Court win over 10 per cent higher insurance payouts

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Insurers were celebrating a £300m court win yesterday after the Court of Appeal reversed a decision affecting personal injury award payouts.

The court ruling means a 10 per cent increase in payouts will not affect claims made before 1 April next year. The original judgment, in the case of Simmons v Castle, would have forced insurers to pay the extra 10 per cent on all older claims settled after that date.

The insurance industry reckoned that would have cost another £300m, adding £13 to the average motor policy.

James Dalton, the assistant director of motor and liability at the Association of British Insurers, said: "We have won a battle against unnecessary costs but not the war. The fight to bring about a speedier, more cost-efficient civil litigation system for the benefit of claimants and customers continues."

The process will be aligned with government reforms included in the Legal Aid, Sentencing and Punishment of Offenders Act and will not be introduced on cases where the claimant has entered a conditional fee arrangement before 1 April 2013.

Britain's biggest motor insurer, Direct Line, had estimated the earlier ruling could cost it £45m, or 7 per cent of its pre-tax profits.