Lord Young is to release his “report” into health and safety law after the Conservative Party Conference. Already it has been trumpeted as a report into health and safety regulation and the compensation culture which causes all sorts of policy stopping all sorts of activity such as teachers having to complete a risk assessment in advance of taking school children on a trip.
Lord Young(1) was industry Minister in Lady Thatcher’s Government. That Government acquiesced to insurance companies demands that legal aid be removed from personal injury claims. A system of Conditional Fees was introduced (known as “No win-No fee”) along with a freeing up of the market to allow claims management companies to enter the market. There was disquiet amongst Solicitors.
Since then the insurance companies have continued to complain. They criticised claims management companies and the operation of conditional fee agreements. Recently Lord Justice Jackson completed his review of Civil Litigation Costs(2) and made recommendations
Regulation of Claims Management Companies –as opposed to Solicitors, who are Regulated by the Solicitors Regulation Authority- has resulted in the closure of many companies who would not or could not comply with the Ministry of Justice’s Regulation system.
The need for claims management regulation(3)
2.1 Over the last ten or so years a small industry has grown up of non-solicitor businesses that help people obtain compensation. This has been influenced by government policy initiatives – the introduction of conditional fee agreements for personal injury cases and the requirement on insurance companies to respond in a particular way to complaints about the mis-selling of endowment policies.
2.2 Whilst solicitors remain the principal providers of claims management services, the traditional culture of the legal profession, combined with the professional regulation to which solicitors are subject, allowed new entrants into the market who were subject to no regulation at all. Standards have varied from very good to very poor, but with no mechanism for excesses at the poor end of the scale to be addressed.
The Compensation Act 2006
2.3 The Compensation Act 2006 became law on 25 July 2006. The Act and subsequent secondary legislation provide for the following activities to be subject to regulation -
for, or otherwise seeking out (for example, by canvassing or direct marketing), persons who may have a cause of action;
• advising persons on the merits or handling of causes of action;
• making representations on behalf of claimants;
• referring details of potential claims or potential claimants to other persons, including persons having the right to conduct litigation; and
• investigating, or commissioning the investigation of, the circumstances of, the merits of, or the foundations for, potential claims, with a view to the use of the results in pursuing the claim.
2.4 Claims in respect of the following are covered –
• personal injuries;
• criminal injuries compensation;
• Industrial Injuries Disablement Benefit;
• employment;
• housing disrepair; and
• financial products and services.
2.5 A number of businesses are exempt from the need to be authorised under the Act –
• lawyers regulated in respect of claims management services by their respective regulators;
• independent trade unions;
• insurance companies, insurance brokers and IFAs providing a claims management service that is regulated under the Financial Services and Markets Act 2000;
• charities and advice agencies that meet the detailed exemption criteria set out in the regulations; and
• certain very small scale introducers (‘exempt introducers’) although they need to comply with the rules on advertising, marketing and soliciting business.
The regulatory structure
2.6 The time period from drafting the legislation to Royal Assent and then implementation was very short. At the time the legislation was drafted no decision had been taken as to the regulatory structure. The legislation accordingly allowed any option. The Secretary of State could establish a new regulatory body, designate an existing regulatory body to be the regulator or be the regulator himself. The latter direct regulation option was selected and fully implemented by April 2007.
2.7 An established civil servant supported by a small team in the Ministry of Justice takes decisions on behalf of the Secretary of State. A Monitoring and Compliance Unit is provided under contract by Staffordshire County Council. A non-statutory Regulatory Consultative Group, comprising representatives of relevant major stakeholders including claims management businesses, other regulators, trade associations and consumer organisations, acts as a sounding board for the Regulator and as a forum for discussion.
The objectives of regulation
2.8 The objectives of regulation were set out in the Regulatory Impact Assessment for the Compensation Bill –
“This proposal aims to provide better safeguards for consumers of claims management services. It is designed to encourage the provision of quality services, to enhance consumer protection and to provide consumers with a clear route to redress. In particular, the proposal aims to improve the effectiveness and efficiency of the system for those who have a genuine claim to compensation, and to tackle practices that have helped to spread the misperceptions and false expectations of compensation claims amongst consumers. This will help to build consumer confidence and promote effective competition within the sector, whilst ensuring that the sector will be able to contribute effectively to the widening of access to justice.”
There is a difference between Claims Management Companies (CMC’s) and Solicitors even though the media and politicians talk of personal injury “lawyers” when they should be talking of two distinct though related groups. There are plenty of Solicitors who undertake personal injury work who do not advertise, who do not pay referral fees to companies and who operate entirely within the SRA’s Code of Conduct. Problems arise where Solicitors pay referral fees or become members of a CMC’s panel of Solicitors. There are ethical issues that must be addressed which are ignored. For instance the Legal Services Board recently indicated that there would not be a ban on referral fees.(4)
In 2004 the Better Regulation Task Force(5) published a report(6) confirming that compensation culture is a myth. What has changed since then?
Lord Young’s use of the term “Compensation Culture” is a political act. His report is based upon a political belief that there is too much regulation, that part of the problem are the “lawyers” (what about the CMCs) who help people claim compensation because this makes all sorts of businesses, organisations and institutions NOT do something they would otherwise wish to do. What is the evidence for this?
Journalists-and especially the BBC-need to be more cynical. The review of health and safety regulation wrapped up in a compensation culture wrapper hides a desire of the Conservatives to help businesses and others save money by not taking proper notice of safety issues.
It is true that there have been excesses of health and safety madness reported in the media. How many of those stories are true? How many people didn’t clear snow away from in front of their house or shop in case they were sued? Has anyone admitted to that? Maybe they didn’t do it because they never have and they expect the Council to do it.
Schools closed last winter not because of a fear children might fall on ice or snow and sue but in fact because teachers couldn’t get into school because roads were closed.
In relation to school trips, which organisation pushes the idea of there being too much red tape because of “compensation culture” in case teachers get sued? The Local Government Association of course http://www.lga.gov.uk/lga/core/page.do?pageId=45106 . Local Authorities create (in that they create policy to enforce health and safety regulation) and enforce the health and safety rules that govern what teachers, shop owners and others can and cannot do.
The media love the health and safety excessive regulation stories and thereby add to the fear of a compensation culture. If compensation culture does not exist then why report on it?
Lord Young and the Conservative Party is using the media’s love of health and safety madness and the prejudice against “lawyers” to obscure the truth of its intent.
Under the No win no fee policy, win or lose, a claimant won't have to pay the solicitor's fee. Basically, the insurance will cover for the court fees and other expenses. However, if the claim wins, a 100% compensation will be awarded to the claimant. The solicitor will be paid including an extra amount called the success fee.
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