Civil Liability Act 2018 is passed

Published: 21/12/2018 | News, Personal Injury

By Amelia Highnam

The Civil Liability Bill received Royal Assent on 20th December 2018. This Act gives the Lord Chancellor the power to change the law on both the measure of damages for whiplash injuries and the discount rate for PI claims. The Act is part of the Government’s plans to increase the Small Claims Track limit which, although not part of this Act, is expected to take effect in April 2020.

Discount Rate:

The Act provides for a review of the current discount rate. After the date of commencement the Lord Chancellor has 90 days to begin a consultation period, that being on or before 19th March 2019. The consultation period may be a maximum of 140 days, following which the Lord Chancellor will publish an Order setting the new rate. The latest date for the new Discount Rate to be announced is 6th August 2019. Of course the Lord Chancellor may act more quickly, but these timings would tend to suggest that anyone who has a trial in the next 6 months will be operating on the current -0.75% discount rate.

The Ministry of Justice has already called for evidence on the new discount rate. The deadline for these submissions is 30th January 2019 and the consultation link can be found here.

Whiplash claims:

The Lord Chancellor is given the power, after consultation with the Lord Chief Justice, to create Regulations setting a tariff for the amount of damages payable for PSLA in whiplash claims where the injury does not exceed, or is not likely to exceed, two years. The Act gives a definition of a whiplash injury as a sprain, strain, tear, rupture or lesser damage of a muscle, tendon or ligament in the neck, back or shoulder or an injury of soft tissue associated with a muscle, tendon or ligament in the neck, back of shoulder. The definition also includes undefined “minor psychological injuries”. This definition can be reviewed or amended by the Lord Chancellor after 3 years of the Act being in force. The tariff itself must be reviewed every 3 years with the first review conducted within the first 3 years of the Act being in force.

Reporting savings by insurers:

The Act gives power to the Treasury to make regulations which could lead to an obligation on insurers to report any costs savings made by the reforms to the Financial Conduct Authority. The date on which this obligation will arise or what information is required and in what format is unclear.

Overall effect:

The Act lays down provisions for change over the coming year but the form and substance of that change is as yet unknown. It is certain that a new discount rate will be in force by 6th August 2019 at the latest and that we will start to see the introduction of a new tariff rate for whiplash injuries. It is important to engage with any public consultation or review to highlight the issues in these areas and to ensure the changes made are properly informed.