Client Alert: Rules Against Inducements

Criminal Justice & Courts Act

Rules against inducements to make personal injury claims: Effective from 13th April 2015

Whilst much of the attention has been focused on fundamental dishonesty, the Government has also brought forward rules against inducements to make a personal injury claim. These rules come into force today - 13th April 2015 - by way of a Commencement Order.

Whilst much of the attention with regard to Part 3 of the Act has been quite rightly focused on cases of fundamental dishonesty, the Government has also brought forward rules against inducements to make a personal injury claim. Those rules come into force today – 13th April 2015 - by way of a Commencement Order.

Government believed that cash inducements offered by claimant lawyers, or offers of holidays, iPads or televisions, drove the wrong behaviours and actively encouraged people to bring claims where otherwise they may not have done so. This drove both frequency and cost particularly in respect of whiplash claims.

As part of their overall reform programme, Government sought to intervene to prohibit such practices. They were also aware that such behaviours had already been banned for claims management companies and so they used the Criminal Justice and Courts Bill to bring about consistency.

The new rules are covered in sections 58 to 61 of Part 3 of the Act. In short, a regulated person is no longer allowed to offer an individual a benefit that is an inducement to make a claim in civil proceedings for personal injury or death. The drafting helpfully goes on to clarify that personal injury includes any disease and any other impairment of a person’s physical or mental condition.

Benefit is spelt out as any benefit, whether money or other property and whether temporary or permanent. The ban even includes “any opportunity to obtain a benefit”, ie. agreeing to bring a claim in return for being signed up into some form of draw to win money or other form of prize.

The ban will be enforced by the regulators specified within section 60. They will oversee the behaviours of any person authorised by their respective organisations to carry on a reserved legal activity within the meaning of the Legal Services Act 2007. The regulators are:

• The General Council of the Bar
• The Chartered Institute of Legal Executives
• The Law Society
• A licensing authority for the purposes of Part 5 of the Legal Services Act 2007 (alternative business structures).

As the regulators are independent from Government, it is for them to implement and then police the ban. We are aware however, that the MoJ has engaged with the various bodies in an attempt to ensure effectiveness and consistency. The resulting arrangements will be subject to compliance and audit requirements which apply to their regulatory function more generally.

Keoghs view

We welcome this further intervention by the Government to try and reduce both frequency and cost. Adverts offering upwards of a £2,000 cash advance or a new iPad or foreign holiday were becoming commonplace and undoubtedly encouraged people to bring forward claims where otherwise they would not have done so.

Keoghs lobbied for reform in this area and we are delighted that action has been taken. We also underlined to Government that personal injury claims had simply become a “commodity” in the eyes of many and that still too much “fat” existed in a system where someone could be given cash or property to simply agree to present a claim.

We hope that the ban is rigidly enforced by the regulators and insurers should be willing to report any attempt to continue the practice after today. Whilst we do not anticipate that the ban itself will result in any sudden or significant reduction in frequency, it will undoubtedly help curb some of the poorer behaviours that we have seen in recent years. Furthermore, perhaps when coupled with the fundamental dishonesty clause in the same Act, it may help deter some would-be fraudsters from bringing wholly speculative claims.