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Experts

Has compensation culture bitten the dust?

If a ‘compensation culture’ ever existed, the underlying data now in the public domain suggests this to be waning - perceptibly and steadily.

As recent statistics evidence a continued fall in both employers’ and public liability claim notifications, alongside a reduction in the number of personal injury claims issued by the courts, we examine whether this signals the end of the UK’s so called “compensation culture”.

Background

The phrase “compensation culture” is believed to have been first coined during the Labour Government of Tony Blair and is best described as a pejorative term, implying that within society there exists a significant number of claims for compensation for torts which are unjustified, frivolous or fraudulent and that those who seek compensation should be criticised.

Whether this “compensation culture” existed in the first place remains hotly contested, with (broadly speaking), claimant lawyers on one side of the divide and compensators on the other.

That the phrase became embedded into the nation’s consciousness is, however, undisputed and perhaps reached its zenith with the media reporting of the US case of Lieback v McDonald’s [1992] and a small number of similar claims brought in the UK. The plaintiff in Lieback pursued a court action after she spilt and was then scalded by coffee purchased from a branch of McDonald’s. The case was compromised following a jury award of damages, though one lasting legacy of the litigation was the introduction of warnings, seen on the outside of beverage containers today; “Caution: contents hot”. The actions brought in the UK failed -for want of establishing negligence.

Newspaper reports largely glossed over the facts that the plaintiff Lieback suffered severe scalding injuries consequent to a coffee served at a pre-set and arguably dangerous temperature of between 180° and 190°. Media reporting on this and other high-profile litigation was noted by the former Master of the Rolls, Lord Dyson, in his 2013 Holdsworth Club Lecture (Compensation Culture: Fact or Fantasy?). as creating a “false perception”.

Against the backdrop of tabloid fury and to counter criticism of the UK having developed an “American-style’’ compensation culture, the UK Government introduced the Compensation Act of 2006 which sought to safeguard individuals and volunteers undertaking “desirable activities”, in addition to regulating the activities of Claims Management Companies (CMCs).

Outside a handful of fines issued to a small number of directors of CMCs, the legislation did very little at first to stem the tide of “cold calling” - inviting the public to pursue compensation claims for accidents which, for the most part, had not happened. Driven principally by CMC activity, the claims market was also swamped with a tsunami of (largely stale), claims for noise induced hearing loss (NIHL) between 2014 and 2016 which peaked at an estimated 125,000 claim notifications in one year.

Claims volumes

Data released by the Department of Work and Pensions about all personal injury claims registered by compensators via the CRU reveals that the Compensation Act did not have the immediate desired impact of reducing claims volumes.

DWP data reveals that the number of employers’ and public liability claims actually increased in the years following the Compensation Act, from 87,000 and 104,000 respectively in 2011/2012 to 105,000 and 103,000 in 2013/2014. However, since the peak seen in 2013/2014, there have been year on year reductions and a significant fall in both EL and PL claim notifications.

The latest data for the period April 2021 to March 2022 showed a 58 % fall in EL (now 43,000 claims) and a 49 % fall in public liability claims (now 52,000 claims) respectively, compared to 2013/2014 levels. The decline is not just confined to claims notifications - HMCTS data shows that 2021 saw a reduction in personal injury claims issued by the courts, dropping by almost 25% compared to the pre-pandemic level in 2019. Data released for the first three months of 2022 indicates that this year the number of personal injury claims issued by the courts will be even lower.

Personal injury claims following road traffic accidents demonstrate an even steeper decline with 387,000 claims registered in 2021/22 compared with peak notifications seen in 2011/12 of 828,000 claims.

Reasons for the decline?

Although the pandemic’s influence through the Coronavirus Job Retention Scheme increased home-working, and depressed human activity and interaction has played a significant role since March 2020, the reality is that COVID-19 simply accelerated a trend in claims volumes which had been present well before lockdown measures were introduced.

There are, however, wider signs that society is becoming less, not more, litigious. In the early days of the pandemic, some commentators were heralding a “bonanza time” for lawyers with a predicted high volume of claims for COVID-19 contraction to be made against employers and organisations. Despite over 22 million people having been diagnosed with COVID-19 and almost 2 million estimated to be living with the debilitating effects of “long-COVID” (ONS data), direct claims for COVID-19 have so far presented in their scores and not in their tens of thousands.

Over the past decades, we have seen our society and workplaces becoming safer, evidenced by both reduced workplace accidents and fatalities. Per capita of the working population, the UK has one of the lowest fatal accident rates in Europe.

The greater sentencing powers afforded to courts in 2016 and 2018 to bring companies and directors to account for safety breaches and with fines linked to a company’s turnover have also played a significant part in improving workplace safety alongside automation and a declining manufacturing base.

During the 1950s and 1960s it was not uncommon to see notice boards displayed at the front of steelworks in Sheffield listing the number of fatalities which had occurred that week. It is rightly difficult to see how a similar notice board erected in 2022 would be deemed acceptable in today’s society.

If a ‘compensation culture’ ever existed in the first place, the underlying data now in the public domain suggests this to be waning - perceptibly and steadily.

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