see the recent Consultation on the Extension of Fixed Recoverable Costs which closed on the 6th June.  We believe it is a step in the right direction and, if implemented effectively should eradicate some of the undesirable behaviours inherent in our claims process.  However, since the Fast Track fixed recoverable costs regime was introduced in 2003 we have seen gaming by Claimant solicitors, consequent to imprecise drafting of the rules and a lack of explanatory notes and it is important that these problems are not replicated in the new rules.

Since our last publication the MOJ has now published its Terms of Reference for the statutory consultation sought from the GAD and the Treasury. We know that the review must be completed by the 5th August, though the decision could possibly come earlier. Whilst it would be foolhardy to make any predictions, we believe the insurance sector should be heartened by the Lord Chancellor emphasising that he wants to look at broad outcomes within a spectrum /range.

Another encouraging aspect is that he wants the returns compared to CPI not RPI which is important because CPI historically runs something in the region of 0.7% below RPI.  Generally, it is clear that he does not want to be unduly restricted in his approach by precise definitions which contrasts with the situation in Scotland, where the Damages Act 2019 has received Royal Assent, and in which the investment portfolio is prescribed; the period of investment is set at 30 years; the deduction of tax and investment charges has been set at -0.75%; and there is an additional deduction of 0.5% as a further margin to reduce the risk of investment underperformance. 

This raises the very real possibility that the discount rate in England and Wales will be higher than the discount rate in Scotland, which will not be a satisfactory state of affairs either in respect of the administration of justice on this Island or, potentially, for the premium paying public of Scotland.