New bill may push more legal costs on those who take insurers to court

Robert Troy: ‘If someone wants to reject their award and bring it to court and the court doesn’t increase the award any further, well then, they’re going to have to pay for that’

By Michael Brennan, 6th February 2022

https://www.businesspost.ie/insurance/new-bill-may-push-more-legal-costs-on-those-who-take-insurers-to-court-5b5866e8

Personal injury claimants face the prospect of large legal bills if they decline an offer from the Personal Injury Assessment Board and fail to win a higher award in court, under new legislation being brought to cabinet this week.

Thousands of personal injury compensation claimants are going to the courts every year rather than accepting a settlement award from the Personal Injury Assessment Board (PIAB).

Under the current system, these claimants rarely have to pay any legal costs if they fail to get higher compensation awards in the courts or in out-of-court settlements.

But under the new legislation, they will have to pay their own legal costs and the legal costs of the insurer if the subsequent court award does not exceed the settlement they had been offered by PIAB.

Robert Troy, the Minister of State for Trade Promotion and Company Regulation, told the Business Post, that the aim of the bill was to get more people to use the PIAB process instead of the courts.

“If someone wants to reject their award and bring it to court and the court doesn’t increase the award any further, well then, they’re going to have to pay for that,” he said.

The bill will allow insurance companies to lodge a settlement offer with the courts which matches the recommended PIAB award. If a personal injury claimant rejects this, then the bill provides for them to be made liable for the insurance company’s legal costs for defending the case from the date of the lodging of the settlement offer.

Troy said this would “tighten” the powers to award legal costs against personal injury claimants who decline PIAB awards.

The bill will make it the “default position” for legal costs to be awarded against personal injury claimants who fail to get a higher court award, unless a judge determines that this would be an injustice. The judge would also be required to explain the rationale for such a decision.

The amount of costly and unnecessary litigation in personal injury cases has been identified as a key factor in high motor insurance premiums for drivers and high public liability insurance costs for businesses.

Under the current laws, personal injury claimants are liable for their own costs if they lose their case in court, but many insurance companies settle in advance to reduce their costs.

The measures in the bill will strengthen the ability of insurance companies to avoid making costly out-of-court settlements with personal injury claimants who reject PIAB awards. These settlements often involve the legal costs of the claimants being covered by the insurance company. It will also mean that legal firms could be left out of pocket if they cannot recover the costs themselves from claimants.

In 2020, PIAB made around 8,500 settlement awards, but around half of them were rejected. PIAB has said that the majority of rejections were made by personal injury claimants rather than insurance companies. It stated in its most recent annual report that the acceptance of its awards “should be much higher” than the current 51 per cent rate, given that the average awards through litigation and PIAB are very similar.

Troy said that the PIAB process was far cheaper and speedier for compensation claimants than going to court.

“The overwhelming evidence is where cases are resolved through PIAB, they are done in a much more timely and cost-efficient manner because it alleviates the legal costs,” he said.

According to the Central Bank’s 2020 report into motor insurance claims, legal costs account for 63 per cent of value of motor insurance court settlements settled in court compared to just 4 per cent of the value of claims settled in PIAB. Legal costs are adding around €16,000 to the average cost of a claim settled in court, which amounts to €40,000 compared to €24,000 for a PIAB claim.

Troy said that the PIAB process was also faster with average claims being settled in 2.9 years compared to 4.7 years through the legal route.

“We cannot take away people’s right to go to court. But if they want to go to court, there has to be consequences,” he said.

The bill will also narrow the number of grounds that insurance claimants can use to avoid going through the PIAB process. This will include claims involving injuries of a wholly psychological nature, which will now go through PIAB first rather than the courts.

It will also allow for PIAB to engage in mediation between personal injury claimants and insurance companies from the start of the process.

Troy said this would not be a delaying mechanism and that it had been welcomed during the public consultation process on the bill.

“Mediation is a tried and tested process. I think this will help bring about a greater number of claims being dealt with in PIAB than if if it wasn’t there,” he said.

The heads of the new bill to overhaul the operation of PIAB are due to be brought to cabinet this week, with the aim of getting approval for drafting the full bill.

Last March, the Judicial Council adopted new personal injury guidelines which have reduced the suggested court damages in personal injury cases. This has had a knock-on effect on PIAB awards which dropped by an average of 40 per cent in the first five months afterwards. But so far, motor insurance premiums have only dropped by between 5-10 per cent.

Troy said that he did want to see any insurance customers being ‘gouged’ with high premiums.

“We have done an awful lot of work in terms of reforming what insurance companies said needed to be reformed in order to bring down their premiums. We want to see the premiums coming down now as a consequence of this,” he said.

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