Justice and its insult to injury

The Damages Lottery

February 27, 1998

Recent work has shown that despite improvements in health care, improved safety in the workplace and on the road and a more enlightened approach to finding work for the disabled, the value of personal injury claims against insurers has increased by 13 per cent a year between 1986 and 1995. This is far in excess of inflation and of the rise in earnings over the same period. Last month, a court decided that liabilities amounting to about £1 billion should fall on the taxpayer to compensate miners who contracted respiratory diseases while working for the then nationalised coal industry. Litigation against the National Health Service increased from about £53 million in 1990-91 to about £125 million in 1993-94. An industry has mushroomed in which barristers, solicitors, doctors, psychologists, nurses, occupational therapists, architects, employment consultants, actuaries and accountants are employed to act on both sides of claims for compensation for bodily injury.

P. S. Atiyah in The Damages Lottery writes for the general reader. He wants us to understand what the courts are doing in our name and what it costs. It is a campaigning book, and therefore written with great clarity.

In Britain, anyone wanting damages must prove that his injury or disease was the fault of someone else who is good for the money or insured. Atiyah argues that the system is rotten to the core. It is expensive, inefficient and unfair; it often rewards precisely the wrong people. If I lose a leg but struggle heroically to continue work without loss of earnings, I will recover about 5 per cent of what I will get if I give up altogether and convince a doctor and a judge that this is a reasonable response to my accident. My lawyers will get far more if I take the latter option. My neighbour in hospital who lost his leg to disease for which no one was to blame will get nothing.

Many claimants are tempted to exaggerate their injuries and some even tell lies for financial gain. This is often treated as par for the course by those involved professionally, and contorted euphemisms abound.

When trying crime, courts imprison those who steal a few thousand £ from their employers. But sometimes claimants try to obtain many thousands of £ by pretending that they cannot bend or walk because of an injury at work, when video evidence proves that they can in fact jump over a wall, or carry a heavy pile of bricks or even tap dance (all real cases). Such people do not do as well as they hoped in their claims, but they are hardly ever prosecuted. The video evidence is often thought of as rather unsporting.

In a recent case the plaintiff claimed more than £3 million. The claim settled for its true value of about £800,000. Afterwards the judge complimented the plaintiff's solicitors for their professional approach to drawing up and presenting the claim. There was nothing remotely dishonest in what they had done, this is how we play the game. Even if part of the claim seems quite hopeless, it may raise the stakes and increase the settlement.

A body called the Association of Personal Injury Lawyers (only open to those who act mainly for claimants) once said to the Law Commission that "when considering the assessment of damages, the victim's interest should be paramount". Atiyah argues that there is no reason why this should be so.

So, claims and costs are rising? Surely, only the wealthy insurers of people who cause injury need to be concerned. What is wrong with it if injured people benefit?

Atiyah explains forcefully what is wrong with it. Most personal injury actions are brought against motorists or employers, who must insure against such claims. We all pay increased motor premiums because of damages claims and increased prices for goods and services because the cost of employer's liability premiums is passed on to consumers. The other major category of defendant is the public body, perhaps a local authority, NHS trust, or police force. Here, damages are often paid directly by taxpayers via the limited budget of the organisation.

There is no head of steam in the courts or legal profession for controlling either the size of damages awards or legal costs. Lawyers ingeniously add new categories of claim and new ways of calculating old ones. Sometimes the result defies sense. For example, if a workman is injured at work by the negligence of his employer and cannot work again he will claim damages for his lost future earnings. If he also receives an occupational pension purchased to replace that lost income, the courts have decided that his employer's insurers cannot deduct that pension from the lost earnings claim, which must be paid as though the pension did not exist. There are two obvious drawbacks. First, there is no incentive for the plaintiff to work either before or after trial, and he is positively rewarded for idleness that may not be good for him. Second, you, via the insurance industry, pay twice for the same loss, which was not your fault.

Atiyah argues that it is a bad use of public resources to pay large awards of damages to those who can prove that they were injured through the fault of someone who was insured, and nothing at all to the far larger group that falls ill from natural causes or is injured through no one's fault or the fault of someone without insurance. The money that funds courts, paying lawyers and damages awards could instead provide a scheme whereby all those who suffer illness or injury are compensated relatively modestly, but at least equally.

The lawyers' comfortable orthodoxy, that damages are too low, is thus turned on its head. In fact, argues Atiyah, damages for fault are far too high and, in any event, a bad thing. Our fault-based system is not really fault-based at all. The paying party is an insurer or public body that is not remotely to blame for the plaintiff's injury. The qualifying criterion for an award (the fault of some person who will not in fact pay the damages) is arbitrary and lacking logic. For this reason the system is properly described as a lottery.

Baby A suffers cerebral palsy as a result of oxygen starvation before birth. The signs of this were such that it could not be recognised until too late. Baby A recovers nothing and must depend on her parents, on charity and on the meagre provision made by the state. Baby B suffers the same condition for the same reasons and has the same needs. She, however, should have been delivered half-an-hour earlier and if this had happened she would have been born healthy. The difference in the observable signs may be slight and the two cases very similar to all but the most sensitive expert and judge. The blameworthiness on Baby B's doctor may be small but its consequences enormous. She gets £2 million of taxpayers' money. Lawyers and other experts on both sides are paid say £200,000 from the same source. The cost of providing courts, judges and staff to deal with the case is a further £20,000. If one in ten people with cerebral palsy can sustain an action under the present law, is it not better that this £2.22m is split ten ways so that they all get £222,000 rather than Baby B getting the lot?

This book is written in a style that means that no one need fear jargon or boredom. It is a short book and very cheap. I recommend it to anyone who is at all interested in its subject matter, which includes the cost of next year's motor insurance premium.

One thing that the general reader may not know and the author cannot explain is his towering status. The fact that he has put his authority behind a radical reform of the system (or at least a more rational approach to fault and its compensation) ought to encourage profound thought. I think he goes too far. The need of the injured for justice as well as compensation is a real one. The system probably does compel employers and others to take better care. It also provides a mechanism by which the individual can investigate and challenge a dangerous practice that has injured him.

Andrew Edis QC is a practising barrister.

The Damages Lottery

Author - P.S. Atiyah
ISBN - 1 901362 06 X
Publisher - Hart Publishing
Price - £7.99
Pages - 20

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