Evidence submitted by the Association
of Personal Injury Lawyers (APIL)
The Association of Personal Injury Lawyers (APIL)
was set up 15 years ago to protect the rights of people injured
through negligence. Members comprise solicitors, barristers and
academics. Our campaigning activity leads to regular discussions
with the insurance industry, consumer groups, employers' representatives,
unions, the Government and other parliamentarians. APIL's work
aims to ensure that injured people gain full and fair redress
for their injuries.
EXECUTIVE SUMMARY
— Independent statistics show that
the total number of personal injury claims are falling.
— The National Health Service Litigation
Authority reports that the number of claims against the NHS has
not been rising.
— The UK has the lowest tort costs
of all developed nations, except Denmark.
— The downward trend in claims suggests
"no win, no fee" agreements may be preventing people
from bringing claims.
— Personal injury claims against local
authorities, schools and volunteering organisations have fallen.
— Risk aversion must be addressed through
education, rather than legislation.
— Government proposals to regulate
claims management companies are welcome, and long overdue.
— Changing current negligence laws
is unnecessary as the law has worked efficiently in this area
for years.
— The attempt to clarify the laws of
negligence in the Compensation Bill will cause confusion and so
fail to reassure those at whom it is aimed.
Q1: Does the "compensation culture"
exist?
1. The evidence that there is no compensation
culture is overwhelming, and now widely recognised by various
organisations and individuals—including the Prime Minister
and the Lord Chancellor. For example, in its report into the regulatory
aspects of litigation and compensation in May 2004, the Better
Regulation Task Force (now the Better Regulation Commission) stated
that "the compensation culture is a myth". This conclusion
is largely based on evidence from the Compensation Recovery Unit
(CRU). Every time a claim is made against an insurance company,
the CRU must be informed, regardless of whether the claim results
in a trial. CRU figures indicate that the total number of claims
registered fell by almost 2% between 2003-04 and 2004-05. Earlier
this year, the Prime Minister stated that "between 2000 and
2005 the overall number of accident claims fell by 5.3%".
Clinical negligence claims have fallen from over 10,000 in 2000-01
to a little over 7,000 in 2004-05.
2. In addition, it is worth noting that
Datamonitor—an independent business-information company—has
also come to the same conclusion. For instance, in its most recent
report—"UK Personal Injury Litigation 2004"—it
concludes "that the anecdotal stories of a growing compensation
culture in terms of claims numbers are outweighed by the statistical
evidence indicating otherwise".
3. The National Health Service Litigation
Authority (NHSLA) is responsible for handling negligence claims
made against NHS bodies. In its Report and Accounts, 2004, the
NHSLA states: "Despite the much vaunted `compensation culture',
the number of claims made against the NHS has not been rising."
This conclusion is clearly borne out by statistics.
4. The current clinical negligence system
is funded to a large extent by legal aid through the Legal Services
Commission (LSC). There has been a steady decline in the number
of certificates issued for clinical negligence cases in recent
years, with 6,064 certificates issued in 2003-04 (down 3.9% from
2002-03). In total there has been a 50% decrease in the volume
of certificates from 1995-96 to date.
5. A recent National Audit Office (NAO)
report found that at least 500,000 adverse incidents in NHS hospitals
could be avoided every year, and that there may be as many as
34,000 avoidable deaths in NHS hospitals a year. These figures
are even more alarming when you consider a further 300,000 patients
suffer from hospital-acquired infections every year. The NAO estimates
that one in 10 patients suffers an adverse event in hospital,
ranging from a fall to a fatal error involving drugs or surgery.
Yet only a very small percentage of these adverse incidents leads
to claims for compensation. In the most recent figures, only 7,205
claims for clinical negligence were registered between April 2004
and March 2005. This suggests that less than 1% (0.74%) of the
patients injured in the NHS each year actually makes a claim.
6. While it is clear, then, that there is
no compensation culture in the NHS, it is also clear that there
is an urgent need to protect vulnerable patients, by preventing
the negligence which is causing such a high number of avoidable
deaths and injuries. APIL also supports, in principle, the Government's
aim of creating a more efficient system for lower value claims
against the NHS to be pursued through the NHS Redress Bill. APIL
has been committed to the review of the clinical negligence system
from the start and we believe the primary focus of any reforms
must be full and fair redress for patients injured through negligence,
and the need to reduce adverse incidents from happening in the
first place.
7. Some commentators make a comparison between
the current UK system of compensation and the US system of compensation.
Yet what is often not recognised is that the UK's system of compensation
is very different from the system used in the US. The UK, for
instance, does not have a system of punitive damages (ie large
awards designed to punish the wrongdoer). Another key factor of
the UK system is that awards are very tightly controlled, with
the sole purpose of returning the injured person back to as normal
a life as possible. In order to achieve this, every penny of the
funds needed to pay for things such as the claimant's future medical
care, loss of earnings, special adaptations needed in the home
etc, is carefully calculated.
8. At the core of many arguments that there
is a compensation culture, is the often-quoted figure that the
compensation culture is "costing £10 billion a year".
This figure was first mentioned in "The cost of compensation
culture", a paper published by a working group of the actuarial
profession in December 2002. It is disappointing that this misleading
figure is rarely challenged. It includes, for example, the exceptional
cost of the Government-run BSE compensation scheme, a scheme which
has nothing to do with personal injury costs at all. The Lord
Chancellor has publicly queried some of the statistics used by
the actuaries, saying that "some of their assumptions were
not just heroic, but heroically wrong".
9. The reality is that the UK has the lowest
tort costs (ie a combination of the legal costs involved in pursuing
the case and the damages paid out) of all developed nations except
Denmark. As a percentage of gross domestic product, the UK's tort
costs are 0.6%—lower than the USA (1.9%); Italy (1.7%);
Germany (1.3%); Switzerland (0.9%); Canada, Japan and France (all
0.8%).
Q2: What has been the effect of the move
to "no-win no-fee" contingency fee agreements?
10. APIL presumes this is actually a reference
by the committee to conditional fee agreements (CFAs) rather than
contingency fee agreements, which are illegal in the UK for personal
injury cases issued in court.
11. APIL argued consistently against the
removal of legal aid from personal injury litigation, in favour
of "no win no fee" conditional fee agreements (CFAs).
Since CFAs were introduced in 2000, however, we have been working
with both the Government and other stakeholders to try to ensure
the effective working of CFAs, which were designed to make access
to justice more widely available. The fact that personal injury
claims are clearly on a downward trend, however, suggests there
is a possibility that CFAs may actually be preventing injured
people from bringing claims.
12. Another difficulty linked with CFAs
is that the expression "no win, no fee" suggests the
system is far simpler than it actually is in practice. If a claimant
loses his case, his solicitor is not entitled to claim a fee for
the conduct of his case, but the claimant is liable to pay the
costs of the winning side. In order to do this, he is required
to take out an "after-the-event" (ATE) insurance policy
to ensure these costs will be paid. If the claimant wins his case,
although the claimant remains primarily liable (because of the
operation of the indemnity principle) in practice his costs are
paid by the losing defendant and, under the system, his solicitor
is entitled to claim a "success fee". This success fee
represents a percentage of the solicitor's original fee (not a
percentage of the claimant's compensation award) and is designed
to off-set the risk of the solicitor not being paid if the case
is lost. This provides the solicitor with a financial "cushion"
which can be called upon to pay for those cases which are equally
worthy but ultimately lost, for whatever reason. Without this
success fee "cushion" there is a risk that the solicitor
would "cherry-pick" easier cases to avoid the risk of
losing and this would have a serious impact on access to justice
for many claimants who may otherwise never be able to claim the
compensation they may desperately need.
13. This system has to be explained in full
to claimants by their solicitors at the very outset of the case.
One of the problems which has arisen, however, since legal aid
was abolished for most personal injury cases in favour of CFAs,
has been the increase in the number of so-called claims management
companies (CMCs).
14. These organisations, which are currently
unregulated, have not always represented the nature of CFAs clearly
to claimants and have exploited the system by arranging loans
and charging fees direct to claimants which in most cases are
unnecessary. The results have often been well-publicised, with
many claimants ultimately under-compensated, and some CMCs (such
as Claims Direct and The Accident Group) going out of business.
Q3: Is the notion of a "compensation culture"
leading to unnecessary risk averseness in public bodies?
15. In the Prime Minister's speech at the
University College, London, in May this year, he said that, between
2000 and 2005, accident claims against local authorities, schools,
volunteering organisations and other public sector bodies fell
by 7.5%. There are, however, many examples, reported in the press,
which suggest that some public bodies are still risk averse due
to an irrational fear of being sued, despite the statistics. APIL
believes this is a misconception which must be addressed through
the proper education of organisations and individuals about the
nature of the law and their responsibilities to other people.
It is not, we submit, a situation which is best dealt with by
legislation.
Q4: Should firms which refer people, manage or
advertise conditional fee agreements be subject to regulations?
16. APIL welcomes Government proposals to
regulate claims management companies, a move which is, we feel,
long overdue. The association has always been concerned about
the continued growth of claims management companies whose practices
are, at best, opaque and who frequently generate extra, unnecessary,
costs for a claimant.
17. There is clearly a considerable amount
of detail still to be established in relation to this aspect (part
two) of the Compensation Bill and we look forward to full participation
in further discussions. At this stage, however, we welcome the
fact that it appears the legislation is likely to provide robust
protection for injured people. We would caution, though, that
the bill should include regulation of the fees which regulated
bodies including, but not limited to, claims management companies
are able to charge to provide further protection for claimants.
Q5: Should any changes be made to the current
laws relating to negligence?
18. APIL believes that changing the current
laws relating to negligence is both unnecessary and impractical,
as the law has worked very efficiently in this area for many years.
What is certainly necessary, however, is education to help people
understand how the laws of negligence are applied.
19. The association also believes that any
attempt to clarify the current laws on negligence through legislation—rather
than education—is unnecessary.
20. For this reason, APIL does not support
clause 1 of the Compensation Bill (reproduced below, for ease
of reference):
"1 Deterrent effect of potential liability
A court considering a claim in negligence may,
in determining whether the defendant should have taken particular
steps to meet the standard of care (whether by taking precautions
against a risk or otherwise), have regard to whether a requirement
to take those steps might—
(a) prevent a desirable activity from being
undertaken at all, to a particular extent or in a particular way,
or
(b) discourage persons from undertaking
functions in connection with a desirable activity."
21. APIL's key concern is that this clause
creates confusion and so will do nothing to reassure those at
whom it is aimed. This result is the inevitable outcome of any
attempt to replicate 75 years of the common law, about which whole
text books are written, in a single clause.
22. The fundamental problem with this clause
is the reference to a "desirable activity". While this
expression has certainly been used in the higher courts on at
least one occasion in the past, to attempt to enshrine such a
subjective yardstick in statute will inevitably lead to litigation
for decades to come, with endless legal argument about how a "desirable
activity" can be defined. Such litigation may be to the advantage
of lawyers, but it certainly is not in the interest of injured
people, who deserve a speedy resolution to their claims.
23. It will also be deeply unjust to people,
injured through no fault of their own, whose right to full and
fair compensation will depend on whether the judge feels that
the defendant's activities at the time the injury is caused could
be considered "desirable".
24. What must be avoided (and what could
easily be the result of clause 1) is a situation in which two
separate incidents, arising from the same set of circumstances,
causing the same injuries to two claimants, will result in one
claimant receiving full redress, while the other fails to receive
the compensation to which he is entitled simply because the defendant
is considered by the judge to be engaging in a "desirable
activity". Such a situation would be totally iniquitous and
contrary to the current common law.
25. Neither can it be fair or just for a
judge only to be required to consider the desirability of the
defendant's activities—the claimant may be injured while
participating in a desirable activity yet, according to clause
1, this cannot be a factor for deciding an issue of negligence.
26. If, for example, the defendant is a
volunteer who is driving a group of boy scouts to scout camp and
he negligently injures a cyclist, the extent of the defendant's
liability may well be reduced, according to clause 1 of the bill,
simply because driving scouts to camp could be considered by the
judge to be a "desirable activity". There is no facility
in clause 1, however, for the judge to decide that the injured
person is engaging in a "desirable activity" by cycling
rather than driving. This is very obviously an inequality between
the parties which must be addressed.
27. Further confusion is caused by the contradictory
nature of paragraph 10 of the explanatory notes: "This provision
is not concerned with and does not alter the standard of care,
nor the circumstances in which a duty to take that care will be
owed. It is solely concerned with the court's assessment of what
must be done to satisfy the standard of reasonable care in the
case before it."
28. It is evident from the previous arguments
that if the court is assessing what must be done to satisfy the
standard of reasonable care by applying the test of desirability,
the standard of care and the circumstances in which a duty to
take that care will be owed has, in fact, been altered by clause
1 of this bill.
29. It is clear, then, that clause 1 of
this bill has an obvious potential to generate confusion, litigation
and to act as a serious impediment to access to justice for people
who have suffered avoidable injuries, caused by negligence, who
may be prevented from gaining the full redress to which they are
entitled.
30. We also believe that the courts have
been astute in avoiding making decisions which could inhibit whatever
"desirable activity" is in this context, and should
be trusted to continue to do so. If there is a difficulty of perception,
we suggest the proper way to address it is through education,
in particular of those who have a responsibility to manage risk.
We believe education about the virtues of proper risk assessment
would act to enable such "desirable activity" to happen.
31. Staff at Hay Lane school in London,
for example, were devastated by the death of a pupil on a school
trip. The staff, who were exonerated in the coroner's enquiry,
were, nevertheless, determined to prevent another tragedy. The
school's unions called for the creation of a health and safety
committee, with equal representation from management and the unions,
NUT, UNISON and ATL. Improvements were made to safety procedures
as a result of this collaboration and their efforts were rewarded
when an OFSTED inspection highlighted the "health and safety
culture" as a strength of the school.
Association of Personal Injury Lawyers (APIL)
November 2005
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