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.