Complaints and Litigation - Health Committee Contents

7  Litigation

151. All healthcare interventions carry some form of risk. In many cases the risks are negligible and outcomes are as expected. In its patient safety inquiry, the previous Health Committee heard evidence from international studies that suggest that about 10% of all patients who are admitted to hospital suffer some form of harm.[153]

152. The existing clinical negligence framework in England is based on tort i.e. a breach of a civil duty to a person or persons must be established. In order to successfully bring a case against the NHS, a claimant must prove that the practitioner or organisation failed to adhere to accepted standards of care and treatment, cannot justify the logic of their approach and that the mode of treatment would not be endorsed by similarly competent practitioners.[154]

"No-fault" compensation schemes

153. The costs of litigation against the NHS are increasing year on year. The NHSLA has told the Committee that between 2007-08 and 2009-10 their total payments have risen by nearly 25%, from £633m to £787m.[155] Claimant and NHSLA legal costs are both growing, though claimants legal costs are growing at a much faster rate than those of the NHSLA.[156] The Committee has heard in evidence that because of its contracting arrangements the NHSLA is able to negotiate significantly lower rates from its legal representatives than claimants can achieve.

154. The Committee has taken evidence on compensation systems that are not based on qualifying liability in tort, also known as "no-fault" compensation schemes, and the Committee has reviewed the proposals being considered by the Scottish Government for the introduction of such a system.

155. Patients who are undergoing treatment must first consent to it, having been fully informed of the risks involved.[157] When things do go wrong, patients can and do resort to litigation in order to establish full disclosure of the facts and to seek apology and redress.

156. The Committee has heard in evidence that "no-fault" compensation schemes could increase the costs of settling claims against the NHS by between 20%[158] and 80%.[159] Furthermore, as claims would increase at a time when NHS resources are already under strain, the "pot" of compensation would be likely to be fixed, meaning that the amount payable to the most severely injured persons would be less than at present.

157. The evidence suggests that "no-fault" compensation schemes may increase the volume of cases seeking compensation from the NHS whilst reducing the compensation available to those most in need. The Committee believes that the existing clinical negligence framework based on qualifying liability in tort offers patients the best opportunity possible for establishing the facts of their case, apportioning responsibility for errors, and being appropriately compensated.

Indemnity Schemes

158. The NHS Litigation Authority (NHSLA) was established in 1995. For the purposes of this report, its principal aim is to:

[…] minimise the overall costs of clinical negligence…to the NHS and thus maximise the resources available for patient care by defending unjustified actions robustly [and] settling justified actions efficiently.[160]

159. It discharges this function by administering schemes that help NHS bodies to pool the costs of liabilities to third parties for loss, damage or injury arising out of the discharge of their functions. It also seeks to support the NHS to improve its risk management practices.

160. The key scheme operated by NHSLA is the Clinical Negligence Scheme for Trusts (CNST). CNST provides an indemnity to members and their employees in respect of clinical negligence claims arising from events which occurred on or after 1 April 1995. CNST is often seen as an in-house mutual insurer, with the costs of the scheme being met by membership contributions based on the projected liabilities for a given year.[161]

161. GPs and dentists are not covered by CNST and instead procure their own indemnity cover. For example, the Medical Protection Society is a mutual not-for-profit organisation that offers professional indemnity to approximately 50% of GPs and 70% of dentists in the UK.

162. In 1998 the NHSLA and other interested parties negotiated a pre-action protocol that governs how medical negligence claims are handled and the timeframe within which each element must be addressed e.g. the sharing of medical records between the NHS and the claimant or their representatives. Under the protocol, the NHS must respond to any offer to settle a claim and alternative dispute resolution may also be used.[162] Some evidence provided to the Committee suggests that not all parties are happy with how it operates. The Association of Personal Injury lawyers have told us that:

There is currently limited access to justice for lower value clinical negligence claims. Proposed changes to the pre-action protocol will reduce areas for potential dispute and reduce costs.[163]

In its submission to the Committee, the Department of Health told us:

There is no effective control over pre-issue costs; certain pre-action protocols lead to magnification of these costs and duplication of effort.[164]

163. Although the pre-action protocol for clinical disputes has been amended over time, the Committee takes the view that it is now time for this to be revised, with a view to reducing costs and duplication within the process.

164. As part of its review of all "Arms Length Bodies" (ALB) the Government found that whilst there was a strong case for risk pooling between NHS organisations that there may be potential efficiencies to be gained from the NHSLA. The Government commissioned an "industry review" of the NHSLA that may recommend that some other organisational form may be more appropriate.[165] The Committee has heard in evidence that the NHSLA offers good value for money to the NHS in how it keeps the costs of legal fees down, but accepts the general principle of reviewing all ALBs to secure better value for the tax payer.

165. Deputy NHS Chief Executive David Flory told the Committee that the industry review of the NHSLA would make an initial report "before Easter". With considerable change already underway in the Department of Health, NHS and the ALB sector, the Committee thinks that distracting the NHSLA from its core task of keeping the costs of litigation down for the NHS could be jeopardised by prolonged uncertainty. The Committee believes that the Government is in possession of the industry review report of the NHS Litigation Authority. In order to prevent further uncertainty the Committee suggests that it complete the review process and make its conclusions known as soon as possible.

Claims Management Companies

166. Claims Management Companies (CMCs or "claims farmers") have been a facet of the legal services industry for over ten years, and have been regulated by the Ministry of Justice since 2007. There are over 3000 CMCs operating in the UK and the Ministry of Justice estimates that approximately 1000 companies seek authorisation to enter the market each year.[166] CMCs operate by collecting claims, assessing their contestability and likely value and then either charging a fee to individual personal injury lawyers or to practices for claims that are passed on to them. CMCs sometimes hold auctions for batches of claims of a particular type.

167. Through their advertising activities CMCs could be seen to increase public awareness of the routes to legal redress available. However, the Committee heard in evidence that:

I think it is odious, but they sell their claims on. They don't sell them on the basis of merit. They sell them on the basis of who is on whose panel.[167]

168. This can lead to a situation where CMCs sell claims to the highest bidder and not to the best qualified solicitor. Lord Young of Graffham has been undertaking a review of compensation culture in the UK. In his report he states that:

Such companies then proceed to auction any claim that appears well founded to the solicitor who will pay the most. Quite apart from encouraging litigation in circumstances when it might not otherwise occur, claims go to the solicitor who pays the most, rather than the one most suitable for the client - sometimes even if their practice is far away from their client.[168]

169. CMCs offer immediate cash payments or inducements to persons who wish to make a claim, as highlighted again by Lord Young:

[…]many adverts entice potential claimants with promises of an instant cheque as a non-returnable bonus once their claim is accepted - a high pressure inducement to bring a claim if ever there was one.[169]

Leigh Day and Co., a personal injury law firm, described them to us as "unscrupulous".[170]

170. The NHSLA has stated that the activities of CMCs have directly contributed to the increase in the numbers of claims being brought against the NHS.[171] The NHSLA told us:

A further concern is that uplifts in costs make claims farming an attractive proposition. We believe that this has been a major factor in increasing numbers of new clinical negligence claims by 10% over each of the last two years. The projection for 2010/11 is for an even higher increase.[172]

171. The code of conduct for CMCs states that they must not engage in face to face "cold calling", or in any form of high pressure selling, and must give written information on how you can pursue a claim and the costs involved before a contract is agreed.[173] This does not prohibit advertising in hospitals, on TV and radio, nor does it seem to prohibit "cold calling" by telephone.

172. The Committee is concerned about the activities of Claims Management Companies or "claims farmers"; in particular it is concerned that they encourage people to go straight to litigation rather than use the complaints resolution mechanisms, that the bidding process may not lead to the cases being passed to the advisers best able to resolve the claim, and that they unduly contribute to the rising costs of litigation to the NHS. The Committee therefore proposes that the Government review the regulatory structure within which these businesses operate in order to ensure that patient and taxpayer interests are properly safeguarded.

The proposed civil justice and legal aid reforms

173. Persons pursuing a claim against the NHS often use a conditional fee arrangement (CFA), a commonly used type of 'no win no fee' arrangement where solicitors are not paid if they do not win. As part of CFAs, claimants will typically obtain "After the Event" (ATE) insurance. ATE insurance is designed to cover legal fees in the event that their claim is not successful. On top of their costs, solicitors can also charge an additional "success fee" if they are successful, and these can be up to 100% of the base costs. Success fees and the full cost of ATE premia may at the moment be recovered from a losing defendant (in this case the NHS).

174. Lord Justice Jackson's review of civil litigation costs had two key objectives; to keep the costs of civil litigation down but also maintain access to justice.[174] The report found that whilst CFAs did improve access to justice for cases that are not legally aided that they are "the major contributor to disproportionate costs in civil litigation in England and Wales."[175] Lord Jackson recommended that success fees or ATE premia no longer be recoverable from the defendant (in this case the NHS) and that they instead be negotiated by the claimant and their solicitor and recovered from their settlement.[176] To compensate for this, payments for general damages in personal injury cases should be uplifted by 10% and the success fees recoverable from a claimant's settlement should be capped at 25% of a settlement.[177] The Government's response was to accept these proposals.[178]

175. In November 2010, the Government also began to consult on reform of the legal aid system in England and Wales.[179] The key proposal is to end Legal Help and Representation to support actions for clinical negligence, as CFAs are available in most cases.[180]

176. The Committee also notes that Lord Jackson's review of civil litigation costs also stated that:

Legal aid is still available for some key areas of litigation, in particular clinical negligence [...] It is vital that legal aid remains in these areas. However, the continued tightening of financial eligibility criteria, so as to exclude people who could not possibly afford to litigate, inhibits access to justice in those key areas. In my view any further tightening of the financial eligibility criteria would be unacceptable.[181]

Furthermore, Lord Jackson continues:

I do, however, stress the vital necessity of making no further cutbacks in legal aid availability or eligibility. The legal aid system plays a crucial role in promoting access to justice at proportionate costs in key areas.[182]

177. The Committee also notes that that Action against Medical Accidents has stated that:

The Ministry of Justice is seeking to save £17 million by taking clinical negligence out of scope for legal aid. We would estimate that at least that amount might be saved for the NHS if access to legal aid was increased for all clinical negligence cases, rather than most claimants being forced to use a CFA.[183]

178. The Government response to its consultation states that it accepts the concerns of stakeholders about the high cost of initial disbursements in clinical negligence cases. To mitigate against this, the Government is proposing that ATE premia will be recoverable in clinical negligence cases only. It will also develop an new, more narrowly-drawn "exceptional funding scheme" for cases where failure to fund a legal case would result in a breach of the right to legal aid under the Human Rights Act 1998 or European Union law. The Government does accept however that:

there may be particularly complex cases where […] it may be difficult to find a CFA, but the exceptional funding scheme for out of scope cases will ensure that individual cases of this type continue to receive legal aid.[184]

179. The Committee notes that the Government supports the recoverability of "after the event" insurance premia in clinical negligence case to mitigate against the high costs incurred in the early stages of such cases. The proposal to end the recoverability of success fees from the defendant, in this case from the NHS, remains in place. The Committee is concerned that this could impact negatively on some of the most seriously injured or disabled claimants, both by reducing the value of final settlements (after erosion by fees) and by undermining access to justice.

180. The Committee considers that preservation of access to justice will be the yardstick by which these proposals will be judged by the public and that the Government must take care to gauge its proposals against this measure.

Timely resolution of smaller claims

181. The NHS Redress Act 2006 allows the Secretary of State for Health to establish a scheme to apply to cases involving liabilities in tort arising out of hospital care provided as part of the NHS in England.[185] The scheme would enable the development of a redress package where there has been a less severe, lower monetary value case of clinical negligence proven against the NHS. Under the Act a redress package must include compensation, an explanation of what happened, an apology and a description of action taken to prevent recurrence. The redress scheme would be voluntary and participants would waive the right to future legal action against the NHS on this particular complaint. Despite its successful passage through Parliament in 2006, the regulations to enact the NHS Redress scheme have not been brought into effect in England. In his review of legal costs Lord Justice Jackson has lent his support to implementation of the NHS Redress Act, stating that the scheme:

[...] is a sensible one, which will facilitate the early and economic resolution of lower value clinical negligence claims in respect of hospital treatment [...]The proposed redress scheme is one which will promote access to justice at proportionate cost.[186]

182. The Government has stated that the NHS Redress Act scheme:

[…] missed an opportunity to improve fundamentally the way that clinical negligence claims are handled. It should have focused on improving the fact-finding phase prior to pursuit of a claim in order to facilitate faster resolution of claims and leaving it to the parties concerned, or ultimately the courts, to determine cases not resolved by the fact-finding.[187]

The Department is also working with the Ministry of Justice on another of Lord Young's recommendation to explore whether the Road Traffic Accident scheme could be extended to low value clinical negligence claims.[188]

183. The Ministry of Justice Road Traffic Accident (RTA) Scheme came into effect on 1 April 2010 and applies to persons injured in RTAs where claims are likely to be valued between £1000 and £10,000. The scheme aims to compensate people quickly using an online portal and "front-loads" solicitors fees, ensuring that sufficient work is undertaken early in the process to enable early resolution, ideally through negotiation.

184. The NHSLA has been tasked by the Government with development of the proposed voluntary scheme, under the umbrella of CNST.[189] The Committee notes that the NHSLA estimates that approximately 3000 claims will be processed through this system, nearly half of the total amount of claims received by it in 2009-10.[190]

185. The Medical Protection Society, whilst endorsing the principle of speedy resolution of claims has concerns about the extension of the RTA scheme:

It is important to note that a low value clinical negligence claim can be as complex as a high value claim. We appreciate that a claimant can only establish that he or she has a claim with the assistance of a lawyer and that there must be costs associated with this. Those costs would be considerably more than the RTA scheme currently allows. [191]

186. The Committee welcomes the development of a rapid resolution process for lower value clinical negligence claims against the NHS, as this will speed up admissions of liability and access to redress for patients, and reduce costs for the NHS. The Committee would like to see evidence of how the complexity of low monetary value claims will be managed whilst costs are reduced.

153   Health Committee, Patient Safety, Sixth Report of Session 2008-09, HC 151 Back

154   Bolitho v City and Hackney Health Authority [1998] A.C. 232, Bolam v. Friern Hospital Management Committee [1957] 1 W.L.R. 583 Back

155   Ev 90 Back

156   Ev 162 Back

157   Although some of this is enshrined in statute e.g. the Mental Capacity Act, most consent to treatment law has been established by case law. Back

158   Scottish Government, No Fault Compensation Group Report, February 2011 Back

159   Ev 85  Back

160   The National Health Service Litigation Authority, NHSLA Framework Document Back

161   Ibid. Back

162   Clinical Disputes Forum, Pre-Action Protocol for the Resolution of Clinical Disputes, December 1998 Back

163   Ev 125 Back

164   Ev 82 Back

165   Department of Health, Liberating the NHS: Report of the arms-length bodies review, July 2010  Back

166   Ministry of Justice, Claims management regulation, July 2009  Back

167   Q 146 Back

168   Common Sense, Common Safety, A report by Lord Young of Graffham to the Prime Minister, October 2010 Back

169   Ibid.  Back

170   Ev 165 Back

171   Ev 91 Back

172   Ibid.  Back

173   Ibid. Back

174   Right Honourable Lord Justice Jackson, Review of Civil Litigation Costs; Final Report, December 2009 Back

175   Ibid. Back

176   Ibid. Back

177   Ibid. Back

178   Ibid. Back

179   Ministry of Justice, Proposals for the reform of legal aid in England and Wales. Cm 7967, November 2010 Back

180   Ibid. Back

181   Right Honourable Lord Justice Jackson, Review of Civil Litigation Costs; Final Report, December 2009 Back

182   Ibid.  Back

183   Ev 152 Back

184   Ministry of Justice, Legal Aid Reform in England and Wales; the Government Response, Cm 8072, June 2011, para. 37 Back

185   Department of Health, NHS Redress, a statement of policy, 2005  Back

186   Right Honourable Lord Justice Jackson, Review of Civil Litigation Costs; Final Report, December 2009 Back

187   Ev 83 Back

188   Ibid. Back

189   Ev 92 Back

190   NHS Litigation Authority, NHSLA report and Accounts 2009-10, June 2010 Back

191   CAL 12 Back

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Prepared 28 June 2011