Compensation Culture FactCheck In Perspective

Compensation culture has been a frequently studied concept on this blog. As even Lord Young has been forced to admit, the concept is a pretty flakey one.  He walked the compensation culture not real, fear of compensation culture real line.  Compensation culture real or imagined is a rather nebulous idea but if we take Compensation Culture to mean a massive increase in compensation claims of poor quality then the evidence does not bear out its existence.  The Government’s promise to ban referral fees in personal injury cases has banged the compensation culture drum again (remember: it’s not a real drum it’s a perceived drum) and FactCheck have posted a sobre blog on the subject which, somewhat unusually for the blogosphere, is supportive of the Government.  It deserves to be read, but also to be placed in context.

I should state from the outset that I do not buy the idea that if there is a perception of Compensation Culture it is as bad as a “real” Compensation Culture.  I accept that perceiving harm can cause harm although interestingly – following recent research – one can doubt the perception that fear of litigation significantly inhibits the behaviour of public authorities (see this post on how public authorities appear to respond proportionately to litigation risk).

More fundamentally, the difference between the fear of something not real and the actuality of the thing is profound.  A fear of crime, or disease or nuclear war, or environmental catastrophe is quite different from the actuality of a world in the mould of Mad Max or The Road.  Call me old fashioned but I’d also like my politicians to speak responsibly and maturely of the risks posed by social problems.  Old-fashioned and naive.  I know.  But those who talk up compensation culture are, generally I think, alongside the toe-curling TV advertising for claimants, the principal causes of the problem.

The press are often sinners in chief.  Naughty lawyers.  Feckless claimants.  These make good stories.  Journalists appear to lap up compensation culture press releases and publish half-baked posturing by interested parties. One example:  I challenged claims in the Telegraph that compensation claims were “ruining” education claims.  It seems they got their basic numbers wrong on the number of claims but in any event for every £1,000 spent on education we spend a whopping 20 pence (I estimate) on compensating injured school children and paying the legal accosts associated with negligence claims.  It’s compensation culture gone minute.  My (eight year old) daughter saw through this when her school banned conkers “because of the risk”.  Her response was: how come the boys get to ride quad-bikes on their school trip?

Inspite of this general perspective, there is one area where claims are growing and as a result FactCheck has affirmed in broad terms the Government’s position:

“With the government moving to bring about the end of the practice of referral fees, Britain’s alleged compensation culture has been in the news again. Full Fact had a closer look at some [of] the figures being put forward by the Justice Minister.”

The number of people with RTA injuries has gone down and the number of claims has gone up (significantly).  They conclude in particular:

“This suggests a higher proportion of those injured will seek compensation, although that stats on their own give no indication of the influence of referral fees on the trend.”

I don’t disagree with this assertion (I haven’t checked the data or calculations but it looks and feels broadly correct).  There are a few things worth pointing out however.  Firstly, this is a phenomenon confined, it seems, to personal injury claims.   Furthermore, research in the past has tended to suggest that the number of people suffering actionable personal injury  who do not claim is probably quite high.   So a growth in claims may reflect an underlying need being met.  It may not be a compensation culture but an access to justice culture.

I do not read FactCheck as supporting the Government’s claims about litigation culture generally, but there is a risk it will be interpreted in this broad way.  It is a not insignificant point.  The Government has made repeated and unsupported claims about litigation culture across the piece as a pretext for legal aid cuts (see here for data in family cases for instance).  (It would have cut anyway of course, but without the political cover provided by the Phantom Menace that is Compensation Culture.  Obfuscation may save them some votes).

Secondly, there is little data available in trends on the size of these claims but that which is available tends to suggest that it is a growth in very small claims that is strong.  In public policy terms, this highlights a vital problem which reform of civil justice generally and the Jackson reforms, and referral fees in particular fail to grasp adequately.  Public debate and policy tends to treat all personal injury claims as the same and can be, to my mind at least, very different.

What do I mean?  The personal injury market, built around CFAs, is probably already somewhat skewed towards servicing quick, easy and small claims.  The cases where there has been more significant injury or injustice and where the resources of the justice system should be directed toward investigating more serious wrongdoing are harder to fund on CFAs.  Importantly, these cases are more likely to raise and protect against significant safety concerns.  The Jackson reforms will probably make these cases harder to bring.  CFAs were brought in without any serious monitoring of their effects on the types of claim and I have seen nothing to show that the error is to be corrected post-Jackson.  Bigger, more difficult and more serious cases are likely to get (somewhat, not totally) squeezed out by the system.

To my mind, we want a system which encourages the bigger, more serious cases to be taken – when they have merits – and we want a system that encourages those cases to be taken by the better firms.  An interesting footnote on the referral fee debate is that in the US – to a degree – the passage of such cases is achieved by referral fees between lawyers.  Firms used to small personal injury firms receive, let’s imagine, a medical negligence case, that they think they could run – here they might be more inclined to do this with some assistance from counsel.  They can try it, or they can pass it on to a more specialised firm for a slice of the damages (they can’t do this in the UK currently but the introduction of damage-based contingency fees in litigation might make it possible).  What should they do?  After a referral fee ban, what would they be likely to do?

3 thoughts on “Compensation Culture FactCheck In Perspective

  1. As ever Richard, so much to discuss but so little time … I will pick on one small point which is about the press.

    We recently acted for a Claimant who was accused by the insurers of fraud in his original claim for damages which they were trying to claim back. When the hearing started, the press were all over it like ‘a tramp on chips’ (thanks to Nick Brewer for that simile) including one paper publishing a photo of a bodybuilder on gym equipment next to their coverage.

    When we won though, the Court agreeing there had been no fraud, it became a non-story. Needless to say, no stories were published about how the poor man had suffered over all the time he spent fearing his life fund was about to be taken away.

  2. Interesting blog and good analysis of the figures from – it seems to me that we’re missing something though.
    The debate around compensation culture suggests that there are too many spurious claims – I’m afraid from the figures in these posts it’s impossible to tell this.
    The number of caualties really needs to be split between those injured that were “at fault” and those that weren’t. Then we would be able to see if the (c.) 80,000 claims out of 210,000 casualties is reasonable or not.
    Unfortunately, as we all know this split would be very difficult to ascertain.
    I think taking a historical view is also problematic, as cars get safer I imagine that the proportion of people injured by cars rather than in cars will have increased; following that logic there are likely to be proportionately less accidents involving one “at fault” casualty i.e. the person driving into a wall when he falls asleep at the wheel. So the mix between “at fault” and “not at fault” could have changed – with there being proportionately more “not at fault” casualties than there were historically.
    I’m sure no-one will be able to derive an exact answer and we should perhaps accept this and instead of focussing on tub thumping epithets look at how we can best provide good legal services to people that need them in a way in which they can afford.

  3. On the press point, I recall a story regarding a case I was handling the press for of an 8 year old killed by a falling tree whilst still holding his parents hand. Successful claim taken against the park owners. The journalist’s take was, must be awful but what are we going to do, cut down all trees in case they fall on you. Compensation Culture used of course. What was missing from the story was that the park owners had been told on numerous occasions that the tree was rotten and could fall and kill someone, they declined as ‘it would spoil the skyline’. The public are frequently mis-informed on liability, neither do they celebrate how safe their environment is on account of the H&S laws regularly pilloried in certain parts of the media.

    On the point of no-win no-fee agreements, the devil’s work according to the Government and the Insurance industry, there seems little explanation as to the assessment given to each case by lawyers as to whether they’ll take it on. To read the ABI press releases it would seem that you can take any claim, however frivolous, to a lawyer and ‘have a go’. I hope that one day APIL press and lobbying strength gets anywhere near that of the ABI.

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