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January 19, 2011

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Personal-injury claims – Damage limitation

Personal-injury lawyers are one of the main targets of Lord Young’s health and safety review, but the expected “compensation-culture” crackdown doesn’t mean that employers can ignore the procedures for dealing with a claim, as Stephen Thomas and Basil Long explain.

Although Lord Young has now resigned as advisor to the Government, his review of health and safety, published last October,1 has shone a spotlight on the issue of personal-injury claims, as well as the lawyers, or ‘ambulance-chasers’ who encourage many unnecessary claims against employers. David Cameron has spoken of the “lawyers only too willing to pounce with a claim for damages on the slightest pretext”,2 and the Government has promised to crack down on what it describes as the “damaging compensation culture” that has arisen as a result.

To this effect, Lord Young’s report, entitled ‘Common Sense, Common Safety’, has made a number of recommendations, including introducing a simplified claims procedure, restricting the operation of personal-injury lawyers, and controlling their advertising. He has also advised introducing the recommendations made last year by Lord Justice Jackson to limit the fees paid to personal-injury lawyers.3 So where does this leave employers?

Firstly, the changes aren’t going to take effect over night, and a number of further consultations and reviews will need to take place before any definite actions are taken. Secondly, the review doesn’t completely remove the threat of personal-injury claims, nor, of course, the need for health and safety in the workplace. It is therefore in the best interest of all organisations to ensure they know how the system works and how to avoid costly compensation payouts.

Exercising a duty of care

To avoid having to deal with personal-injury claims, it is obviously crucial to get the health and safety basics right in the first place. Enforcing authorities, such as the HSE and environmental health officers, will ask to see documentation, such as a written health and safety policy, risk assessments, and proof of suitable health and safety training. This documentation also provides crucial evidence in the case of a personal-injury claim, showing that the employer was fulfilling its duties

Insurers will also want to see evidence of health and safety processes when providing employers’ liability cover. This can range from simple box-ticking to inspections, with some even stating that companies must use independent health and safety advisors. However, Lord Young’s review aims to crack down on some of the more excessive requirements, stating that “insurance companies should cease the current practice that requires businesses operating in low-hazard environments to employ health and safety consultants”. Furthermore, the HSE, Lord Young and the Government are keen to promote simple documentation that accurately reflects an organisation’s activities. No one, for example, is expecting a small business to have an all-encompassing health and safety management system.

Employers are legally required to provide suitable budgets for health and safety and, although this will require an initial financial outlay, this is negligible compared with the potential costs associated with an accident, including fines, legal costs, bad publicity, poor business reputation, and loss of work. The law also requires the employer to appoint competent persons (i.e. persons with suitable qualifications, training and experience) to assist with health and safety but, again, this is a question of scale – low-risk hazards, for example, may require a relatively basic understanding, whereas the more hazardous the environment, the higher the level of competence required.

Some organisations may choose to use the services of a specialist but before entering into a contract, it is crucial to check their qualifications and relevant experience. ‘Cowboy’ health and safety consultants are another group that Lord Young’s report has in its sights, but even before any changes are brought in, companies should look for chartered membership of IOSH, or certain membership status of other relevant professional bodies, as a measure of competence.

Responding to a personal-injury claim
Dismissing a claim at the outset

As employers’ liability insurance is obligatory, serious claims must be dealt with by an organisation’s insurers, who will decide whether to contest, or settle out of court. However, in some situations, it is possible for the employer to dismiss a claim before passing it to the insurers, depending on its seriousness.

For example, if the letter received contains  full details of the claim and comes from a solicitor, rather than just the employee, it should be taken more seriously. On the other hand, if it appears to be a stock letter providing little or no evidence of the incident, where it occurred, or the quantified loss to the individual, then it is worth initially dismissing the claim for these reasons. When responding, however, the employer must choose its wording carefully to avoid any acceptance of liability. If unsure, it is worth involving the insurer at this stage to avoid accepting any responsibility.
On receiving the dismissal, the claimant’s solicitor will investigate the claim further, either choosing to abandon it, or responding with further details and evidence. 

Gathering evidence

If enough detail and evidence is provided by the claimant then the organisation should be able to refer directly to the accident file to see whether this information is corroborated by its own records.

If it has a defence against the claim, the employer should gather evidence as soon as possible, including collecting detailed and signed witness statements, CCTV footage, as well as any other relevant documents, such as building access records. If this is sufficient to counter the claim then the employer may wish to disclose this to the claimant in the hope the claim will be dropped. However, the employer again needs to act carefully and may wish instead to get the insurer on board to ensure that there is no risk of accepting any liability.

If the claimant’s solicitor feels that it still has a case, it will, at this point, take out ‘after-the-event’ insurance to cover legal costs if the claim is unsuccessful. As the insurance is a cost, the solicitor will only take this out and continue with the claim if they feel they have a viable case. If so, the solicitor will inform the employer and start gathering further evidence.

Settling the claim

At this stage the employer must involve its insurer if it hasn’t already and, in many cases, if the claimant has provided detailed information and evidence, the insurer will often settle the case at the outset, rather than investing hours and expense in fighting it. This can be frustrating for the employer, as settling a claim can have a negative effect on its reputation, so, by doing sufficient research upfront and dismissing spurious claims outright, it can avoid the claim being settled unnecessarily.

If the insurer does decide to settle and the employer doesn’t agree, then it is possible to contest it. While the employer is unlikely to have much influence over the decision, it may, at least, be possible to reduce the settlement.

Contesting the claim

If the claimant has little evidence, or the claim is for a significant sum, then it is likely that the insurer will contest it in court. In this case, the insurer and its solicitors will undertake a full investigation of the incident, and the employer will need to provide witness statements, CCTV records, accident-book records, etc. While the investigation is taking place, and until the case goes to court, any party can decide to settle. The judge will also encourage both parties to consider appropriate offers to settle.

Going to court

If the case makes it to court then the employer will be defended by the insurer’s solicitors. However, a representative of the company, usually the managing director, or the relevant department manager, should be in attendance. The case can take anything from two months to a few years to get to court depending on the value of the claim, how busy the court is, and the amount of evidence to be given by both sides. There could also be a number of case-management hearings before the trial, to ensure that all parties are disclosing the appropriate information. 

The outcome

If the defending employer loses, it could be required to pay significant costs, including not only the damages but also the claimant’s solicitor’s fees, the ‘after-the-event’ insurance premium, and a success fee, which will reflect the amount of time it has spent on the case. The extent of these costs highlights the advantages of settling in many cases. 

Further considerations
When is a claim ‘out of time’?

There is generally a time limit of three years from when a claimant becomes aware that they can claim. Usually, this will be from the moment when the accident happens; however, it may be further down the line – for example, if the employee is in a coma, or if there is a delay in the injury coming to light, as was the case with asbestos claims.

Multiple claims

Multiple claims arise when one injury leads to another problem, such as if an employee suffers a broken leg and then develops depression, or if a broken ankle leads to arthritis. To avoid such claims, it is crucial for the claimant to have a thorough medical assessment at the outset to identify the possibility of further issues. It is also possible for the initial claim to be settled on the basis that the damages will cover any further problems.

How will the system change?

Under Lord Young’s proposals, the system will become much simpler and less weighted on the side of the claimant. One of the biggest changes will come from the implementation of the recommendations made by Lord Justice Jackson last year. These state that rather than the claimant’s solicitor’s costs being paid by the losing side, they would actually come out of the damages paid to the claimant. In addition, ‘after-the-event’ insurance would be abolished, meaning the claimant’s lawyer wouldn’t be paid if they lost the case. The hope is that this would dissuade personal-injury lawyers from taking on spurious claims.

Furthermore, a simplified claims procedure would limit legal costs in personal-injury cases, so, if the claimant won, the solicitor’s fee would be greatly reduced. This, again, would discourage lawyers from taking on unnecessary claims. 

Moving forward

The proposals certainly seem to be a step in the right direction and should, in the long term, reduce the number of claims against employers, as well as eradicating the ‘ambulance-chasers’ that encourage them. However, there is still a long way to go and, in the meantime, it’s important that employers ‘cover their backs’ and understand the law, in case they are ever faced with such a claim.

References
1     Common Sense, Common Safety, Cabinet Office – www.number10.gov.uk/wp-content/uploads/402906_CommonSense_acc.pdf
2     www.number10.gov.uk/news/latest-news/2010/10/lord-young-report-55605
3     ‘Proposals for reform of civil litigation funding and costs in England and Wales’, Ministry of Justice, CP13/10 – www.justice.gov.uk/consultations/docs/jackson-consultation-paper.pdf

Stephen Thomas is a safety technical consultant and Basil Long is senior legal consultant at Croner – see page 4 for more information

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