Personal injury lawyers have warned of unintended consequences of legislation that seeks to dismiss cases entirely when claimants have shown fundamental dishonesty.

Peers will debate the Criminal Justice and Courts Bill in the House of Lords this afternoon following the measure's passage through the Commons.

Clause 45, which was inserted after the bill was first laid, allows a court to dismiss a personal injury claim if it is satisfied the claimant has been 'fundamentally dishonest' in the course of the case - even if the claimant would still have been entitled to damages.

The clause adds that courts will make an exception only if the claimant would suffer 'substantial injustice', and that judges can order the claimant to pay costs incurred by the defendant.

In its impact assessment, the government says the policy is designed to reduce the volume of dishonest claims and to ensure that only reasonable and genuine compensation is awarded.

The assessment cites figures from the Association of British Insurers suggesting that there were 59,000 dishonest motor claims in 2013, representing 8% of all claims. This was a 34% increase on 2012.

But the Association of Personal Injury Lawyers (APIL) has warned that clause 45 will encourage satellite litigation as parties argue over what is meant by 'fundamental dishonesty' and 'substantial injustice'.

In briefing notes ahead of today's debate, the organisation also predicts an increase in 'spurious allegations of fraud by unscrupulous insurers' and a rise in genuine claimants underplaying their symptoms and failing to bring valid claims for fear of being falsely accused.

APIL gives a scenario of a claimant seeking compensation for loss of a future career: currently if this argument is lost the claimant can still receive some compensation, but in future if the court decides they have exaggerated the chance of a future career the claim will be dismissed in its entirety.

APIL also suggests defendants will not be subject to the same standards as claimants when courts assess their evidence.

The briefing adds: 'The rule of law demands a level playing field - clause 45 tilts that playing field firmly in favour of defendants and their insurers who pay compensation to injured people.'

Clause 45 seeks to address a source of dispute between claimants and defendants that has simmered since the Supreme Court ruled in Fairclough Homes v Summers in 2012.

The claimant had been awarded £88,000 in compensation after suffering an injury at work, but had originally claimed more than £800,000. 

The insurer Zurich had argued for the Supreme Court to dismiss the claim in its entirety, but the court declined to do so, finding this would be disproportionate.

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