Fast food king wages war on compo culture

PAT McDONAGH leafs through a list of phone messages which seem to have one common theme.

"Let me see," the Supermac's managing director says.

"There's one here from a chamber of commerce about compensation, another from a politician looking for information on it, another from a restaurant owner..."

The list goes on. Mr McDonagh may be head honcho of the largest Irish-owned chain of fast food outlets, but more and more of his time is consumed by the issue of compensation.

Grainy, closed-circuit TV footage of a bogus personal injury claimant trying to feign a fall on a slippery floor in Supermac's flashed across news bulletins earlier this year.

Hundreds of such claims mean insurance for restaurants has jumped from about 11,000 three years ago to 76,000 this year.

At present, Supermac's has a startling 100 personal injury compensation cases lodged against its 49 restaurants. Research by the firm shows half the claimants have already tried to sue elsewhere. And Mr McDonagh is getting angrier and angrier.

"It's at crisis point now it's killing off any incentive to set up a business. Just last night I had a woman in her 40s who runs a B&B and restaurant on the phone. Her insurance premium has jumped from 3,000 to 15,000 this year after two claims against her. She says she's getting out. She can't make a profit any more."

He estimates 1,000 jobs have been lost so far this year due to escalating premiums but says the crisis has been brewing for the last 10 years. Instead of seeing the problem in terms of money-grabbing fraudsters who'll do anything to grab a few easy grand, he lays the blame at the door of the "legal terrorists" encouraging bogus claimants.

"These people are degrading the legal profession. If you look through the Golden Pages you see them. There's one solicitor's firm which is giving away money up front for claimants to take an action. That's the stage it's reaching."

There are other problems too, he says. Liability laws are weighted against businesses. The judiciary are too eager to please their solicitor friends, insurance firms too quick to settle cases.

One story he has illustrates how the game works.

A young man slipped on a floor recently. He went straight to the manager to demand compensation on the spot. The manager refused. There was little evidence of a slippery floor. The case went to court. Before it could be heard the insurance company decided to settle for 5,000. It was cheaper to do so than pay legal fees for a court case.

Insurance premium costs are so crippling Mr McDonagh is looking at expanding his business portfolio in the US instead of at home. It would be a sad change of focus for the 48-year-old entrepreneur who takes great pride in how he built up the Supermac's empire from inauspicious beginnings.

In 1978 the former national school teacher established the first Supermac's during the summer holidays. Three years later two more restaurants had been opened. After two decades of rapid growth, today there are 49 restaurants generating profits of 1m.

The Government is aware the wheels of industry need to be oiled with incentives such as low corporation taxes and generous grants. But it has been slow to respond to the more nettlesome issue of confronting the legal profession to deal with insurance costs. Justice Minister Michael McDowell says he is determined to stamp out our "compo culture" through a package of tough reforms. Mr McDonagh has heard such fighting talk before, but this time thinks something will happen.

"We had a meeting with him last week and he is interested in the issue. I believe he understands the seriousness of the situation, coming as he does from a legal background. But he has to do something quickly."

To ensure this happens, Mr McDonagh has helped set up the Alliance for Insurance Reform, a lobby group comprising 400 Irish businesses. There are several steps, they say, which would tackle our acute bout of compensation-itis. They include:

Tough penalties for fraudsters who try to get away with bogus claims.

Guidelines for judges on how much should be paid for various types of personal injury.

A ban on advertising by ambulance-chasing solicitors.

The group says Irish companies have already sacrificed more than 1,000 jobs this year as they struggle to allocate resources to insurance costs.

If you thought the rise in premiums was partially down to Irish people being more accident-prone than other countries, you were wrong. We have the second-lowest accident rate in the EU. Yet for every 100 paid in insurance by an Irish firm, the charge in Britain would be 34, while in the Netherlands the cost would be 13. Average awards in the Irish courts are 12-times higher than in Britain.

All this can change, says Mr McDonagh, with political pressure. And thanks to the work of the Supermac's chief and others, the Government is listening. And he'll be keeping a close eye on matters to ensure it keeps its word.

"I'm confident it can be tackled. Action on some of these steps can be taken immediately and may not need legislation. This is urgent, we need action now. Something has to be done."