Have-a-go Henriettas

A recent industry report has rubbished the idea of a compensation culture, but with businesses being put under increasing pressure from insurance premiums, who can identify where the real problems lie? Jon Robins reports


Every little darling that falls off a horse is someone else’s fault,” says Barry Peachey, a leading expert witness in horse-related accidents, an Anglican priest and chair of the Equine Animal Lawyers’ Association, according to last month’s Sunday Express. “It used to be that if you were learning to ride, or your children were, you knew they might get injured, but that attitude has changed, especially among what you might call the ‘Hooray Henriettas’, who are interested in getting their little ones into the sport but, if he or she gets hurt, the parents go to the lawyers,” he adds.

As we are constantly being told, the UK is engulfed in a rising tide of litigation. Apparently, the latest victims are riding schools. It was reported last month that stables were going out of business at a rate of two per week as a result of the deluge of compensation claims and increasing insurance premiums. The same week that this story was covered in the press, there was a rather less eye-catching insight into our national enthusiasm for litigation. The Better Regulation Task Force (BRTF), the independent body which advises the Government, found that the so-called ‘compensation culture’ did not really exist in the UK.

“Many of the stories we read and hear either simply aren’t true or only have a grain of truth in them,” claims the group. While it rejects the hackneyed tag of ‘compensation culture’, it concludes that, instead, we are living in a ‘have-a-go’ society. The report, ‘Better Routes to Redress’ (sample chapter titles include ‘Compensation Culture: Exploding the Urban Myth’ and ‘It’s all in the mind’), states that press coverage, combined with the irresponsible tactics of claims management companies, encourage people to have a go.

Apparently these groups create “a perception, quite inaccurately, that large sums of money [are] easily accessible”. The report goes on to say that “it is this perception that causes the real problem: the fear of litigation impacts on behaviour and imposes burdens on organisations trying to handle claims”.

Scaremongering

The report represents a rare triumph for claimant lawyers in the ongoing propaganda war with the defendant insurance industry. For the past couple of years, the Association of Personal Injury Lawyers (Apil) has been quoting the authoritative ‘Datamonitor’ report to anyone who has been prepared to listen. Far from claims being out of control, it is estimated that out of a potential 1.8 million personal injury (PI) claims per year, only 614,000 complaints were made to insurers. Now they have the BRTF report.

Much of the report’s general commentary reads like a leftover speech from an Apil conference. As Apil president Colin Ettinger puts it: “The endless scaremongering about a nonexistent compensation culture has diverted attention from the need to focus on the protection of vulnerable people [and the] provision of rehabilitation and proper compensation when things go wrong.”

The statistical reality behind the hype is that there is little, if any, evidence to suggest that we are claiming more.

The report flags up the Government’s Compensation Recovery Unit figures, which show that claims have been largely static since 2000.
In the past year the number of claims actually dropped significantly, with employment liability accident claims down by 15 per cent, ‘slip and trip’ claims down by 17 per cent, motor claims down by 6 per cent and clinical negligence claims down by 11 per cent. The number of successful claims fell last year in the UK by 60,000.

Nor have we become a nation of compulsive litigators like the US. The report features a worldwide table of “international tort costs” expressed as a percentage of gross domestic product (GDP).
Excluding Denmark, which had a total of 0.4 per cent, the UK, with 0.6 per cent, had a lower score than anywhere else, not least the US, which had 1.9 per cent, and Germany, which had 1.3 per cent.

So what about the Hooray Henriettas and their pointless claims threatening middle England’s favourite pastime? “People don’t understand the reality of riding a horse anymore. It’s a risk activity,” says Peachey. He is an unwitting symbol of the ‘compensation culture’. “I’ve never spoken to the paper,” he says of the Sunday Express. In fact, Peachey has little sympathy for frivolous claims and specialises in serious accidents and fatalities in the sport. There are a surprisingly large number, with around one fatality every month in a horse riding accident. He stands by his quote, but stresses that he was not being entirely serious. What “wears his patience”, he says, is the two or three “nonsense” calls that his group receives per week from riders who have “grazed their knees” and “twisted ankles”. As he points out, they are not likely to have much success with their claims, but that will never stop them trying.

What Peachey is concerned about is the rising cost of insurance. “As premiums go up, more and more horse riding establishments function uninsured, and to get a licence they have to have insurance,” he says. “They function, cash-in-hand, out of a rented accommodation on the Welsh marshes and get their clients by word of mouth. We know there’s an extraordinary amount of uninsured riding instruction going on. People then get seriously injured, find out the person teaching them has no cover and then they are left up the proverbial gum tree. It’s a big problem.”

Credibility gap

The role of the insurer in the debate about our propensity to claim is not always apparent to the public, but insurers have become an increasingly powerful voice. Last month, Norwich Union found that an overwhelming 96 per cent of UK people believe we are more likely to seek damages than we were a decade ago. The insurer, which obviously foots the bill for many of these claims, billed their report as “the first in-depth look at whether and why the ‘blame and claim’ culture has taken hold in the past 10 years”.

Apil, in a lengthy response attacking the research, questioned just how “in-depth” a report could be when it was based on the perceptions of just 1,000 people. The claimant lawyers also took issue with the insurers’ reliance on a report by the Institute of Actuaries, which found that £10bn in compensation claims had been paid out. According to Apil, the figure was hugely inflated by the inclusion of the costs of Government-paid schemes, including compensation paid to farmers following the BSE crisis. Jeff Zindani, founder of claimant firm Forum Law, recently said of the research that it was “about as credible as a briefing from Donald Rumsfeld on the threat from Iraq”.

Apil’s Ettinger believes that the insurance industry plays on a willing media to score political points. He says that in his 28 years of practice, PI has never been political in the way that it has become so now. “What’s happened is that insurance companies, with the collapse of the stock market, have relied on using premiums to generate fees,” he says. “They’re also fed up with the change in the law that allows claimants to recover success fees and after-the-event premiums. And so they’ve launched a coordinated attack to try and undermine the process.”

But what do the likes of the Norwich Union make of the BRTF’s explosion of the claims culture myth? “One man’s ‘compensation culture’ is another man’s ‘have-a-go’ approach to life,” says Norwich Union director of claims David Hooker. “It’s probably a matter of definition and maybe semantics,” he adds. Hooker wholeheartedly agrees with the BRTF finding that the danger is as much the perception of litigation as the reality of rising claims. He says that is what was being addressed in last month’s report. There is also much in the report’s recommendations that the defendant industry will happily sign up to (see box).

Risk-free environment

While claimant lawyers attack the statistical evidence of the insurers, both Norwich Union and the Forum of Insurance Lawyers (Foil) take issue with what they see as a misplaced emphasis placed on the table comparing tort costs to GDP. They say that it is more than three years old and, as such, largely misses the inflationary impact of claims companies and ‘no win, no fee’.

“The current system is operating in a totally risk-free environment for the claimant. There isn’t an even playing field and the report doesn’t necessarily address that issue,” says Foil vice-president Andrew Underwood. More generally, Foil argues that the recent report “fails to highlight the burgeoning cost of claims”. The insurance industry puts the overall expenditure of legal costs between 30 and 40 per cent of claims costs. Underwood flags up the ‘Datamonitor’ report, which revealed an annual growth in cost of motor PI claims of 9.9 per cent. “It’s getting on for double inflation and, as an increasing growth figure, that can’t be sustained,” he says.

Apil argues that the coverage of spurious cases and the media obsession with ‘compensation culture’ not only brings the whole process into disrepute, but undermines legitimate claims, as people are deterred from pursuing their legal rights. The BRTF goes out of its way to make the same point. “[Claiming] redress is viewed by many as not the right thing to do. People should ‘put up and shut up’.
This is wrong. If people have rights, they should be able to enforce them,” concludes the report.

What next? The BRTF recommendations
The first target to come within the sights of the Better Regulation Task Force (BRTF) is the excess of claims management companies. It says the legacy of discredited former market leaders The Accident Group (TAG) and Claims Direct “has not been good… helping people to pursue claims”.

Last month, Court of Appeal judges upheld an earlier ruling in TAG test cases that only half of the insurance premiums of the now bust company are recoverable. It is also believed that the 700 firms on the company’s panel could have to pay out more than £40m to accident victims, as the sums are not recoverable from the defendant insurer because the payments breach the Law Society’s referral code. “If that doesn’t flag up the need to put some regulation in place, I don’t know what will,” says Andrew Underwood of the Forum of Insurance Lawyers (Foil).

John Peysner, who chairs the Civil Justice Council’s costs sub-committee, wrote the draft ‘Blackwell Report’, which examined the case for regulation in the claims industry and which was published in February 2000. “Everything that’s happened since then indicates that this is a sector that needs to be regulated,” he says.

“And self-regulation isn’t the answer.”

The BRTF seems prepared to contemplate a form of self-regulation through the Claims Standard Federation; however, if progress is not made by the close of next year, it has called on the Department of Constitutional Affairs to step in.

The taskforce also objects to claims company advertising, especially on NHS premises; it states that this is an issue that “should be dealt with as a matter of urgency”. It flags up one advertisement that appeared in hospitals which asked: “Did the doctor or nurse make you worse?” The BRTF says: “We find this sort of advertising totally distasteful.”

Next up is the more controversial recommendation – at least, from the claimant lawyer’s point of view – that the limit for the small claims court be lifted for personal injury (PI) (and housing disrepair) cases to £5,000, bringing it level with other civil claims. The profession lines up predictably. “Whether we like it or not, the law concerning PI isn’t straightforward and people do need help,” says Colin Ettinger, president of the Association of Personal Injury Lawyers. “If people had to represent themselves, the insurance industry would run rings around them,” he adds.

Underwood argues that lifting the limit for small claims would be “an excellent move”. He also welcomes the report as an opportunity to kick-start the extension of the fixed-fee scheme that is currently operating for road traffic accident cases worth £10,000 or less. He argues that defendant firms have worked on fixed fees for years “in a competitive environment where insurers have made us change our model” – so why not claimant firms?

The BRTF also makes a radical argument for ditching overly-complex conditional fees in favour of contingency fees. It believes that such deals do not automatically herald US-style litigation, as long as safeguards are left in place. In particular, it argues that the rule that costs follow the event in the UK, and the fact that juries did not set damages, were a “bulwark” against excessive litigation.

Peysner believes that contingency fees are “absolutely the answer”. He says: “It puts the lawyer and the client on exactly the same side and it’s a better risk management approach, which ensures that only the good cases are brought.”

He adds: “There’s been a sea change. When I did my first lecture promoting contingency fees four years ago that view was regarded as eccentric, but it has now moved to centre stage. Even members of the senior judiciary are commenting quite favourably about it.”


Full list of BRTF recommendations:
1. Regulation for claims management companies and strict guidelines on their advertising in hospitals.
2. Raising the limit for personal injury claims on small claims track to £5,000.
3. Removing the ‘overlaps’ between the various ombudsmen.
4. More consideration of mediation and rehabilitation.
5. New research into contingency fees.
6. New research into the economic benefits of greater NHS-provided rehabilitation, and the Department for Work and Pensions should look at developing mechanisms for earlier access to rehabilitation.
7. Promoting better management of occupational health.
8. Lower insurance premiums.