Research undertaken by Lloyd’s and the Economic Intelligence Unit reveals a widespread belief among global business leaders that a US-style compensation culture is developing in other regions. In the UK, the liability environment is undoubtedly becoming more complex, but here two experts from different fields argue that this does not necessarily mean that a US-style compensation culture is inevitable.
Common sense culture prevails in the UK argues Gary Slapper, Professor of Law at The Open University and legal columnist for The Times.
In Britain, compensation culture is a myth. Most people and organisations go through their entire lives without suing, being sued or being related to someone who is involved in litigation.
Figures show that during the last ten years, the sort of civil litigation that people mean when they speak about “compensation culture” has gone down. According to official figures, in 1998, the number of county court claims issued nationally was 2,245,324 but last year it was 2,157,000.
People might have become more emotionally litigious and more prone to shout “I’ll see you in court” over the garden fence, but that has not lead to more court cases. The law does not make it significantly easier to sue anyone now for negligence or a defective good or service than it did ten years ago.
Sometimes newspapers highlight silly cases but the claimants in those cases invariably lose. Ludicrous claims don’t get past the first five minutes of an interview with a solicitor. Even when a lawyer is exceedingly keen, injustice will almost never occur because judges tend not to make daft decisions. There is a key difference between “man sues over nuts in peanut butter” and “man wins damages over nuts in peanut butter”.
It would be wrong to say the UK has got more litigious simply on the basis that more people now read about and discuss legal cases. You wouldn’t say the UK has become more sporting because it watches more sport on TV.
If people and companies behave well and all their processes are reasonable, they can’t be liable for any loss or damage. Just because an accident happens doesn’t mean anyone is to blame. Reasonableness immunises against all claims of negligence. That is common sense culture.
Perception need not become reality with good risk management says Bronek Masojada, Chief Executive Officer, of international specialist insurer Hiscox.
There is definitely a perception of a compensation culture in the UK and perhaps
a fear of one. This perception is broadly fuelled by three phenomena – a general increase of protective legislation (for example, legislation affecting the rights of employees), a rise in awareness of individual rights (‘blame culture’) and access to “no win, no fee” legal agreements.
It is correct to say that people are much more aware of their rights, and access to lawyers willing to take on cases under conditional fee agreements is much easier. Historically, there have also been less scrupulous “ambulance chasing” claims management companies who have sought out and pursued claims, however unmeritorious, on behalf of claimants, although the introduction of legislation governing this activity in 2007 has weeded out the worst culprits.
More claims may be pursued in light of the trends I’ve mentioned, however to describe it as a ‘compensation culture’ akin to the US is wrong. We are a way off that yet in England and Wales - largely due to the independence of the judiciary but also as a result of stronger regulatory pressures, control of lawyers’ costs and fewer jury trials.
However, the reality is that businesses today are operating in complex environments. There is the potential for claims against businesses on so many levels. Directors need to be aware of what their potential liabilities are and, most importantly, make sure they have in place robust procedures and systems to limit the risk of a claim being pursued in the first place.
While the courts have taken a sensible and practical line in relation to public liability cases, the raft of legislation designed to protect employees does mean that businesses face significant liability if they do not have in place systems and risk assessments to protect themselves from claims arising from wrongful employment practices.
Compliance is time-consuming and often not the main focus of any specific business. There is evidence that compliance with UK company law is one of the more pressing concerns for small business entrepreneurs, with two thirds of new small businesses citing it as a risk.
Hiscox research also shows that over half of British small business entrepreneurs believe that government red tape is a major barrier to setting up their own business. However, there is a need to balance the interests of businesses against the need to protect potentially vulnerable employees from risks inherent in their jobs.
Claims will never be eliminated, nor will the events that give rise to them. Taking all the preventative steps possible by investing in good risk management is crucial, backed by quality insurance from an insurer who is proactive in helping clients to manage their exposures.
