Compensation culture has been a frequently studied concept on this blog. As even Lord Young has been forced to admit, the concept is a pretty flakey one. He walked the compensation culture not real, fear of compensation culture real line. Compensation culture real or imagined is a rather nebulous idea but if we take Compensation Culture to mean a massive increase in compensation claims of poor quality then the evidence does not bear out its existence. The Government’s promise to ban referral fees in personal injury cases has banged the compensation culture drum again (remember: it’s not a real drum it’s a perceived drum) and FactCheck have posted a sobre blog on the subject which, somewhat unusually for the blogosphere, is supportive of the Government. It deserves to be read, but also to be placed in context.
I should state from the outset that I do not buy the idea that if there is a perception of Compensation Culture it is as bad as a “real” Compensation Culture. I accept that perceiving harm can cause harm although interestingly – following recent research – one can doubt the perception that fear of litigation significantly inhibits the behaviour of public authorities (see this post on how public authorities appear to respond proportionately to litigation risk).
More fundamentally, the difference between the fear of something not real and the actuality of the thing is profound. A fear of crime, or disease or nuclear war, or environmental catastrophe is quite different from the actuality of a world in the mould of Mad Max or The Road. Call me old fashioned but I’d also like my politicians to speak responsibly and maturely of the risks posed by social problems. Old-fashioned and naive. I know. But those who talk up compensation culture are, generally I think, alongside the toe-curling TV advertising for claimants, the principal causes of the problem.
The press are often sinners in chief. Naughty lawyers. Feckless claimants. These make good stories. Journalists appear to lap up compensation culture press releases and publish half-baked posturing by interested parties. One example: I challenged claims in the Telegraph that compensation claims were “ruining” education claims. It seems they got their basic numbers wrong on the number of claims but in any event for every £1,000 spent on education we spend a whopping 20 pence (I estimate) on compensating injured school children and paying the legal accosts associated with negligence claims. It’s compensation culture gone minute. My (eight year old) daughter saw through this when her school banned conkers “because of the risk”. Her response was: how come the boys get to ride quad-bikes on their school trip?
Inspite of this general perspective, there is one area where claims are growing and as a result FactCheck has affirmed in broad terms the Government’s position:
“With the government moving to bring about the end of the practice of referral fees, Britain’s alleged compensation culture has been in the news again. Full Fact had a closer look at some [of] the figures being put forward by the Justice Minister.”
The number of people with RTA injuries has gone down and the number of claims has gone up (significantly). They conclude in particular:
“This suggests a higher proportion of those injured will seek compensation, although that stats on their own give no indication of the influence of referral fees on the trend.”
I don’t disagree with this assertion (I haven’t checked the data or calculations but it looks and feels broadly correct). There are a few things worth pointing out however. Firstly, this is a phenomenon confined, it seems, to personal injury claims. Furthermore, research in the past has tended to suggest that the number of people suffering actionable personal injury who do not claim is probably quite high. So a growth in claims may reflect an underlying need being met. It may not be a compensation culture but an access to justice culture.
I do not read FactCheck as supporting the Government’s claims about litigation culture generally, but there is a risk it will be interpreted in this broad way. It is a not insignificant point. The Government has made repeated and unsupported claims about litigation culture across the piece as a pretext for legal aid cuts (see here for data in family cases for instance). (It would have cut anyway of course, but without the political cover provided by the Phantom Menace that is Compensation Culture. Obfuscation may save them some votes).
Secondly, there is little data available in trends on the size of these claims but that which is available tends to suggest that it is a growth in very small claims that is strong. In public policy terms, this highlights a vital problem which reform of civil justice generally and the Jackson reforms, and referral fees in particular fail to grasp adequately. Public debate and policy tends to treat all personal injury claims as the same and can be, to my mind at least, very different.
What do I mean? The personal injury market, built around CFAs, is probably already somewhat skewed towards servicing quick, easy and small claims. The cases where there has been more significant injury or injustice and where the resources of the justice system should be directed toward investigating more serious wrongdoing are harder to fund on CFAs. Importantly, these cases are more likely to raise and protect against significant safety concerns. The Jackson reforms will probably make these cases harder to bring. CFAs were brought in without any serious monitoring of their effects on the types of claim and I have seen nothing to show that the error is to be corrected post-Jackson. Bigger, more difficult and more serious cases are likely to get (somewhat, not totally) squeezed out by the system.
To my mind, we want a system which encourages the bigger, more serious cases to be taken – when they have merits – and we want a system that encourages those cases to be taken by the better firms. An interesting footnote on the referral fee debate is that in the US – to a degree – the passage of such cases is achieved by referral fees between lawyers. Firms used to small personal injury firms receive, let’s imagine, a medical negligence case, that they think they could run – here they might be more inclined to do this with some assistance from counsel. They can try it, or they can pass it on to a more specialised firm for a slice of the damages (they can’t do this in the UK currently but the introduction of damage-based contingency fees in litigation might make it possible). What should they do? After a referral fee ban, what would they be likely to do?