10% increase in compensation for personal injury.

The Legal Aid, Sentencing and Punishment of Offenders Act 2012 although confusingly titled contains a raft of provisions about the legal costs of pursuing an action to recover damages for personal injury. The present system where the lawyer’s costs including up to a 100% uplift (success fee) is paid by the losing party’s insurance company is seen as increasing costs and hence insurance premiums.

The changes aim to reduce the costs by making the claimant pay up to 25% of their claim to their lawyers as part of the costs. To compensate for this the amount they can claim for compensation is to be increased by 10%. Basically this is swings and roundabouts but has the overall effect of reducing the amount an insurance company has to pay following a successful claim against them.

Looking deeper though there are gaping holes in how the scheme is to be introduced and this presently would lead to the position where claimants who start to claim before 1st April 2013 but settle after would have the windfall of having all their costs recovered AND getting 10% more compensation.

This strange but advantageous position has just been realised and may well be changed before the deadline. We are monitoring the position very closely so that we can advise clients, particularly those with serious (and therefore high value) claims as to whether to settle now or wait until after 1st April 2013.