Claims costs are indeed a very big concern. The marked deterioration in the frequency of claims can be traced back to the changes introduced by the Legal Aid, Sentencing and Punishment of Offenders Act 2012. The Act intended to reduce the disproportion in claimants' lawyers' costs by mandating new payment arrangements from 1 April 2013.

Unfortunately its unintended consequence was to create a massive spike in claims ahead of that date and long afterwards as the lawyers quickly signed up their clients under the old, more favourable terms. Claims numbers rose dramatically but we also saw our rebuttal rate for medical claims, that is claims we do not settle, rise from 70% to over 80%.

The main reasons claims cost so much is that clinical negligence defendants such as the NHSLA and the MDU are required by law to disregard the availability of NHS care when making compensation payments to patients who have sustained serious injury as a result of negligence. These patients need a high level of health and social care for the rest of their life, which is often 30 or 40 years or more.

Defendants are not allowed to fund NHS or local authority care but must compensate on the basis that the care will be sourced privately by the claimant, whether or not it actually is. Not surprisingly it is no longer unusual for the MDU to be notified of medical claims where, for just one claim, the damages sought may be well over £10 million.

Added to this, the Lord Chancellor announced a massive fall in the discount rate from 2.5% to minus 0.75% on 27 February 2017. The discount rate is the mechanism used by the courts to adjust large compensation payments to take account of future investment returns. Reducing the rate, as the Lord Chancellor has done, adds billions to the cost of claims, and not just in the future. It also has retrospective effect. This change increases the costs of compensation awards dramatically and immediately for known claims which have already been reported. It will also increase the costs of claims arising from incidents in the future.

Even worse, it applies retrospectively to claims for incidents that have already happened, where a claim has not yet been made but will be at some future date. This is a particular feature of medical negligence claims where there is often a long time lag, sometimes decades between the date of an incident happening and the date when the claim arising from that incident is actually made against the doctor.

Rates and reforms

Dr Christine Tomkins

Rates and reforms