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Compensation Culture

  154 Downloads   |   11 Pages 2,682 Words   |   Published Date: 19/11/2015

To what extent is there now a so-called 'compensation culture' in negligence claims in the UK and if so, how are the courts reacting to this phenomenon? 

 

 

Introduction:

The debate whether U.K is under the control of compensation culture has increased in the recent years. It is also believed that it has led to litigation crisis in the country. In 2003, a commissioned report by the government pointed out to this fact that the term “compensation culture” has not been appropriately defined anywhere, but still major concerns are being raised with regard to it all across the country. It is difficult to define what exactly compensation culture is. In simple language, it can be defined as when one person sues a second person, on account of his suffering due to something done by that second person and which could be avoided if the second person would have been little more cautious while doing that thing. But, nothing seems to be wrong with this definition, as it forms the basis of Law of negligence that a victim must be compensated for his loss due to another person.So, why so much concern regarding compensation culture? It is because compensation culture becomes an evil when it is presumed that:

  1. Someone is definitely at fault, for every damage/injury.
  2. Someone has to be blamed, for every accident.
  3. There is some person to pay compensation, every time and for every claim.

 

 

Is Compensation Culture Actually a Problem?

The answer to this question depends on as to what actually is leading to this problem and to whom this question is asked. The ‘compensation culture’ means it has encouraged people to engage in the unreasonable and increased wish for getting compensation, whenever anything goes wrong. Litigation crisis means such a change in the attitude of people has led to the increased unnecessary formal disputes. Various kinds of evidence can be used to assert or deny such debate.

There are various problems associated with the compensation culture. Either the number of claims is quite high or the fees of the lawyer are quite expensive or at an other time payout of compensation is higher. Apart from all these, another major point is the type of claims involved in this debate.  A report submitted by the Institute of Actuaries, in 2002 revealed that compensation culture has increased at an alarming rate in the U.K.  As per this report, the total cost of such claims was about £11 billion a year or it can be said around 1 per cent of GDP. However, to reach at some conclusion based on this report would be too early unless a research is made about the other countries spending on the same.

 

In 2004, it was submitted by the Task Force that cost of  only the tort claims, which were  published in 2002 for the expenditure of the UK (at 0.5% of GDP) was much lower as compared to other top 10 industrialized countries like, Australia (1.0%), Canada (0.7%), Germany (1.2%) and the USA (1.8%). Moreover, the number of claims of personal injury, which were registered in the U.K. in the recent years, which were not found to be increasing also support this report. It was, thus, asserted by The Task Force that the actual problem lay somewhere else. It was found that it was the advertisements and the stories covered by the media, which created a myth among the general public that a good amount of money could be assessed easily through compensation claims. Since there were no statistical data to prove the same, it was concluded by  The Task Force that the U.K. is under the control of compensation culture is only a myth and prompted many people to accept it as a reality and engage in fake claims. However, not excessive litigation, but it is the fear of excessive litigation, which has led to serious social consequences. For instance, in an attempt to reduce the excessive litigation, protective medical practices, denial of students by the schools for participation in the outdoor pursuits are examples of such serious consequences.

How far the claims for personal injury have increased?

Such types of claims are the main focus of the debate about compensation culture in the U.K.  in order to determine, if the number of such claims have increased in reality depends on the source, from where the data is to be collected. The data provided by the judicial statistics can’t prove to be of much help, as it includes only the cases, for which proceeding have been initiated and moreover, it does not provide data of the personal injury claims separately. Thus, it was the data provided by the Compensation Recovery Unit (CRU), which was relied upon by the Task Force, according to which the number of accident claims fell by 10% in the year 2003/4 in comparison to the last two preceding years. However, another alternative source provided that there was no regular or consistent trend seen in U.K. with regard to personal injury claims, although there was a common consent that the cost of such claims definitely increased.

Thus, the data collected seems to be little incomplete and ambiguous. But, even if it is presumed that a correct data as to the number of claims is found, it would be difficult to comment as to how many can be regarded as “too many”. Compensation culture seems to be a wrong term associated with the awareness of people to claim for compensation for the loss suffered by them. Every claim cannot be criticized as a vexatious claim. The two major points associated with such claims are:  substantial justification is given by the lawyers that the majority of the claimants in the U.K. does not go to the courts, so that indicates the absence of the compensation culture in the U.K.  The second major point is that whether the legitimate and rightful claims also form part of this debate. The stories presented by the media, however, consists mainly of the stories, where public is shown to be anxious with respect to downfall  in the moral and social values, in which lawyers are shown as greedy attracting clients and convincing them to claim for trivial issues. Thus, looking at this scenario, the legal crisis should include only the fake and unreasonable claims made by the people and not the rightful claims. According to a survey, around 70% of the personal injury claims were found to be successful, thus, indicating that the majority of such cases at an average, are genuine.

 

Increased cost:

When there is no increment in the new cases of personal injury or the fraudulent claims, then certainly another point of concern in the changing trends is of the increased cost or compensation claimed by the claimants in comparison to the legal reasonable share. In certain claims like that of  clinical negligence, there has been a sharp rise in the number of claims and their cost. The cost of settlement of the injury claims of the industries has also increased considerably. It is further expected that the costs of claims related to asbestos will also increase in the coming future. Nowadays,  the calculation made for the compensation for the injury or death is more favorable to the claimants and is very high.

Root cause of the problem:

Irrespective of the fact, what is the actual result of the fake claims, people in general, find themselves as unsafe and are afraid of being sued unfairly. This urban myth results in  a behavior, which is socially as well as financially damaging. Thus, huge sums are spent by big organizations on adopting safety measures rather than spending on creativity or innovation. Recent analysis provides the causes of  this kind of increasingly behavior. It is mainly due to the exaggerations of the stories by the media.  Apart from that the aggressive approach adopted by some of the management companies demanding claim and the conditional fee agreements has resulted in the adoption of more safety measures by the public sector and the businesses.

How the courts are reacting to this phenomenon?

The kinds of claims have considerably increased in the past 30 years. It is because of the various new laws made and recognized by the judiciary. The majority of the law making decisions of the judiciary is based on the requirements of a claimant without taking into account its effect the defendant. However, this does not imply that the courts are completely unconcerned with respect to the adverse effects of the expanded liability system for the public. Rather much alertness and awareness has been shown by the senior judiciary while interpreting such laws to avoid the dangers of providing the over or under compensations. With regard to the debate of compensation culture, judges have used their power of intuition or common sense to pronounce judgments in such claims and cases along with the empirical evidence. In a few cases, the judges have tried to convey the message to the claimants of the fraudulent cases.

In a case, Gorringe v Calderdale MBC [2004] UKHL 15 at [2],  it was warned by the Justice Lord Steyn that there should be no contribution of the courts in the formation of such a society, which is entirely dependent on the litigation and which runs with an illusion that there is a remedy for every misfortune.

In another case, Tomlinson v Congleton BC,  compensation for an injury caused to an adult trespasser, while diving into the lake was denied and emphasis was made on the individual’s   responsibility.

 

Solution to the problem:

Certain structural changes are the demand of the hour. For instance, the ways and the methods of charging by the advocates and the activities of the claim management companies should be checked. Fake advertisements in the media regarding easy money through compensation claims should not only be discouraged but should also be barred. Rehabilitation opportunities should be increased for the accident victims.

Conclusion:

Through advertisements on radio and television, an awareness regarding the claiming of compensation, might have led people to believe that huge sums of money can be claimed and received for an injury suffered. However, this is not the situation in reality in the U.K. more appropriate awareness and education is required, to educate people making silly decisions about getting involved in trivial injury claims on the basis of such advertisements. Undoubtedly, there has been a rise in the number of some accident claims and the cost of compensation. But, there is no reliable evidence as to the increase in the number of vexatious or fraudulent claims and that the law of torts has been flooded with an increase in the personal injury claims. The analysis of the situation of the Task Force seems to be reasonable and appropriate that it is not the excessive legislation, rather the fear of excessive legislation, which has led to the legal crisis. It is more due to the fear of the powerful defendants along with their insurers, which has increased the litigation rather than the blame-claim game, as presented by the propagators of the compensation culture. Thus, by no means, it can be said that there exists a compensation culture in the U.K.  A legislative input is required in the law of torts of the U.K. and a bill has also been introduced for the same in the U.K.  The scope as well as the reliability of the bill will be taken into account during the evaluation of the bill. Any loose talk or rumors about the existence of a compensation culture in the U.K. may help the media to sell its advertisements, but one has to be aware and cautious while interpreting such advertisements and basing his decisions on such advertisements with regard to personal injury negligent claims.

 

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