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A Literature on the ‘Compensation Culture’ Litigation Crisis

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Date added: 17-06-26

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Literature Review It has been widely discussed that Britain is in the grip of a ‘compensation culture’ and, thus, a ‘litigation crisis’ was said to be a problem. Worries of this kind can be found in newspapers, in official reports, political speeches, legislative debate, and judicial decisions. Therefore, in 2004 Stephen Byers protested about the opposing effects of 'excessive litigiousness' on both the economy and the national psyche,[1] while David Davis the shadow Home Secretary also said that if a conservative government were to be elected it would cut out ‘the cancer of litigation’.[2] This piece aims to discuss the reforms proposed in accordance to the compensation culture and the government response to that. Thorough research was done by Lord Young that sets out measures which should be considered to bring effective reforms. Lord Justice Jackson also reviewed in his report matters regarding civil litigation which the government has reacted to. However, very less investigation has been carried out in relation to describe what the ‘claim culture’ actually is and considering if it exists is a whole different story.[3] This article reviews some of the recent evidence. The initial point to discuss here is that is there really a problem. The answer to this question is highly doubtful, depending as it does on what exactly is thought to establish the ‘problem’, as well as who is asked. The development of a ‘compensation culture’ infers an enlarged and irrational willingness to pursue legal redress when things go wrong,7 whilst a ‘litigation crisis’ suggests that this change in social attitudes has been interpreted into unwanted points of official debating. It seems that the label of the problem has picked up in its importance due to the idea that number of claims showed incline over the years. In 2002, a report by the Institute of Actuaries said that there was an increasing compensation culture, guessing the total cost of claims at about £10 billion a year or 1 per cent of GDP. This is a very big sum of money though it signifies a wide diversity of claims as well as their related administrative costs and expenses. The 'real' problem was said to be a perception. Too many of us have been convinced by media stories and the greedy advertising of certain claims management companies that 'large sums of money are easily accessible'.[4]According to the Task Force there is no accurately completed basis for such views or for declaring that Britain is suffering from a 'have a go culture'. However some reports absurdly decided that an 'urban myth' declaring its existence has been widely accepted as the reality which has motivated a minority to press hypothetical claims that lack value or are false.[5] In these impoverished times to save on costs, it is vital that the Young review studies the British Regulation Task Force report. There are a lot of similarities in the Young report and the BRTF report. The BRTF decided that the compensation culture was a myth however, it influences other acting bodies to deliberate that it exists and is a grave problem. Lord Young has previously pointed out the illogicality of many myths and here Lord Young highlights what are clearly misunderstandings of the law. For example, “Ridiculous compensation culture claims and pay-outs burden on tourist attractions” [6] Lord Young specifies that he means to examine the litigation procedure inpersonal injury compensation claims in his report. The strengths of his report are that it tries to uncover the reality that’s been hidden behind the mask of exaggerations. It also suggests paramount reforms to improve the status of law governing compensation culture. His recommendations focus largely on how to regulate the abundant amount of pay-outs by government to regulate the feud of compensation culture. Where there are some extremely good points in his report it is unfortunate that the element of objectivity regarding references and approach is absent.[7] It can be seen from the heading ‘Compensation Culture’ that the initial point of the research is biased and perceptive. However, the new claims procedure in road traffic accident cases following this report is bedding in but seems already to be having an intensely reducing effect on time taken and costs incurred.[8] The statistics can be seen to assess the delicacy of the issue. The rise in the number of claims is the reason why the blame culture is in question. Table showing number of claims reported (CRU)
Dates Clinical Negligence Employer Motor Other Public Liability not known Total
2013/2014 18,499 105,291 772,843 14,467 103,578 2,123 1,016,801
2012/2013 16,006 91,115 818,334 17,695 102,984 2,175 1,048,309
2011/2012 13,517 87,350 828,489 4,435 104,863 2,496 1,041,150
2010/2011 13,022 81,470 790,999 3,855 94,872 3,163 987,381
It can clearly bee seen that the total number of claims has stabilised over the last few years. However, even the road accident claims have been showing a decline from 2011. It has established by various authors and it can be seen from the stable that the ratio and number of such claims fluctuate time to time. However, few things can be seen clearly. The total number of claims is less than the past two years which suggests that the recommendations have an impact on regulating the law nevertheless one can still argue that the year 2014 is not finished yet. So the number of claims will increase because future claims of this year still have to be recorded. There has been a recent extensive review of civil litigation by Jackson LJ. The government’s response to that review was positive. Jackson makes several important recommendations and which are listed below,[9] • Consumers should no longer be able to recover the cost of After the Event (ATE) insurance • There should be ban on referral fees whether paid in cash or by discounted or free legal services. • Success fees should come out of client compensations. Impact: Up to 25% reduction in damages in addition to the deductions due to non-recovery of any ATE premiums. • There should be fixed costs for fast track personal injury claims. • There should be green light for contingency fees. • Not having to pay defendants’ costs in lost cases. • There should be a 10% increase in general damages. His recommendations were very considerate of the law and problems in the society. The government published its response and conclusion in March 2011 following the proposals in Lord Jackson’s report.[10] The major issue to assess was the ‘no win no fee agenda’. The government intended to:
  1. Abolish the general recoverability of the CFA success fee from the losing side.
  2. Abolish the general recoverability of after the event insurance premiums
  3. Introduce the package of associated measures set out by Lord Justice Jackson.
It can be seen clearly that a lot of emphasis has given to the law professional fees and insurers meaning that these are the two main bodies that enhance the view of compensation culture. Firstly, it’s the law professionals such as lawyers and barristers who in order to make their money support the idea of high level of claims. Secondly, the insurance companies bag some money for their own benefit and use the law for their own advantage. As lee McIlwaine says, “If we must follow this folly the insurance industry ought to agree a strict regulated pricing regime so that additional profits attained as a consequence of any reduction of rights were returned to the community by way of reduced premiums or indeed injury prevention and treatment. Any taker?” There are two other deliberations associated with the numbers issue. First, claimant lawyers often point out with substantial explanation that countless majorities of injured persons never use the law and that it is exactly the absence of a compensation culture that describes our liability organization. A second point is whether genuine, well-founded claims should be calculated as part of the 'problem'. Another point is that it is not easy to find an appropriate substitution measure. For example a 1998 study of legally assisted personal injury cases stated a success amount of 63% with more than 80% of road traffic applicants recovering compensation.[11] This suggests that the great majority of injury claims are well-founded and honest. However, since all the cases in the example must have approved by Legal Aid Board's 'merits' test in order to be capable for public funding in the first place, no such supposition can finally be made? It is very clear that lawyers are doubtful to want to act for clients unless their chances of success are good. Indeed, the 'problem' we started with seems to have come down to this; Effectively they say that whilst some liability stories may be media overstatements or even mythical, business and the public sector have been put on the self-justifying side by the introduction of conditional fee agreements (CFAs) and the strong tactics of some claims management companies and solicitors' practices. So it bring us to say that First that only solid cases are likely to be taken up which, while hardly surprising from the viewpoint of claimant lawyers,[12] falls well short of approving the claim sometimes made by politicians that the replacement of legal aid by conditional fees has made justice available to all. Equally, there have been times on which courts have simply wanted to send a powerful note to possible claimants and the legal profession. Thus in Gorringe v Calderdale[13] , Lord Steyn warned that “the courts must not contribute to the creation of a society bent on litigation, which is premised on the illusion that that for every misfortune there is a remedy”.[14] CONCLUSIONS In some jurisdictions, the number of injury claims that have been made seem to act as a yardstick to measure the moral state of the country. The question here is that: Are we less tolerant and more litigious? Regrettably, the accessible statistics do not deliver a suitably reliable answer, though on balance it looks as if the British continue to be a nation of 'lumpers' rather than litigators[15]. It can be concluded from the discussion above that there is no specific proof of the existence of a claim culture in Britain. The statistics show that there is a drop in the registered claim in the past few years. It seems like that by making these claims, lawyers and insurance companies are most benefited. It’s clear that the some of the legal bodies have done an impressing job in proposing reforms which will bring a great change and according to the statistics they started to show some effect. So hence concluding that compensation culture has been referred to a myth is most likely a better definition of its status. Statements like ‘compensation culture' without any argument helps to sell the newspapers that signify to hate it most however, we should be careful before we allow it to command the legislative policy-making agenda.
[1] ‘Curb claims culture, says Byers', The Guardian, 10 March 2004. [2] ‘Victim Nation’, The Spectator, 21 August 2004. ' Too many rights' seems to be the central thesis. [3] Office of Fair Trading, An analysis of current problems in the UK liability insurance market, June 2003, at para 10.4. [4] W. Haltom and M. McCann, Distorting the Law. Politics, Media, and the Litigation Crisis [5] Foreword titled 'Compensation Culture: Exploding the Urban Myth'. [6] http://www.dailymail.co.uk/news/article-1268723/Ridiculous-compensation-culture-claims-pay-outs-burden-tourist-attractions.html [7] http://www.13kbw.co.uk/articles/young-report.pdf [8] Cru statistics [9] http://www.judiciary.gov.uk/NR/rdonlyres/8EB9F3F3-9C4A-4139-8A93-56F09672EB6A/0/jacksonfinalreport140110.pdf [10] Global Competition Litigation Review, implementing of Lord Jackson’s recommendations- the Government response. [11] Pleasence, n 24 at 11-13. [12] The CABx report, para 9, observes that CFAs 'create perverse incentives for the legal profession [13] Gorringe v calderrdale [14] [2004] UKHL 15 at [2]. [15] Lee McIlwaine , Tort Reform and the Compensation Culture
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