Examination of Witnesses (Questions 107-119)
NICK STARLING,
JUSTIN JACOBS,
DOMINIC CLAYDEN
AND PHIL
RUSE
10 JANUARY 2006
Chairman: Welcome everyone. Welcome,
in particular, Mr Starling and Mr Jacobs from ABI, Mr Clayden
from Norwich Union and Mr Ruse from Allianz Cornhill, if I have
got all that right. Before we seek your invaluable help, and we
are very glad that you have come along to help us today, we have
the duty to declare any interests that we might have.
David Howarth: I write legal text books
on the law of tort.
James Brokenshire: I am a non-practising
solicitor.
Chairman: I am a consultant to Bourne
Leisure, which has holiday park interests.
Q107 David Howarth: Can we start
with clause 1 of the Compensation Bill and your views of
it? Obviously there have been grave doubts expressed, first of
all, about the need for such a clause at all and, secondly, even
among those who think that it might be a good idea to have a clause,
about the way it is drafted. Can you start by giving us your general
view at this point of clause 1?
Dominic Clayden: We support the
principle behind seeking to address the issues around a compensation
culture. We have got some significant reservations around how
clause 1 would actually be interpreted by the courts. We are concerned
that there would be a period of uncertainty while the courts work
out its impact, and, as such, we do not support it in its current
form.
Q108 David Howarth: In what form
would you support it?
Dominic Clayden: We would look
to have a situation where there is greater clarity for what the
Government is seeking to put outside of claims for compensation.
I think that is a matter of government policy.
Q109 David Howarth: Is it not inherent
in the exercise of legislating and producing a statutory section
that there will be litigation about it? Does not the logic of
your argument take you to a different position of not being in
favour of such a clause in the first place?
Dominic Clayden: I think the issue
is that there is a reasonably clear body of case authority around
what is covered by negligence and what is not, and if the whole
body of negligence law was going to be re-looked at in individual
circumstances that would lead to a significant period of uncertainty.
Q110 David Howarth: What sort of
more limited clause are you suggesting? What sort of issues are
you suggesting should be covered by legislative action and what
not?
Dominic Clayden: At the moment
we do not believe that there should be an extension of that in
terms of seeking to reduce the scope of negligence.
Q111 David Howarth: What about the
other problem that has been raised, which is the problem of the
legal scope of the clause? I think in the House of Lords there
was some discussion of whether the clause should or should not
cover breach of statutory duty, which of course itself is an ambiguous
term. What is your view on that?
Dominic Clayden: I think in truth
if I were to go into a level of detail I would probably have to
write to you separately.[1]
Q112 David Howarth: Does anyone else
have any views on that?
Nick Starling: Broadly speaking,
we do not see the need for this particular clause. It is not for
us the main issue in the whole issue around the compensation
culture and the compensation debate. We think that the Bill in
general is a good first step, if you like. We would like it to
go much further. That is our broad approach.
Q113 David Howarth: Could you tell
us a bit more about in what way it could go further?
Nick Starling: We think that there
are problems in the personal injury compensation system. We do
not think it is working effectively. We think it is adversarial.
It is complex, it costs too much, it takes too long, it undervalues
the importance of getting people better after personal injury,
it encourages frivolous claims and, in fact, deters legitimate
claimants. We think that what is actually needed is a proper reform
of the compensation system, and we have put forward proposals,
as you know. We think that the Bill is a good first step, but
it needs to have something which addresses some of these issues
which I have set out.
Q114 David Howarth: Before we move
on, I think you are suggesting some sort of parallel to the NHS
Redress Bill, and I want to cover that in a second, but could
I finish off this line of questioning by asking whether you think
there needs to be any legislative change to the common law of
negligence.
Dominic Clayden: No.
Q115 Chairman: You do not all have
to have the same view.
Nick Starling: No.
Q116 David Howarth: No conferring,
should I say!
Justin Jacobs: I think the general
point is we agree that there needs to be greater clarity about
when people are entitled to compensation. It might be the case
that clarity has been lost in recent years, but whether the best
way of achieving that clarity is through legislation is something
which is clearly open to debate and perhaps not the best way forward.
Q117 David Howarth: Could I go on
to the recommendation that you are making that there should be
consensual mechanisms, I think is the best way of putting it,
similar to the NHS Redress Bill. Could you just take us through
the system that you would expect to come into place were your
recommendations to be taken up?
Nick Starling: The problem at
the moment with the personal injury system, the compensation system,
is that it starts off as if everything is going to end up in the
courts, and we think that for claims below £25,000, which
is about 90% of claims, in a very large number of cases they can
be sorted out without recourse to the courts and they can be sorted
out much more quickly. We are proposing a set of proposals which
essentially mean that, instead of an average of I think it is
400 days for a personal injury claim to be notified to an insurer,
notification happens virtually immediately. It means that arrangements
can be made to get the person better—rehabilitation, medical
treatment and so forth—and a process then starts whereby
insurers have to come back with whether they accept or reject
the claim within three months and with a figure for compensation
within six months via a form, a proposal for people putting their
claim forward on which there will be a free helpline. Once the
claim has been received, once the suggested compensation has been
received by the claimant, it will be informed by a tariff of compensation
payments, which will be set by government, it will then be open
for claims above the small claim limit for the claimant to accept
or reject or to go for legal advice. The next step beyond that,
if is not settled, will be mediation and only, finally, after
that, would it go to the courts. So we think there is a system
which would enable the straightforward claims where everyone is
agreed where liability falls, everyone agrees what the compensation
should be by a tariff of compensation proposals, and they can
be sorted much more quickly than the current three-year average
which we see and reduce the costs, which are very high—40%
transaction costs.
Q118 David Howarth: Can I ask a couple
of questions about that. The first question is how do you envisage
the tariff being drawn up? Would it be based on the courts' present
methods of estimating damages?
Nick Starling: I think that would
be the starting point. I think it is important that it is society
which decides what compensation levels are appropriate, and that
is the courts, that is government. It is not for the insurance
industry itself to decide what the compensation should be. I think
that is quite an important point.
Q119 David Howarth: The second point
is how would you envisage giving incentives for people to stick
to this system, this line of going first to the tariff, then to
mediation and then only finally to the courts? How would that
work?
Nick Starling: We think there
should be penalties for people who do not stick by the laws, insurers
who do not stick to the three months plus three months system,
and there should be penalties for exaggerated or frivolous claims
as well.
1 Note by witness: There are many claims particularly
in public and employers liability cases where the cause of action
will be pleaded both in terms of negligence and /or breach of
statutory duty. In view of the way Clause 1 is presently worded
and in addition to our written evidence, a judge when considering
if a desirable activity may be affected by alleged breach of the
standard of care in negligence has no similar discretion to apply
to breaches of statutory duty. This could result in the intention
and purpose of the Bill being obviated in a considerable number
of cases Back
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