Out-Law News 2 min. read
11 Oct 2012, 3:04 pm
The increase, announced as part of a court ruling in July, would have originally applied to any cases heard after 1 April 2013. The Association of British Insurers (ABI) had asked the Court to reconsider its original judgment, which it said would have "upset" a "carefully balanced package" of civil litigation reforms due to take effect from this date.
The ABI said that, without the change, insurers could have been faced with up to £300 million in increased costs which would have been passed on to the public in the form of higher premiums. The 10% increase will now be balanced by reductions in legal costs, such as the end of the recoverability of 'success fees' under CFAs.
"The insurance industry took this action in our continuing fight to reduce unnecessary costs being passed onto honest motorists," ABI assistant director James Dalton said. "We are pleased that the Court recognised that the original judgment upset the package of measures which feature in the Legal Aid, Sentencing and Punishment of Offenders Act 2012 and which were originally intended by Lord Justice Jackson to maintain a careful balance between the interests of claimants and defendants."
The ABI was also "pleased" to see the Court acknowledge that it should have "sought submissions from ABI and other interested parties" before announcing the increase, he said.
In its revised judgment (12-page / 66KB PDF), the Court also confirmed that the increase would apply to contract claims as well as tort claims where damages are to awarded for pain and suffering, loss of amenity, physical inconvenience and discomfort, social discredit and mental distress.
The changes will apply to those cases where the party bringing the claim entered into a CFA agreement before 1 April 2013. The increase will still be applied to all other cases heard after this date, regardless of when the claim began.
"It is clear ... that both [Jackson] and the MoJ envisaged and intended the primary purpose of the 10% increase in damages would be to compensate successful claimants, as a class, for being deprived of the right which they had enjoyed since 2000 to recover success fees from defendants, in cases where a claimant was funding the legal costs of pursuing his or her claim by a CFA," the judgment said.
The Court said that this need not apply to 'conventional' claimants as they would "not be worse off" once the increase took effect.
Legal costs expert Keith Levene of Pinsent Masons, the law firm behind Out-Law.com, said that the revised policy was "sensible and pragmatic".
"The Court of Appeal's judgment resolves the issue of CFA claimants, who entered into CFAs pre-April 2013, potentially being able to recover both the CFA 'success fee' and enhanced damages from an opponent where the judgment is made after 1 April," he said. "It is likely to save insurers several million pounds as a consequence of not having to pay the additional 10% on general damages for certain specified civil claims."
Lord Justice Jackson recommended an increase in general damages as part of his wide-ranging review of civil litigation costs. Many of his other recommendations will also come into force from 1 April 2013 as part of the Legal Aid, Sentencing and Punishment of Offenders Act (LASPO).
Among other changes LASPO will abolish the recoverability of success fees in CFAs, or 'no win, no fee' cases. Under a traditional CFA, the successful party's lawyer can recover a "success fee" of as much as 100% on top of their usual charges from the losing party. Instead the successful party will have to pay this fee, to be capped at 25% for personal injury claims and 50% for non-PI claims, from any damages they receive.