Media reports paint a confused picture of compensation industry in UK. Some studies provide evidence of an increased willingness to sue for compensation however slight supposed injury, with diminishing consequences for society, public services and industry. Others reject claims of a widespread compensation culture as tabloid myth.
In recent years there has been a rise in number of people claiming accident compensation; question is whether this is a positive or negative trend and what likely outcomes are. Many see upward trend as a contributing factor in rise in insurance premiums, costing hospitals millions of pounds and contributing to an overall change in society. On other hand, as a result of these changes, there has been an increase in level of awareness of issues such as health and safety and employee rights. This has forced many companies and public places to raise their standards and provide safe and comfortable working environments for their employees.
What has caused this rise?
It is thought that one trigger for rise in number of people claiming compensation was lifting of laws banning solicitors from advertising. This made it easier for legal firms to seek out potential claimants and develop ‘class actions’ involving large groups of people. Another explanation for rise is introduction of ‘Conditional Fee Arrangements’ in 1995 which allowed solicitors to take on cases on a ‘no win, no fee’ basis, so claimant could take on a case knowing that if case was lost, no legal fees need be payable. To cover themselves against risk of losing or becoming liable for defendant’s legal costs, lawyers could take out ‘after event’ (ATE) insurance. These policies also offered cover for expenses incurred by solicitors acting on behalf of claimants.
A significant change in law introduced in 1995 was that in event of winning case, rather than recovering legal costs from claimant’s damages, law allowed that both insurance premium and success fee could be recovered from defendant’s solicitors.
Rising compensation claims – what are costs?
There are those who would argue that ‘compensation culture’ is causing an overall change in patterns of behaviour and expectations of society. Whereas in past one might resolve problems and differences by mediation or negotiation, now a minor issue is likely to be referred to courts to settle disputes. Some feel that traditional risks encountered in our daily lives, like uneven pavements and slippery floors, are now overhung by legal and financial risks. An example of how this risk has potentially had an impact upon society is with Queen Elizabeth II’s Golden Jubilee celebrations in 2002. Many believe that one reason why there were fewer street parties than there were for her Silver Jubilee in 1977 was because borough councils, town halls and public sector providers were fearful of potential litigation claims caused by an accident at such an event.
The cost to employers of claims from existing employees, and unknown risk of future employees, has increased considerably over last five years. This unquantifiable risk may have given rise to volatility of share values and depressed share trading. In addition to this more managerial time is taken up dealing with claims.
It is evident that consumers are all paying for increase in compensation claims through higher insurance premiums. For example, employers’ liability insurance premiums have recently risen by 20% for one third of firms.
How can this trend benefit society? To explore whether rising numbers of compensation claims has brought benefits to society, we will focus on changes that have taken place in workplace. Employers have a ‘duty of care’ to their employees and must take steps to ensure they are not exposed to potential dangers and risks whilst at work. They must meet minimum health and safety standards to prevent their employees becoming ill or getting injured in workplace. Most employees would argue that anyone who is seriously injured at work deserves compensation. To avoid facing claims for compensation many companies have no doubt considerably improved their safety record in recent years and have set up health and safety at work committees or working groups. Trade unions have ensured that such groups are set up.
Claims for compensation have alerted employers to improve their safety record and monitor claims resulting from injury. The widespread publicity over personal injury compensation has caused people to spot dangers in workplace, where previously safety issues did not hold much significance.
The imposition of liability or threat of it seems to have served as an incentive to safe conduct and proper care, and statistics bear a direct correlation to this. According The Health and Safety Executive, number of workers fatally injured in 2002/03 was 226, a decrease of 10% from 2001/02. The trend in both number and rate of fatal injury was generally downwards in 1990’s, and rate is currently a third of that recorded in 1981. On other hand, number of reported major injuries to employees rose by 1.5% in 2002/03 from 2001/02, but it is thought this rise may reflect changes in level of reporting.