The move will hit personal injury firms who will lose around £200 million in fees every year.
The legal action was brought by the Association of Personal Injury Lawyers (APIL) and the Motor Accident Solicitors Society (MASS) after the Ministry of Justice introduced new fees for handling cases via the road traffic accident (RTA) Portal.
The Portal is an online system for low value claims for personal injuries are processed.
Lawyers had argued in court that the government’s decision was taken carrying out a consultation process.
However, when giving his judgment, Lord Justice Elias said the government had decided on the fee changes two years ago and could consult with anyone ministers chose.
The Law Society said the action’s failure was regrettable and that they will work to highlight the need for people who have been injured in road traffic accidents seeking legal redress to do so without suffering financially.
In a statement, APIL and MASS said: “The vast majority of injured people have no knowledge of what their injuries are ‘worth’ in terms of damages, so such negotiations will inevitably be biased in favour of the insurers.
However, the Association of British Insurers hailed the judgement as a victory for common sense and good news for everyone buying motor insurance – and that motor insurance premiums should now fall.
James Dalton, the association’s head of liability, said the court’s decision was good as it not only benefits everyone who buys motor but also keeps planned reforms by the government on track.
He added that the move now made the possibility of lower premiums a step closer.
The new fees have been drastically cut – for Portal claims up to £10,000 the fee will drop from £1,200 to £500 and for claims worth up to £25,000 the new fee will be £800.
The new fixed fee structure being implemented from April.