Evidence submitted by the Trades Union
The TUC does not believe there is
a compensation culture.
The number of claims is falling.
Nine in every 10 workers who are
injured or made ill through work do not claim.
Compensation payments could be cut
were more employers to offer early access to rehabilitation.
Costs could be cut were insurance
companies to admit liability at an early stage.
There is no evidence of a "risk
The TUC would welcome regulation
of commercial Claims Management Companies.
The proposed change to the law of
compensation is unnecessary and could be unhelpful.
1. The TUC would wish to give evidence in
relation to compensation for claims of personal Injury against
employees following an accident or occupational disease.
2. It is the TUC's contention that there
is no compensation culture within the UK and, in fact, the reverse
is the case, with most people reluctant to claim compensation,
or unable to do so.
3. The number of civil claims for compensation
against employers as a result of accidents have fallen ever year
for the last five years.
In fact, according to a recent report by the Better regulation
Task Force, despite the introduction of "no winno
fee" claims, the total cost of compensation cases in Britain
has remained, in real terms, static since 1989.
4. Britain also pays out much less out on
civil compensation, as a proportion of its GDP, than any other
major European country apart from Denmark, and a third that of
5. Each year over 850,000 people are injured
or made ill as a result of their job.
The most common injuries are musculoskeletal disorders such as
back injury or RSI, injuries from slips and falls, skin diseases,
and deafness. Many people will get better, some will not. Over
25,000 people are forced to give up work every year as a result
of work-related injuries or illness.
6. However the number who gain compensation
from their employer is, according to the Association of British
Insurers, around 60,000 a year.
A further 20,000 will make a successful claim for industrial injuries
benefit, which is a government funded "no fault" scheme.
7. This means that 9 out of every 10 workers
who are injured or made ill through work get no compensation.
8. The TUC would also challenge the idea
that compensation payments are too high. Exact figures are difficult
to come by because in excess of 95% of cases are settled out of
Figures from the leading solicitors companies give an average
personal injury settlement of around £7,500.
However, because there are a small number of large payments, the
vast majority of claimants receive less than £5,000. Over
three quarters of cases taken by trade unions result in a settlement
of under this amount.
9. Payments are made based on decided cases
and independent medical evidence compensating actual loss and
even where there is a debilitating and life destroying disease
the compensation is never more than those guidelines. An example
is mesothelioma caused by asbestos exposure. This is invariably
fatal. The guidelines for pain and suffering are £45,000£70,000,
however if the case is settled after death, the payment is often
lower, with a standard tariff for bereavement damages of £10,000.
10. There have been reports of individuals
getting large settlements for occupational diseases, sometimes
in excess of £100,000. These cases, which are very rare,
are relatively young workers who, because of their employers'
admitted or proven negligence, will no longer be able to work
again in their chosen profession as a result of their illness.
This level simply reflects the loss in their income over their
remaining working life.
11. Very occasionally there are settlements
of over £1,000,000. These invariably relate to people who
have been so badly injured that they require permanent care and
will never work again. Often they will have lost the use of their
limbs and/or are significantly brain-damaged.
12. The TUC would contend that, in reality,
the levels of compensation in Personal Injury cases are too low.
It is now seven years since the Law Commission recommended raising
the damages for non-pecuniary loss in PL cases by increasing them
to up to double the current rate but that has never been implemented.
13. Concern has been raised in the past
about the effect of Personal Injury settlements on the insurance
industry, especially where asbestos related diseases are concerned.
The insurance market is about assessing risk, pricing premiums
accordingly, investing premiums collected, and hoping that the
risks don't become a reality. To win compensation in a civil claim
against an employer, the claimant has to show negligence. This
means that the employer knew or ought to have known that they
were putting you at risk. If the employer can show that they could
not have known that there was a risk then they will not be liable
for damages. For example claims for hearing loss can only be brought
for damage caused after the HSE produced guidance on this in 1963.
14. The dangers of asbestos have been documented
since the 19th century, there have been health and safety controls
on its use since 1931, and the risks were known across the industry
since the 1940s. Despite the known dangers many employers continued
to use it and to expose their workers right up to the 1970s. Even
now too many fail to take any adequate care with asbestos present
in their workplaces. As a result over 2,000 people die every year
from exposure often 30 or 40 years ago.
15. All these deaths were avoidable if the
industry had protected its workforce. The insurers insured these
companies, and took their premiums, despite the knowledge that
exposure was occurring and that many would die. There is no reason
why these workers should be denied compensation just because the
exposure took place many years ago. The insurers were happy to
take the risk and should meet their obligations. There is no justification
for the taxpayer having to pay the bill.
16. The total cost of claims for occupational
diseases is actually only a quarter of the total amount paid out
in compensation to workers by insurance companies and the number
of claims are falling.
17. Nor should these claims and settlements
be seen as putting an undue burden on business. It is a legal
requirement for employers who have staff working for them to have
insurance cover in case they injure or kill someone through their
negligence, or an employee develops an avoidable disease through
work. The average cost of EL insurance is 0.25% of total payroll
and is the lowest in Europe. Average damages for an ELCI claim
18. Unfortunately the way the insurance
market works there is little economic incentive for employers
to take action to reduce the number of injuries and illnesses
they cause, as premiums within each sector vary only marginally
between the good and bad employers.
19. It is true that premiums have gone up
considerably in the last few years, but this is nothing to do
with the number of claims. The main reason is that insurance companies
were using Employers Liability Insurance as a "loss leader".
20. In 1999 the cost of claims and insurance
companies costs was 54% higher than the amount that the insurance
companies were charging.
Following the stock market crash and the attack on the World Trade
Centre, the companies decided they could no longer afford to subsidise
Employers Liability Insurance so premiums have gone up. However
this is not because of higher compensation or more claims.
21. Another factor is that legal and medical
costs have been rising much faster than inflation. Between 1997
and 2002 medical and legal costs increased by 50%.
This is simply because insurance companies are failing to follow
protocols which oblige them to respond to claims within certain
time limits and to admit liability early on, if the employer is
liable. All too often liability is not admitted until a claim
is about to go to court, and unnecessary costs have been run up.
22. The TUC is however concerned about the
costs incurred in many Personal Injury cases. In part these seem
disproportionate because of the low settlements in most cases,
however the TUC would welcome any action to speed up cases and
reduce costs, so long as such measures did not reduce the access
of claimants to justice. There is no evidence that costs are being
incurred by solicitors dragging out cases unnecessarily. Costs
must be reasonable, necessary and proportionate. Costs however
could be reduced if employers, or their insurance companies, admitted
liability early, according to the protocols, rather than waiting
until the last minute when the claimant's lawyer will already
have had to get medical and other reports and spend, perhaps months,
preparing a case.
23. The failure by employers and insurers
to admit liability early has another effect as well. It means
that often no attempt is made to provide access to early treatment
and proper rehabilitation for the victim. This means that the
condition may become worse and their chance of a recovery is greatly
reduced. This is particularly a problem in injuries that respond
best to early treatment, such as back pain.
24. The TUC does not believe that there
is any evidence of "risk aversion" within the workplace.
The death of 220 workers last year shows that, as do the high
rates of occupational ill health and injury.
25. The statutory basis under which employers
must act is to reduce risk "as far as reasonably practical".
This means removing those hazards which lead to risk where possible
and otherwise reducing the risk to the lowest practical level.
Unfortunately the focus on "risk averse behaviour" may
send the wrong message to employers that it is acceptable to take
greater risks with the health or safety of their employees.
26. We do accept that health and safety
has been used by some employers and public bodies as an excuse
for cutting back activities, often where the real grounds are
cost. In addition restrictions imposed by the insurance industry
have often been interpreted as being a result of regulation, or
risk averse employers.
27. The TUC would like a separation of the
risks faced by those who have no choice, such as workers, the
young and those with learning disabilities or special needs, from
those who choose as part of a lifestyle decision, to undertake
an element of risky behaviour. However we believe that this distinction
was already make in the judgement of Tomlinson v Congleton BC.
28. The TUC has seen a range of cases which
show that some claims management companies are acting in a way
which is against the interests of both the individual concerned
and society. These include taking extortionate premiums, encouraging
frivolous claims, inappropriate advertising and considerable lapses
in professional conduct.
29. These should not be seen as a reflection
on either the legal profession, or the voluntary organisations
and trade unions who refer members or clients to solicitors as
a part of their broad support services. Trade union legal services
refer around 65,000 new cases every year to solicitors. Last year
they achieved compensation settlements to the value of over £300
million. This is part of the overall support work that unions
undertake and is closely aligned to their work on prevention.
Many local support groups provide a similar service.
30. The TUC would welcome the regulation
of those Claims Management Companies who operate commercially
and where their role is simply to find and pass on claims. We
could not support the inclusion of non-commercial organisations
under the same regulations, which will be developed to counter
a specific issue and will not be appropriate to regulate trade
unions, or legal firms, who are already regulated by other means.
31. The TUC is concerned that the government
proposals on negligence means that the current common law (which
is both clear and well established) will now have to be read in
conjunction with this new provision. This will lead to a period
of uncertainty. In addition the TUC is concerned that the proposed
wording will mean that any worker injured in a "desirable
activity" will have to show a higher degree of negligence
than a worker suffering the same injury in any other activity.
It is unclear what constitutes a "desirable activity".
It may be interpreted by the courts as including areas such as
school excursions, and volunteer work, but could also be interpreted
as covering many public or essential services.
32. The Government has indicated that its
intention is simply to clarify the existing law to make it clear
that there is no liability and negligence for untoward incidents
that could not be avoided by taking reasonable care or exercising
reasonable skill. The TUC does not believe that the proposed wording
within the bill does that. Instead the provision will lead to
a two-tier civil compensation system with workers in occupations
deemed a "desirable activity" being denied access to
the civil courts.
33. There have been indications that the
proposed wording is meant to reflect the judgement in Tomlinson
v Congleton BC, which looked at the issue of liability
in a case where a youth seriously injured himself after diving
into a lake where diving was prohibited. However there are at
least two significant differences between the Bill and the judgement
given in the Court of Appeal. The first is that this judgement
referred to "social value" and not "social activity".
These are very different and the latter is much wider.
34. Secondly, the judgement was never intended
to cover those who undertake an activity as part of their work.
It related to those who choose to take risky activities. This
was made quite clear in the judgement, where Lord Hoffman commented
"a duty to protect against obvious risks . . . exists only
in cases where there is no genuine informed choice, as in the
case of employees." This clear distinction is not made in
35. Whether any new legislation is necessary
is highly doubtful. The Tomlinson judgement stands regardless
of any legislation. In addition the TUC believes it has demonstrated
that there is no compensation culture within the UK. Personal
injury claims are falling and the real scandal is the low levels
of compensation awarded to those few workers who are successful.
36. The TUC therefore believes that the
proposal for a clause intended to deter compensation claims is
not only unnecessary, but does not even meet the aims the Government
had claimed for it.
37. In workers' personal injury cases, claims
arise because employers act negligently. There is no evidence
of frivolous or unnecessary litigation, most workers do not claim
and settlements are modest.
38. The insurance companies can help reduce
negligence by linking the premiums much more closely to the actual
risk within that employer. Insurance companies should more readily
offer risk based premiums that reflect an employer's health and
safety history. Good health and safety should be rewarded. However
when a claim does arise, costly medical and legal bills would
be less likely to arise if insurance companies were more ready
to admit liability where justified early and follow court rules.
39. When someone is injured or made ill
through work they should have early access to proper rehabilitation.
This means the worker would be more likely to make a full or early
recovery. Rehabilitation must not however be used as a stick to
beat the claimant with, to force them to accept an offer or return
to work early. It must only be used as a means of enabling an
injured person to cope again either with work, or with family,
domestic life and society.
40. The TUC does not believe that there
is a risk averse culture within the workplace, and the current
debate should be used to strengthen awareness of the legal requirements
on employers. However "health and safety" should not
be used as an excuse not to take actions which an organisation
does not wish to do on cost grounds.
41. The TUC would welcome regulation of
Claims Management Companies operating commercially.
42. The Government proposals to alter the
law of negligence would be unhelpful and confusing. They may lead
to some workers being unable to seek redress against their employer
where negligence has taken place.
Trades Union Congress
51 Compensation Recovery Unit, 2005. Back
Better Routes to Redress, BRTF 2004. Back
Tillinghurst-Towers Perrin, US Tort Costs -2003. Back
Occupational Health Statistics Bulletin, 2003/04, HSC, 2004. Back
ABI, quoted in Hazards magazine, May 2005. Back
DWP Industrial Injuries Disablement Benefit statistics, September
APIL, July 2005. Back
TUC survey July 2005. Back
Judicial studies Board Guidelines. Back
Work place Compensation-Greenspan Bergman report for ABI, 2002. Back
DWP Review of ELCI, First Stage Report. Back
DWP Review of ELCI First Stage Report. Back
Workplace Compensation, Greenspan Bergman, 2002. Back