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The Hidden Claims Inflation of COVID

05 November 2020

Insurers need to be aware of the potential for the values of settlements on fairly minor injury claims to increase with a rise in the number of claimants seeking compensation for psychiatric harm.

Most insurers have reported a reduction in the number of new third party claims being intimated to them this year. Given lockdown and the ongoing restrictions in movement and economic activity, it is fair to assume there have simply been fewer accidents resulting in injury. With workplaces being closed or open at reduced capacity and less traffic on the roads, that makes sense.

David Hoey
Stephen Bryceland, Partner

However, some accidents are still happening and claims are still being made. As we get back to the “new normal” in due course, we can expect claims volumes to go back up. What has been interesting to observe is a subtle change in the nature of the injuries being claimed during the pandemic restrictions. There has been a rise in the number of claims where an element is sought for psychiatric injury in addition to the usual physical harm where previously this might not have been seen.

There are a few main reasons for this. Firstly, the public awareness of mental health issues was being significantly raised prior to the current COVID crisis. Old stigmas and taboos regarding mental health were being challenged and openness and consideration of these issues were being strongly promoted. It is from this background that injured parties are, it seems, becoming more inclined to consider the psychiatric impact that the trauma of an accident has had on them and to explore whether they have been caused a diagnosable condition for which compensation should be paid.

Secondly, it is likely that the COVID crisis has increased the vulnerability of the population at large to psychiatric harm. Everyone is under stress in the battle to manage the virus and anxiety levels in normal day to day life are running high. These heightened levels of mental strain mean that the effects of an accident where a physical injury is sustained might include more often a level of psychiatric harm that meets the criteria for a specific DSM5 condition for which damages can be claimed. Those claimants who would normally have had a level of resilience to allow them to recover from their physical injury without significant mental suffering may not be able to do so under current pressures.

Finally, in the COVID era, digital and remote solutions to evidence and treatment in claims are becoming more acceptable and indeed inevitable, as restrictions prevent examinations or therapy sessions taking place in person. Before the pandemic restrictions, evidence obtained remotely would often have been considered second rate and unreliable, but attitudes are having to change as the present situation continues. There will have been a significant number of claimants who would have not been agreeable to attending a psychiatrist’s office for a psych assessment or to see a therapist for CBT - wishing to avoid being judged for their mental health issues. The availability now of assessment using Zoom or other digital meeting platforms and the expansion of remote treatment is more likely to encourage those reluctant claimants to participate in the process and to obtain evidence to help establish their psychiatric claims. Being able to do so in the comfort and, more importantly, privacy of their own homes could be a big factor in the presentation of these claims by claimants who would otherwise have presented a stoic front and avoided making a psychiatric claim.

Whilst the number of claims may be down at the moment, I think insurers need to be aware of the changes in the nature of the claims being presented and consider the potential for the values of those claims to inflate by the expansion of psychiatric harm. Once the bar is raised, it will be unlikely to reduce again when claims volumes return to higher levels and therefore claims spend overall may be affected.

Special consideration should be given to claims in Scotland which are not subject to the MoJ portal rules or to the whiplash guidelines. Such claims in Scotland remain unregulated and there are accordingly no fixed costs for medical reports or treatment. A close eye should be kept on developments in this area and the potential for increased costs challenging indemnity spend.

Stephen Bryceland, Partner & Solicitor Advocate: / 0141 221 8012

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