Personal view: Claims culture

13/12/2004

David Hartley asks if the activities of some players in the personal injury industry have made it more difficult for those with legitimate claims to seek compensation.

Industry research from Datamonitor published yesterday has shown a decline in the number of personal injury cases being brought in the UK the third such drop in successive years. How can this be the case in our increasingly litigious and compensation-conscious society?

With the death of companies such as Accident Group, has natural order been restored to the claims industry, or does the drop in claims reflect a more worrying trend away from legal advice for personal injuries altogether?

Research from Accident Line, the Law Society’s personal injury referral and insurance service, suggests that both situations may hold true. A third of those injured in accidents where the blame was entirely the fault of a third party are turning their backs on the safeguards that were introduced to deliver justice when legal aid was withdrawn for personal injury cases in 2000.

The main reason is overwhelming cynicism about claims management companies, whose aggressive antics are cited as the principal reason for inaction by 70 per cent of those surveyed. More worrying is the conclusion we draw that these claims managers have not only tainted their own pool but have created barriers between those with legitimate claims and the personal injury sector as a whole.

Much as a cowboy builder dents the credibility of his entire profession, so have these claims management companies dented confidence in the legal system, the reputation of the judiciary and public bodies across the land. But unlike cowboy builders, who are constantly on the run from trading standards inspectors, the Department of Constitutional Affairs (DCA) recently bought the claims managers an unexpected round in the last-chance saloon, by giving them an opportunity to regulate themselves. To understand the damage claims managers have done, we should look at the ways in which they work.

With traditional high street law practices, the emphasis is on personal service with a locally accessible specialist. The Law Society’s service, Accident Line, simply provides a freephone facility that matches callers to a personal injury lawyer specialising in their area. The relationship is between the lawyer and the client, and the lawyer is quick to rid any spurious claimant of a grand design. Transparency is key, and costs and insurance options are discussed before anything else. Solicitors do not take commissions unless they have their clients’ written permission and must advise on whether a particular policy is appropriate to the clients’ needs.

With ÃâÅ#8220;claims farmersÃâ? marketing firms that aggregate potential claimants and sell them to law firms the relationship is not between the local lawyer and their client but between the claimant, the person who has been stopped, or ÃâÅ#8220;farmedÃâ?, on the high street, and a marketing firm that depends more on commissions driven by bulk cases than on doing an expert job for a client.

This relationship is neither regulated nor approved and offers no redress or compensation in the event of business failure. Insurance premiums sold by claims management firms have consistently been found by the courts to be overpriced, and even in winning cases have often been greater than the awards, leaving claimants with a shortfall to make up from their own pockets. Clients are swept up through over-promising mass advertising and techniques such as door-stepping. There is often inadequate screening of cases. The ÃâÅ#8220;farmerÃâ? simply builds a book of half-baked tick-box cases that he then tries to sell on to obliging law firms for a bulk cost. The handling and sifting of the cases generate costs that quickly translate into higher insurance premiums for us all as insurance companies struggle to cope with the onslaught of frequently spurious claims.

The emphasis is on the volume and not the viability of cases. Lawyers seldom meet claimants, let alone offer specialised advice. Instead, it has often been poorly trained paralegals who maintain contact by phone and bombard public authorities and others with mass-produced letters and computer-prepared documentation.

Instead of offering continuity to this spurious sector, it is time for Lord Falconer, the lord chancellor, to recognise its true nature and hold it open to much greater transparency.

It seems wrong that directors of defunct claims farmers, some of whom are subject to DTI investigations, should be allowed to regulate themselves. When faced with the prospect of a ban on cold calling, many of the claims managers still in operation today simply walked away from the initial attempts to set up a self-regulatory body. A most unlikely start for voluntary regulation.

Other sectors in the legal world have been quicker than the DCA to react to the dangerous consequences of the bogus claims this industry has produced. Judges are alert to spurious claims and resent being regarded as soft touches. Local authorities are beginning to show more gumption and less inclination to settle. Public liability claims are falling faster than all other types of claim as councils realise that for every erroneous claim they accept they attract two more.

Claims managers have forced the personal injury sector to look in on itself and to work harder to champion the virtues of specialised, professional advice. There are still many claims managers today, and I hope that the DCA will soon do the right thing.

In the meantime, having debunked the compensation culture myth and having exposed the claims farmers who created it, we must now move forward to a health and safety culture in which companies and authorities that fall below modern standards of due care and attention can be held properly accountable.

People responsible for health and safety should be encouraged to improve their performance with the ultimate objective of making the need for litigation redundant. Legitimate claimants should be encouraged to seek compensation for damages when the financial rewards reflect genuine pain, suffering and loss and not the mythical goldmine.

David Hartley is director of Accident Line, the Law Society’s personal injury referral and insurance service

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