Transcript A new era for Stephensons - Manchester Claims Association

Compensation from a Claimant Lawyers
Perspective
Disclaimer
What follows are personal opinions for discussion
purposes only and should not be relied upon by anyone
The Theory of Compensation
People inevitably suffer injury and loss, who should
pick up the pieces?
1. No one?
2. The State?
3. If there is fault, the party at fault/their insurers?
For those tempted to say 1 :
Would your answer be the same if it was you, your husband, wife,
son or daughter in the wheelchair?
The state benefit system has turned into a safety net only
arrangement which neither can, or aspires to, return people
to their pre-injury financial position. Public spending cuts
are likely to led to even more ungenerous benefits.
In our society it is either the state or the compensator who must
shoulder the burden and therefore either the tax payer or the
policyholders .
“The obvious residual concern is that injured people deserving
adequate compensation are missing out, with jeopardy to their
treatment, rehabilitation and general well being and lifestyle.
What will probably occur, is occurring, at least with those more
seriously disabled is supplementary resort to the public health
system, with the consequence that some of the financial burden is
effectively transposed from insurer to tax payer. How could that
be justified?” – The Honourable P de Jersey AC, Chief Justice
Queensland Australia.
Are Compensation Claims out of control?
There are a number of mechanisms for controlling and limiting
liability.
Judges in the UK can be quite conservative, see for example the
Tomlinson line of cases where claims by people jumping into
shallow water have been rejected.
See also the doctrine of pure economic loss. In the scenario
outlined by Lawrence Besemer, (FOIL lecture) where motorists
suffering no physical injury or damage themselves seek to
claim as a result of delays caused by a traffic jam – such
claims would be rejected as amounting to pure economic
loss.
Caution to also look behind the lurid headlines;
“We live in a compensation culture. Everyone is running scared of
litigation. Terror of being sued means its only minutes until
pavements are painted with gigantic government warnings in case
we catch our stilettos in a crack and sue the local Council. The
over paid café lattes will carry huge labels lest you burn your
tongue and slap a writ on them like the American plonker who
gulped her McDonalds coffee and took Ronald McD to the cleaners
– Vanessa Feltz Daily Star 15th November 2003.
According to the Better Regulation Task Force the truth about this
“American Plonker” is starkly different – Stella Liebeck (79) was
trying to add cream to her coffee when she was a passenger
in a stationary car.
The spillage was her fault but she could not have
expected the consequences;
• The coffee was served at 88 degrees centigrade any
temperature above 65 degrees centigrade will cause serious
burns;
• There being 700 prior complaints against this super heated
coffee to McDonalds;
• McDonalds knew of the risk of severe burns from its coffee;
• Decided to not warn customers of the risk despite knowing most
of their customers would not recognise it;
• Knew its coffee was not fit for consumption as served and;
• Did not attempt to change it’s policies in light of the evidence at
Trial.
Although hospitalised for 8 days and disabled for 2 years with
third degree burns Mrs L did not want to litigate but
McDonalds refused to refund her 10,000 dollar medical
expenses.
The jury awarded 200,000 dollars compensatory damages and 2.7
million dollars punitive damages. The Court reduced this to
160,000 dollars and 480,000 dollars respectively.
How would you feel if it was your mother?
Are claims out of control in the UK?
Not compared to the US. The Better Regulation Task Force
indicated that tort costs in the UK from 1998-2000 were an
average of 0.6% of GDP whereas in the same period in the US the
figure fluctuated between 2.28% and 1.88%. Reasons are likely to
be that the UK uses less juries and punitive damages are only
awarded in very restrictive circumstances.
Our current cost rules whereby the loser pays the winners costs
act as a disincentive in the UK to pursuing a case that is unlikely to
be won. There may be more speculative litigation in the US
without the cost risks. However see Lord Justice Jackson’s
proposals for one way cost shifting.
In the UK the Claimants tend to under estimate the amount of
compensation they are entitled to (see HPW you. gov poll) .
The TUC estimates that 9 out of every 10 workers who are injured
or made ill through work do not get compensation.
However claims are going up, with the number of injuries reported
to police since 2002 having fallen by 18% yet the number of claims
rising by 37% (FOIL lecture) – but is it wrong that someone who
has suffered injury does claim?
What about the insurers?
It is often contended that insurers cannot make a decent profit particularly
in motor insurance.
What about Admiral? Profit before tax in 2009 was £215.8 million
compared to £202.5 million 2008, an increase of 7%. Chief Executive Henry
Engelhardt said the UK car insurance business remained “central to our
success”, producing a pre-tax profit of £206.9 million.
The TUCs proposals “the insurance companies can help here by linking
premiums much more closely to actual risk within that employer.
Insurance companies should more readily offer risk based premiums that
reflect an employers health and safety history. Good health and safety
should be rewarded. If insurance companies were more ready to
admit liability where justified earlier and followed Court rules so
that costly medical and legal bills are not run up”
The Australian experience
“Last year I expressed serious reservation whether the so called
“insurance crisis” which led to the Ipp reforms were substantially
caused by anything other than lack of prudent financial planning
and forecasting by insurance companies including premiums set
uncommercialy low for competitive reasons. The president of the
Law Council of Australia, Mr John North, recently referred to
current high levels of profitability in insurance companies. Many
commentators have highlighted what has appeared to be minimal
reduction in insurance premiums. Many remain to be convinced
that the reduced financial burden on insurers, consequent upon
these legislative changes is benefiting anyone other than those
insurers themselves”. – The Honourable
P de jersey AC Chief Justice Queensland Australia.
A significant restriction in Claimants rights to claim in Australia
has resulted in insurers gaining a 20% return on capital since Tort
Law changes were introduced. This is despite that, 11 years prior
to 2004, average profits were in the range of 6-8% (the Cumpston
report)
“Recent events in this state (Queensland) offer a good illustration
of how the community can become dissatisfied with the system
which interferes with well established, reasonable rights and
expectations. I refer to what was perceived as the need for the
special the compensation plan – laudable although it otherwise
was – released by the Government in September last year for the
treatment of claims arising from events at Bundaberg hospital.
Ideally, the system already legislatively in place would have been
sufficiently streamed lined to facilitate the expeditious,
reasonable determination of those claims at compensation
levels which would readily be accepted as appropriate.
The Courts would certainly have done their best to fast track those claims
to avoid delay. The practical difficulty, as I understand, was that the
complication of the present pre hearing framework meant that the
processing of claims would have taken a substantial period of time, and
that the statutory limitations on the amount of compensation available
may have meant inadequate ultimate compensation for alleged victims.
That special arrangements were felt necessary for that class of Claimants
plainly raises a query – what of others within the community, without a
voice or media support currently disadvantaged by this legislation” – The
Honourable P de jersey AC Chief Justice Queensland.
If insurers don’t pick up the pieces then would it be the tax payer? How
long will the Government and tax payer put up with that in the face of
increased profits for insurers? – plenty of precedents for shifting the
burden from tax payers to insurers, for example recoupment of NHS
fees and abolition of legal aid in favour of CFAs.
The future
Regardless of the rights and wrongs reform has generated a head
of steam and may be driven by a Government keen to save public
expenditure. The announcement of the consultation on elements
of the Jackson report emphasises the potential savings to the NHS
if recoverability of CFA success fees and ATE premiums was
abolished.
Fixed fees. Not a new concept. Predictable costs have been
around for a long time in RTAs and the new claims process
advances that further. Fixed fees are also found in other areas of
legal practice e.g. conveyancing and legal aid. Some benefits to
Claimants lawyers, a known level of return and improved
cash flow.
Fixed fees work providing there is no game playing. The assertion
by Lawrence Besemer the Claimant lawyers would save up RTA
cases to deluge an insurer in the new system suggests that
Claimants Solicitors can take the consequences on their cash flow
– they must be the lucky few.
Insurers play games too – for example pre medical offers at a low
level and deliberately allowing cases to drop out of the new RTA
claims process to pay a lower level of predictable costs.
Are fixed fees a Nirvana for insurers? – not resulted in great
savings in RTA cases since their introduction although well run
insurers, like Admiral, appear to be able to make decent profit.
Jacksons proposals may result in irrecoverability of success fees
and ATE premiums but damages could be hiked to compensate
accident victims which might not ultimately save for insurers.
Contingency fees as recommended by Jackson could
also cause problems. Cumbersome (need for independent advice,
and yet another lawyer, may make them impractical) and could
lead to a hike in damages. The US experience would tend to
suggest that contingency fees do not result in less or cheaper
litigation. Also employment tribunal claims in the UK are often
funded through contingency fees and those claims continue to
rise.
Referral fees – Claimant Solicitors don’t like paying them in the
same way that insurers and brokers don’t like paying
commissions to price comparison websites but we all have to live
with it. May be driven down by market forces if the
Government’s consultation on Jackson results in cost rule
changes. This would also have a significant impact on the
income for brokers and insurers from referral fees.
The new RTA system
The IT wasn’t ready on time and there are still problems. However
claims are now going through.
From a Claimant’s perspective it’s operable. Helps cash flow with stage
one payments. No major impact yet on referral fees.
It will be interesting to see the Court’s assessment of conduct where
cases have fallen outside the system. The system rigorously enforces
time limits.
Fraud – “insurers who do not tighten their claim controls will lose market
share as well as gaining a reputation for callously assuming that it’s ok
just to pass the cost on”. Lawrence Besemer (FOIL lecture). Can fraud
be effectively be policed in the new RTA system. Major challenge for
insurers.
Claimant lawyers log, law date December 2011
The Claimant will expect a quicker pay out – they already do.
The Claimant’s lawyers will need to work to fix fees in many cases
– they already do.
The compensator will see a brief up turn in fortunes as the average cost
of claims start to fall in real terms for the first time in a generation – how
long will Government and tax payers be relaxed about that? Keep the
“anti compensation culture” PR machine going because the battle isn’t
over.
Defendant Lawyers will need to re-align their business models to handle
less litigation from insurers in terms of the count of new instructions –
does this mean they will be collecting their P45s? The Forum of
Lawyers Voice In The Wider Public Interest - FOLVITWPI
(made up name) is outraged.