Guidelines should change to exclude big settlements, say lawyers.
Insurers could be paying out too much in personal injury claims because of distortions in the guidelines for determining the size of award, a leading law firm has warned.
Browne Jacobson analysed the Judicial Studies Board (JSB) guidelines, which are used to assess damages in personal injury cases, and found that between 2000 and 2006 the size of awards for certain types of injury had increased disproportionately.
While the awards guidelines for most categories of injury had increased in line with claims inflation at around 17%, some categories had seen awards increase at a rate that far outstripped inflation.
For example, the guideline awards for the most serious cases of post traumatic stress disorder increased 35% from £10,000 to £13,500 over the period.
Simon Robinson, insurance industry partner at Browne Jacobson, said: “While we would expect awards to be generally in line with inflation, in cases where higher awards have been granted, we would expect some explanation or logic to apply to that particular instance.”
The JSB said that extraordinary court decisions were taken into account when setting the guideline awards.
A JSB spokesman said: “It is important to stress that while the guidelines provide an important framework for assessing damages, judges and others in these cases will always need to exercise discretion based on the particular circumstances of specific cases.”
Robinson argued that the JSB should not include those extraordinary pay-outs in its guidelines because they distorted the average awards.
He called for the JSB to ensure its guidelines clearly defined average and exceptional awards, and said insurers should challenge the guidelines.
Robinson said: “A better working model might be to increase all recommended payments by the retail price index (RPI) each year, but pay specific attention to injuries that merit more.”
He added: “One area where we would like to see the JSB guidelines develop is in providing more definitive guidance on smaller injuries. Around 95% of all personal injury claims are for less than £5,000, but the guidance given for these awards is minimal.
“For instance the lowest whiplash award is £750 to £2,250 – a 300% bracket. This is less than helpful when these smaller cases need certainty to avoid costs spiralling disproportionately,” he added.
The Ministry of Justice (MoJ) has still not set a date for its planned personal injury reforms.
The MoJ’s response was initially to be published early in the New Year, and then the deadline was pushed to late March. In early April the MoJ said the reforms would take at least another two months, but on Tuesday, it said its response would be delivered as soon as possible.
The ABI has already expressed disappointment over the delay of the reforms, which are expected to fast-track the claims process, introduce fixed fees and extend the small claims limit.