Fostering a culture of compensation

While many grumble that suing for even minor accidents has become the norm, there are positive benefits as the attitudes of companies and bodies to safety improves hugely, writes Dan Buckley

NEVER a man to mince his words even when it comes to his own profession, Michael McDowell was commenting on the propensity of Irish people to sue for the consequences of life’s little mishaps.

In a review of Irish civil law, McDowell attacked our legal system that supports a culture of compensation. He cited “ambulance-chasing solicitors”, “Santa Clause” judges and “sue-happy” plaintiffs as the reason why things were getting out of hand.

He was addressing a very receptive audience at a conference organised by the employers’ organisation, Ibec. They heard him assert that there exists a general attitude that claims for compensation are fair game for many people and that, because the cost is diffused by insurance, those claims are encouraged rather than discouraged.

Lamenting the uproar that follows when pedestrians are threatened with prosecution for ignoring the rules of the road, he said: “If a motorist hits a jaywalker or a motorcycle courier who is ignoring lane discipline, the motorist, because he or she is insured, is found liable as a matter of course.”

He made those comments in 1998, before he became attorney general and later minister for justice, yet little has changed since then, either in the application of the civil law or in to our willingness to sue.

When Mr Bumble declared: “the law is a ass…” in Charles Dickens’ Oliver Twist, he was grumbling about the Victorian legal presumption that a wife always acted under the instruction of her husband. These days he might well think in terms of the law of negligence as it applies in the US and, increasingly, Ireland and Britain.

While neither Mr McDowell nor Mr Bumble addressed the law as it pertains to childhood accidents, there is growing concern even the mildest injury suffered by a minor will end up in court. What used to be considered a part of growing up — split lips, broken leg, fall from tree, playground injuries — now attracts awards or settlements of thousands of euro if someone who is wealthy or insured can be found to blame, wholly or in part.

When it comes to lively and boisterous children, an accident may be just an accident and nobody is to blame, yet the reality is that if an injury occurs on public property or a premises owned by an insured business, the courtroom beckons and the insured person or company will be held accountable. If there is nobody worth suing, there will be no proceedings.

It is not the child who will make this determination but the parent or guardian. Children are represented by adults when making a personal injury claim. The statute of limitations applies differently in children’s personal injury claims. Under the statute, which normally limits the plaintiff’s right to claim to two years after “the date of knowledge” of the injury, allowance is made so that in the case of a minor the date of knowledge of the injury is the child’s 18th birthday.

Proponents of rigorous litigation argue that a litigious society makes for a safer one as it ensures that councils, businesses and other enterprises take safety seriously if they fear they will be sued. Where many business owners might be tempted to cut corners on safety, the threat of being sued puts manners on them in a way that no amount of penal legislation can.

That threat means that many enterprises have to be fully insured against accidents from the day they open their doors. Yet, in some respects, that has served to close the circle on our compensation culture. A study presented to the Society of Actuaries in Ireland concluded that insurance has lead to a more litigious society in Ireland. Although the study is now almost a decade old, its findings are still apt.

Marian Keane and Patrick Grealy looked at — among other things — the benefits that non-life insurance has brought to society. They concluded the risk of litigation has, to some extent, led to a fairer society in which wrongdoers are punished and victims are compensated. That means individuals and firms are forced to take more precautions and act more carefully. This is borne out by the fact that, for instance, Ireland has the lowest workplace accident rate in the EU. Among the benefits of insurance were:

* Peace of mind: The insured replaces the uncertainty of loss with the certainty of a known premium.

* Efficient use of resources: Businesses are able to free up capital that would otherwise have to be put aside to guard against contingencies. Thus insurance encourages the growth of industry.

* Support of trade: In the 17th century, the marine trade was boosted by the development of insurance at Lloyds. Today, banks and other financial institutions require the security of insurance in financing international trade. Similarly, mortgage providers require fire insurance for mortgages.

* Loss control: The system of rating, rewarding risk prevention measures with lower premiums, encourages loss prevention. Workplaces implement health and safety measures, drivers drive more carefully, homeowners install burglar alarms and smoke detectors. Society would suffer greater losses if not for these measures.

They also investigated the downsides, concluding that insurance has made our society more litigious. They found that people are slow to trust one another or to help one another for fear of being sued.

For example:

* Teachers are under instructions from their unions not to even put a sticking plaster on an injured child’s finger, following a case where a teacher was sued because a finger injury he had attended to had become infected.

* Doctors refer more cases to casualty or X-ray departments for fear of negligence claims against them — which is increasingly clogging up hospitals.

* Voluntary organisations are unable to organise activities for young people through lack of insurance cover.

* Local authorities cut back on non-essential services such as playgrounds.

According to their findings: “The insurance industry has played a big part in the development of the compensation culture. This is because, in most personal injury and other liability cases, insurance companies pay for the damages and have become administrators of the system.

“Often, the solicitor representing the injured party will never speak to the negligent person apart from finding out the name of their insurance company. The insurers decide whether or not to admit liability, whether or not to settle, and how much to offer.

“These decisions are based on commercial reasons. One commercial decision often made by insurance companies is to settle outside court, whether there is blame or not, in order to save the expense of mounting a defence in court. This practice encourages opportunistic claims — there is little to be lost in having a go. Without insurance, an innocent defendant would possibly fight harder to clear his name and protect his/her own level of wealth.”

According to the study, the situation is particularly bad in Ireland because we have the highest average personal injury damage awards in the EU. As well as that, 90% of cases are settled out of court, a situation that encourages many people to sue, secure in the knowledge that there is little risk of having to pay substantial court costs.

Even though the Law Society, the governing body of solicitors in Ireland, banned members from advertising “no win, no fee” services, the practice still exists and this serves as a further encouragement to litigation.

In the past decade, public liability insurance for businesses has become prohibitively expensive or in some cases, completely unavailable and, for most enterprises, insurance is now the second-highest cost.

The Small Firms Association says 92% of small companies regard insurance costs as their biggest threat to viability.

The French have a phrase for it: “abus de droit” — abuse of a right — which means the law will not allow you to exercise a right if, among other things, it would produce an unfair result. In other words, they use a bit of cop-on when enforcing citizen rights and liberties. This makes sense because an overly litigious society is often a fearful one and can lead to social inertia where even the most common practices become fraught with anxiety.

According to Tom Copeland, an expert on the American legal system and author of Family Child Care Contracts and Policies, the situation in the US has become so out of hand as to inhibit the most benign of practices.

He warns: “In all situations, when an adult of any kind [parent, grandparent or hired professional] babysits, that person becomes liable for the child’s safety and well-being. Babysitters may become economically liable for covering any injury to the child, either through standard home owner’s insurance, additional childcare coverage or out of pocket.”

In many respects, we have followed the US example where civil litigation has gone to extreme lengths, although caution should be used when reading about, for instance, a woman awarded $3m (€2.4m) because her McDonald’s coffee was too hot [see panel].

Yet the US remains home to excessive litigation. In a seminal work, Philip Howard, a lifelong campaigner for sensible jurisprudence, argues that the compensation culture in his country has obviated personal responsibility to the detriment of society. In his book Life Without Lawyers, he argues that Americans are losing the freedom to make daily choices and companies plaster inane warnings like: “Remove baby before folding stroller.”

He has a point — but, while it can be argued that minor accidents or mishaps should be endured as a part of life, serious injury resulting from negligent behaviour is another matter. A study by British publisher BioMed Central shows that injury is the major cause of death and suffering among children and adolescents in Europe.

Looking at data from eight EU states, its research showed there was a huge difference in safety levels, with the UK and the Netherlands being the safest countries. The second safest batch were Ireland, Norway, and Denmark and they shared almost identical levels of child safety. Latvia and Slovenia were the least safe, with accidental childhood injuries four times the UK level. In all countries, the highest accidental death rates were observed in males aged 15-24.

The study, conducted in 2010, states: “Each day, the ideals of thousands of our vivid and promising youth are suddenly destroyed by road traffic crashes, injuries at home or during leisure time, or acts of violence. This is largely unnecessary, since an abundance of simple and effective countermeasures are available, but these are underused.

“For this reason, even in high-income countries, injury is still the leading cause of death and disability among children and adolescents.”

By any standards, that is an appalling reality, so any system that tends to make everyone more careful must, on balance, be a good thing.

The tragedy is not that someone, child or adult, might, on occasion, be over-compensated for minor mishaps, but that many more who suffer catastrophic harm are not compensated at all simply because the party responsible has neither money nor insurance and is therefore not worth suing.

Coffee case

On Feb 27, 1992, Stella Liebeck, a 79-year-old woman from Albuquerque, New Mexico, ordered a 49c cup of coffee from the drive-through window of a local McDonald’s restaurant. Liebeck was in the passenger seat of her grandson’s car, and he parked so she could add cream and sugar to her coffee.

Liebeck placed the coffee cup between her knees and pulled the far side of the lid toward her to remove it. In the process, she spilled the entire cup of coffee on her lap. She suffered third-degree burns that required skin grafts and two years of medical treatment.

Liebeck sought to settle with McDonald’s for $20,000 to cover her medical expenses, which amounted to $18,500. The company offered only $800. A jury found McDonald’s 80% responsible because the coffee was too hot. They awarded Liebeck $200,000 in compensatory damages and $2.7m in punitive damages. The total amount was later reduced by a judge to $640,000 and, on appeal, Liebeck settled for an undisclosed sum of less than $600,000.

Award levels

Irish judges tend to be more generous than their British counterparts in awarding or approving settlements for child injuries.

IRELAND

nFootball injury

A boy who sustained a broken leg while playing football on council property, had €20,000 compensation approved in the circuit court. The boy fell on the concrete surface and had to wear a plaster cast for six weeks.

nThe €17,500 baby-wipe

Although the plaintiff was an adult, the baby-wipe case serves to illustrate the extent to which some businesses have to go in ensuring the safety of customers.

A court approved a settlement of €17,500 for a customer who slipped on a baby-wipe in a shopping centre. Although the store in question had a rigorous cleaning policy, the judge concluded that, because CCTV cameras showed the baby wipe was on the floor for at least 10 minutes, it was liable.

nAirport injury

A toddler who injured his hand on an airport baggage conveyor belt had a settlement of €15,000 approved. He had climbed on the baggage belt and suffered the injury when his arm became trapped.

nCrèche injury

A three-year-old boy who cut his lip when he ran into a chair while playing in a crèche was awarded €17,500 in damages against the childcare centre’s owners. He was left with a tiny, slightly noticeable mark on his lip.

UNITED KINGDOM

nSchool accident

Playing in a field at school, a boy sustained a laceration to his lower leg requiring sutures when he tripped on an object hidden in long grass. The scar measured 6cm and a £5,000 (€6,300) award was approved by the court.

nBus injury

A six-year-old girl hit her mouth on the seat in front of her and damaged two teeth when her bus braked suddenly. A settlement of £5,000 was approved.

nCar crash injury

When he was nine, Tom was a rear-seat passenger in a car being driven by an uninsured relative. The driver of the car in which he was travelling caused a horrific crash in which passengers in other cars were killed. Four people in his car were injured including Tom who fractured his lower leg. He was awarded £7,500 by the court.

In Ireland, fractures to a lower leg generally see awards of between €15,000 and €85,000.


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