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Thirdly, the regulation of claims managers is important because of the widespread malpractice by so-called ambulance chasers, run by some pretty
ruthless and unscrupulous people who are happy to sell on the introduction of a victim while contributing precious little towards the speedy and satisfactory handling of a claim. The no win, no fee basis of claims handling is confusing to claimants, often results in significant parts of their compensation being hived off to pay legal bills and has contributed to a situation in which legal fees amount to a staggering 40 per cent. of all personal injuries claims costsmoney better used to rehabilitate and compensate victims and, I dare say, better used if we all had to pay lower premiums for the insurance cover that we have to purchase. In the end, we all pay; insurers have no money other than what we pay them in premiums.
I shall deal with the three items in turn. On risk aversion, the new definition in clause 1 is meant to enshrine in statute the current understanding of the law of negligence. We have already had considerable debate on whether that clause is necessary, whether it adds anything to existing law and whether, if it does not, it has any point. Back in November, the all-party group agreed with the lawyer associations that clause 1 should be dropped, but the Government have not been persuaded to accept that view. If, as looks likely, clause 1 remains, I hope that we will be able to examine it in further detail in Committee because it is critical to understand precisely what the clause means.
I am concerned about some of the new concepts, particularly desirable activity, that may require a new definition, but I sense from listening to todays debate that there may already be something new in the definition and perhaps more in the Governments intentions than they have admittedthough I do not say that in a critical way. If the new definition clarified what precautions might be disproportionate in persuading people not to go ahead with a desirable activitythat seems to lie behind what the definition suggestsit could have a positive aspect.
As other Members have suggested, it is important that the courts, including the lower courts with which my hon. Friend the Member for Canterbury (Mr. Brazier) has a bone of contention, fully understand Parliaments intentions. It is wholly desirable that voluntary organisations, who obviously rely on volunteers and do not have access to an army of expensive lawyers, understand precisely the legal implications of what they do.
I want to make one other point about the insurance aspect. Many activities do not take place simply because people cannot afford the public liability insurance cover. The long-term test of the new definition in clause 1 should be what it does to public liability insurance underwriting. I rather suspect that, for quite some time, underwriters will wait and see what happens in all the court cases that I know the hon. Member for Hendon (Mr. Dismore) thinks are likelywe had an exchange about the matter one evening in one of the Dining Rooms recently. We need to keep that prospect in mind.
I turn next to rehabilitation. Just one issue has dominated our news for the past six weeks. It is nothing to do with politics, the state of the world or even Iraq. It is Wayne Rooneys broken metatarsal. It has dominated every news bulletin and every newspaper. We all hope that he has been miraculously rehabilitated, but that experience is in stark contrast to the long delays experienced by
people with workplace and motor accident injuries in getting the rehabilitation that they need to get them back to work.
Clause 2 is a hugely welcome addition because it can provide new impetus to efforts to get people rehabilitated quickly. That is better for claimants and for employers. It is also better for third partiespeople who have caused accidents. We should not always think that they are being difficult because they do not have sympathy with the victim. Most of the time, they do. In the long run, quicker rehabilitation is better for insurers.
All the evidence points to the fact that the more quickly someone can be rehabilitated, the more likely it is that they will recover from the injuries that they have suffered in an accident, especially motor accidents in which people suffer whiplash injuries, back problems and so on, and the more likely it is that, for the good of them, of all of us and of their families, they have the chance to get back to work. So I welcome the addition of clause 2 and congratulate my noble Friend Lord Hunt of Wirral and his colleagues in the other place on introducing it.
The regulation of claims managers is a long overdue measure. Some right hon. and hon. Members have concerns, as I do, at the notion of yet more regulation, but currently we have the farcical situation in which the arranging and sale of an insurance policy is subject to statutory regulation, and the loss adjusters who assist the insurers in the handling and measurement of claims are regulated through their professional bodythe Chartered Institute of Loss Adjustersbut claims farmers are not regulated at all. Yet it is in the management of claims that abuse and mischief lies. The proof of the pudding is in the eating is an old saying, but it is only at the point of claim that people understand whether the insurance policy that they bought provided them with the protection that they thought it did when they paid the premium. It is at the point of claim that the real value lies.
Undoubtedly, whether the individual policy holder claims for himself against his own policy is an issue about which we should be concerned, but it is far worse if we are dealing with the management of a claim in respect of a third party, who has a right of action under the policy as a result of what has happened, but has no relationship with the insurance company in the way that the policy holder does. It is critical that we get the claims management industry properly regulated.
For the regulation to work, it must be comprehensive. There has been much discussion about exemptions. I want to make two points about them. If there are exemptions, the bodies that regulate exempt organisations must have equivalence in their regulatory bite. I am reassured by the Ministers comments that if trade unions, about which there has been much discussion, do not match up, they will be subject to tougher regulation.
The most critical thing is definition. I strongly urge the Minister to regulate the activity and avoid the danger of simply regulating the name claims farmers. My experience in the matter comes from the past 10 yearsall the time I have been a Memberof my election to the Insurance Brokers Regulation Council, which was a statutory regulator, but we regulated the name insurance broker. If a firm used
the title insurance broker, it had to be regulated by the IBRC. Of course, many people practised, in effect, as insurance brokers but called themselves insurance consultants, so when we disciplined a broker and chucked them out of the profession they carried on in business under another name. We have to avoid that situation in respect of claims farmers.
It is also critical that the regulator has the power to exclude, and that there is no route back for the cowboys to whom the Minister referred several times. That means that we need strong codes of conduct, but we also need clarity about precisely what they can and cannot do in their presentations to claimants and possible clients and in the advertisement of their services.
The Government have made huge progress by specifying that the regulator will be the Department for Constitutional Affairs, even if only temporarily. I heard the comments of my hon. Friend the Member for North-East Hertfordshire (Mr. Heald) and I understand his sense of disappointment that we are not being provided with a distinct regulator. However, we have to bear in mind the other side of the argument. There are probably only about 500 claims management firms and my hunch is that half of them could be driven out of business, which would reduce their number to 250. Even charging them reasonable fees would not give us a basis for funding a regulator to do all that I have suggested needs to be done. We may have to wait until the new regulator has been set up under the Legal Services Bill to bring all the threads together.
I am disappointed, however, that the Financial Services Authority has not agreed to undertake the regulation process. Claims management is related to insurance products. It is a financial services issue, so that is largely where the regulation should be. The intention is not to pursue a vendetta against claims managers but to ensure that they operate professionally and that we protect consumers from the unscrupulous. We must also ensure that the accident or event that is the subject of the claim, which is a bad enough experience for the individual, does not become a double whammy, due to bad advice about how to claim. All of us have heard about such experiences in our surgeries.
Madam Deputy Speaker, I hope that you and the House will forgive me for not staying until the end of the debate, as I have another duty to perform. I particularly wanted to take part in the debate and hope that my comments show that I am very much behind what the Government want to do. The Bill is long overdue and I wish it well. The regulation of claims managers and strengthening the possibility of rehabilitation are two developments that we can all warmly welcome, and from which all our constituents will benefit in the long run.
Mr. Andrew Dismore (Hendon) (Lab):
I declare an interest, as I was a personal injury lawyer for 20 years before I became a Member. I worked with trade unions and their members, not in an academic way but hands on, with real cases, helping real victims. I remain a consultant with my law firm, but I have not taken cases since I came to this place. I am a founder member of the Association of Personal Injury Lawyers, a former
member of its executive committee and a former Law Society specialist assessor for its panel of personal injury lawyers.
My job here is to represent constituents, not lawyers. If I were here to represent lawyers, I would probably welcome clause 1, because it will wave off not just a mere gravy train but a veritable Orient Express of rich cordon bleu sauces for the legal profession. It will create a tsunami of litigation that will flood the courts with cases of such complexity, and in such volume, that Jarndyce v. Jarndyce will look like a small claims debt recovery action in comparison.
Clause 1 creates confusion where there is settled law. It will jeopardise safety standards, creating a charter to kill and maim with impunity. It will deprive deserving claimants of their just compensation and will create a two-tier system whereby victims of identical accidents have entirely different outcomes. I chair the Joint Committee on Human Rights, which has expressed criticisms of clause 1. We were not persuaded that the clause accurately reflects the subtleties of the existing law of negligence. It restricts access to legal redress by claimants, including vulnerable groups. We believe that the clause will be applied in a manner that restricts claimants access to justice and runs the risk of being in breach of our countrys obligations under articles 2, 3 and 8 of the European convention on human rights.
It is claimed that all that clause 1 does is restate the law, but if that is the case, it raises the question: why do it? The common law has developed over the past 75 years in particular, starting perhaps with the Donoghue v. Stevenson principle and ending, most recently, with Tomlinson v. Congleton borough council. There have been many other cases in between. In no way does the clause accurately restate the law. The Lord Chief Justice made it clear to the Constitutional Affairs Committee that
it is quite impossible to encapsulate the law of negligence in a single sentence.
Despite the Governments protestations and the Minister repeating herself until she is blue in the face, clause 1 manifestly fails to reproduce the common law as it stands. In reality, the clause is simply a reaction to the popular misconception of the compensation culture, which has been roundly rubbished by everybody who has bothered to look at it. The facts show a decline in claims, not an increaseso why reinforce prejudice?
Clause 1 is riddled with ambiguity, uncertainty and a lack of legal precision. It starts off by giving the court discretion about whether to apply it. That in itself will lead to many legal arguments about whether the judge should or should not have exercised his discretion in the first place. It refers to the need for the claimant to identify the taking of precautionsa positive case required from a claimant that was not previously required. This is about expecting a claimant to deliver a positive safety regime for the defendant if they are going to win their case. The clause introduces a whole new concept into common law of desirable activity, which the Bill fails to define. The Minister indicated earlier that she was not prepared to define it through an amendment.
Mr. Dismore: Exactlymy hon. Friend is right. We will have a plethora of cases interpreting the provision. The courts could, in the end, come to the same conclusion as the Minister and say that there is no difference between it and the existing common law. They may rely on Pepper v. Hart and say that that is what the Government said. However, I doubt that. Even if that were the case, it would happen only after extensive, expensive examples were tried in the House of Lordsor, possibly by then, the new supreme court.
In reality, clause 1 creates a brand new series of defences, rebalancing the scales of justice against injured employees, travellers or schoolchildren and in favour of the multinational insurance industry. It does not replicate the key point in Tomlinson that willing consent to the risk is necessary, and that the principles laid down there are not appropriate when there is a real lack of informed choice or an imbalance of power, such as between an employer and employee, or a public authority as against children and vulnerable pensioners. I am truly appalled that a Labour Government should propose such a measure to weaken the rights of the small person against the mighty insurer.
The Government say that there is no need to exclude employment accidents from clause 1, but some jobs involve more desirable activities than others. Some are very desirable, but hazardous; some are less so, but safer. When I was in practice, for many years I represented injured firefighters. The principles of liability towards firefighters were well established in the House of Lords many years ago in the case of Ogwo v. Taylor. The clause considerably weakens those principles, and reopens some of the arguments that were put forward by the defence in the House of Lords and rejected. A seriously injured firefighter could well see his or her right to compensation undermined or even removed by the rebalancing of the law.
Of course, if the employment were a less desirable activity, perversely, the new defence would not work. There would thus perhaps be stronger protection for people with less desirable occupations. Journalists, estate agents or even Members of the House might thus attract greater protection than a firefighter, who does what might be considered to be a more desirable activity.
The situation becomes even worse when we find that clause 1 goes beyond negligence and covers breaches of statutory dutyexactly the sort of cases that Lord Hoffmann said should be excluded from the test in Tomlinson. Statutory duties underpin the health and safety regime, especially for some of the most dangerous occupations, such as those in construction. Contrary to the Governments contention in the other place, very few of those statutory duties are absolute duties. There is a strong argument that we do not comply with EU directives in that respect already. The duties are circumscribed by conditions that use such phrases as reasonable practicability, practicability, appropriate, suitable and adequate. Some duties are already too weak, without watering down the protection still further through the desirability defence. All the duties apply without fail when there is an
asymmetric power relationship, such as the employee-employer relationship, the relationship between a public authority and an individual citizen, or the relationship between an occupier and a visitor.
If we are thinking about the construction industry, should we consider whether some projects are more desirable than others? For example, people might think that it is rather more desirable to build Wembley stadium than it was to build the dome. What about the position of children? What of a school-run mum who crashes her 4x4 while ferrying her children and her neighbours children to school? Going to school is a desirable activity, which might weaken the case, but it could be argued that it would have been rather more desirable for the occupants of the vehicle to walk to school, instead of going by car. There could thus be an argument about which activity would be more desirable. In those circumstances, there would be a risk of there being a lesser standard for the passengers, and anyone whom the mum hit crossing a red light, than would be the case if the accident happened on the way home and the occupants of the vehicle had decided to call at McDonalds for an unhealthy burger and chips, which could well be considered to be entirely undesirable. There is thus a paradox. It simply cannot be right that a less desirable activity gives the claimant a stronger case.
I suspect that the roots of the clause lie in the private Members Bill promoted by the hon. Member for Canterbury (Mr. Brazier). He seems to be proselytising the measure as a change in the law, but if that is the case, why are the Government saying that it simply restates the law? The hon. Gentleman is right to say that the measure does not restate the law; it dramatically changes it, and weakens it from the victims point of view. The Government should recognise that they withdrew their support from the hon. Gentlemans Bill for good reason, because between 2000 and 2005, claims against local authorities, schools and voluntary organisations fell by 7.5 per cent., rather than increased.
Of course we want to encourage adventure and volunteering, but the existing law already provides for that. If it is true that the clause simply restates the law, the Government must accept that argument. Contrary to the words that the hon. Member for North-East Hertfordshire (Mr. Heald) tried to put into my mouth, I warmly welcome the idea that we should issue guidance and publications to explain the law as widely and fully as possiblebut frankly, I do not think that the clause is going to be the talk of school staff rooms, or scout leaders in the pub after a volunteering exercise. The fact remains that people will be far more interested in the guidance than what the clause might or might not state.
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