Compensation culture urban myth

According to a new report by the red tape watchdog the “compensation culture” of Britain is a myth, but the costs of it are very real.

David Arculus, chairman of the Better Regulation Task Force, said it’s the fear of claims being made that is making town halls cancel events and schools to cancel trips unnecessarily.

His report condemns “no win, no fee” advertising in hospitals and also calls for claims management companies to create a code of practice independently by the end of next year or face government regulation. The watchdog says that the “no win, no fee” cases have become too complicated and in too many cases solicitors on the losing sides are pushing up costs by trying to challenge the other lawyers’ conditional fee arrangements. Also it says that the government should think about alternatives for conditional fee arrangements if these concerns remain in years to come.

According to Mr Arculus, some businesses are becoming less innovative, largely due to sensationalist media coverage of an urban myth of bogus compensation claims. Businesses feel they can be sued for the slightest thing in today’s culture and they try not to run the risk.

He says: “The compensation culture is a myth but the costs of this belief are very real. Almost everyone we spoke to in this study told us they did not believe that there is a compensation culture in the UK. They argued that the reality is somewhat different because the number of accident claims including personal injury, is going down.”

In this report it is suggested that the outcome of most litigation claims goes unreported in the press. However, most claims are settled out of court. In the year 2003-04, £2 million out of a £22 million road budget was spent by one local authority on battling compensation claims. The cost of this would be beyond belief if this occurred in all 409 local councils in England and Wales. It doesn’t help local authorities that insurance premiums have also been raised in response to this compensation culture myth.

Also included in his report Mr Arculus continues: “Of course, some of the claims will be genuine but a large number will be vexatious or frivolous.”

The NHS is getting extra funding by being paid to carry claims companies advertisements in some of its GP’s surgeries and hospitals. The task force is not convinced that this is appropriate with some adverts using slogans like “Did the doctor or nurse make you worse?” Appointment cards are also being used in this advertising with some claims management companies telephone numbers being printed on them.

The report says: “We find this sort of advertising totally distasteful. The vast majority of doctors and nurses do not deliberately set out to harm patients.”

Banning such advertising would be difficult but strict guidelines should be introduced. The Claims Standards Federation which represents firms with “no win, no fee” actions should set out a code of practice by September next year or the government will step in to regulate the industry.

Mr Arculus is advising the NHS chief executive to immediately issue guidelines to surgeries and hospitals on the content of this advertising. It should also contain details of an in-house complaints system. This could help control the amount of claims made against hospitals, as NHS medical error claims have risen from £1million in 1974 to £477 million in 2003. This money could have been spent on an extra 22,700 nurses.

Advertisements by claims managements companies in general should be better regulated by enforcing rules more rigorously says the report. With claims made against schools rising to £200 million a year, the watchdog is questioning why so much money has been allowed to be spent on compensation when it could have been better spent on 8,000 extra teachers.

The watchdog is also asking the government to address the impact of allowing small claims courts to hear more personal injury claims by extending the courts current limit of £1,000.

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