Personal injury rules are in need of further reform to make them work for all

As the first anniversary of the introduction of the new personal injury award guidelines approaches, it is timely to reflect on what the impact has been for claimants, insurers and society at large.

The new guidelines were transferred into law on 24 April 2021 following a prolonged period of lobbying government by the insurance industry, business representatives and other interest groups. The shared hope was that we finally had fairer monetary values for personal injury claims, which previously averaged over four times the amount of compensation for similar injuries in neighbouring jurisdictions. The high levels of awards and fees combine to create an added incentive to take these cases and the number of claims taken, particularly for soft tissue injuries, represent a much higher percentage of overall claims in Ireland than other countries. For every €100 of motor insurance premium here, roughly €45 pays for injury claims – equating to a large percentage of premium.

The good news is that progress has been made. PIAB figures for the period from April to December 2021 noted an average reduction of 42% on 4,731 claims assessed under the new guidelines. However, the same report advised that 60% of those assessments were rejected by claimants who, either on their own or with the advice of a solicitor, decided to refer the case to the courts for adjudication. This represents a 15% increase in the number of assessments currently being rejected, resulting in the overall rejection volumes rising by one third. This unfortunately means that a lot more claims are going into the lengthy and costly litigation process.

The fall in acceptance rates of PIAB’s assessments is an unforeseen consequence that remains a major concern for those of us who hoped to see a positive outcome from the reform. PIAB commented that the change may relate to the fact that the reduced awards differed from the expectations of claimants. This may be the case, but it would be naïve to imagine that it is the only factor at play here. The high percentage of judges (37.5%) who voted against the guidelines and the various judicial challenges in train against the new guidelines since their introduction, must place some hope in the minds of claimants and their legal advisors that rejecting PIAB’s assessment will lead to a higher award in court. This increase in pending litigations for a court system already suffering significant backlogs means claimants will wait years for compensation.

The mandatory obligation on judges to take account of the guidelines should be relied upon to keep awards at a reasonable level. However, even a marginal increase in the award in the courts would result in significantly higher legal costs that must be borne by the insurance industry. This is evidenced in the Central Bank of Ireland’s NCID report that consistently points to the fact that, while the average legal costs incurred through PIAB is €600, this amount increases to €15,000 when the case is adjudicated via the courts.

To date, much public commentary assumes that ALL injury awards have reduced by the 40% quoted, resulting in very significant reductions in overall claims costs. This is not an accurate assessment of the full picture. It ignores the fact that injury awards are made up of both general damages – which have been reduced by the guidelines, and special damages, covering the cost of medical care etc which have not been affected. While general damages make up the bulk of the award for minor injuries, the proportion of the award relating to general damages falls dramatically for large claims where significant monies must be allocated to meet medical and other care costs. These large claims, while small in number, make up a significant part of an insurance company’s reserves, thus diluting the overall impact of the guidelines on the insurer’s cost base. They also incur significant legal costs from a sector that has yet to see reform despite evidence of increases in fees of up to 20% over the past few years.

Maintaining adequate compensation for people with life-changing injuries is an important element of the guidelines as it supports a societal goal to ensure such victims of accidents are properly cared for. It was never part of the reform agenda to interfere with these cases which form a core part of the contribution that insurance makes to society. However, in analysing the impact of the guidelines, it is important to understand that maintaining these values means that insurers must retain adequate funds to pay them.

It is undoubtedly a shared view amongst those who advocate reform of the personal injury process that proportionality and consistency of injury values in PIAB and the courts is important. It is positive that further reform of PIAB has been proposed to increase its remit. However, more is needed, particularly in relation to legal costs if we are to see a material impact on the costs of personal injury claims.

Certainty is also essential for all concerned. We await the outcome of the various constitutional challenges, and hope that decisions on these cases will be expedited.

At the end of year one, we remain hopeful that the promise of the new guidelines to reduce the overall level of awards and other reforms will lead to a fairer, faster, and more equitable process and outcomes for all involved. It will however take some time before the expectations created on the 24 April 2021 are realised.