Court of Appeal rows back on introduction of 10% increase in general damages

The Court of Appeal has performed a u-turn over its introduction of the 10% increase in general damages for all cases where judgment was given after 1 April.

The Association of British Insurers last month persuaded the court to re-open the case – Simmons v Castle – in which it made the announcement.

The ABI argued that the original ruling would “upset the carefully balanced package of Government reforms to the civil litigation system by introducing the 10% increase in general damages ahead of other measures”.

Following yesterday’s ruling, the 10% increase will not be introduced in cases where the claimant has entered into a conditional fee agreement before 1 April 2013. This is the date that the Jackson reforms in the Legal Aid, Sentencing and Punishment of Offenders Act are due to come into effect.

James Dalton, the ABI’s Assistant Director of Motor and Liability, said: “The insurance industry took this action in our continuing fight to reduce unnecessary costs being passed onto honest motorists. This decision by the Court of Appeal means that insurers will not be forced to pass on about £300m in increased costs to the premium paying public, which represents around £13 per motor insurance policy.

“We have won a battle against unnecessary costs but not the war. So the fight to bring about a speedier, more cost-efficient civil litigation system for the benefit of claimants and customers continues.”

However, the Association of Personal Injury Lawyers argued that the Court of Appeal’s turnaround would “introduce unfairness where before there was an even playing field”.

APIL President Karl Tonks said: “The key difference is that the first Court of Appeal decision meant that anyone who started a claim for compensation before 1 April, but finished it after that date could claim the ten per cent increase.

“But now someone who starts funding his claim in, for example, March next year but whose case concludes in, for example, November, won’t be entitled to the increase, while at the same time someone who starts on 1 April but whose case concludes in November will receive a different sum in damages for his pain and suffering.”

Tonks added: “It could easily mean that two claimants leaving court on the same day, with the same injuries, will receive different damages just because of the date on which they signed their funding agreement.

“Not content with all the extra money it will save from injured people as a result of the LASPO Act, the insurance industry has, once again, put the needs of its shareholders before those of people who are injured through no fault of their own. And once again, the victim loses out.”

Tonks said the Government needed to provide clarity and direction about other outstanding aspects of the reforms related to the LASPO Act.

“As the Court of Appeal noted in this judgment, the increase in damages is only one aspect of the reforms which remains to be implemented,” he said. “For example, provisions relating to the introduction of qualified one way costs shifting (QOCS) including the implementation date, have still not been decided, making it extremely difficult for solicitors to prepare for the changes ahead.”