Take blame out of personal injury law, Supreme Court judge says

"Ambulance chasing" lawyers are not to blame for compensation culture as it is the way the system is set up that encourages claims, a Supreme Court judge has suggested.

Lord Sumption said that the people making claims could not be accused of greed when it is the current law which is "extraordinarily clumsy and inefficient" and the system of blame "often misses the target". 

He said: “If the law entitles the victim of an accident to compensation, it ill becomes us to criticise him for knowing it and claiming.”

A rise in the number claims, which has been in part blamed on no win no fee lawyer services and  cold callers encouraging people to sue, has led to rising insurance costs particularly in the motoring industry. There is also concern about the increasing cost for the NHS and fake claims.  

Earlier this year, a group of tour operators wrote an open letter to the Ministry of Justice in which they warned that Britons face being denied access to certain resorts or hotels abroad because of a surge in fraudulent compensation pursuits for holiday illnesses such as food poisoning.

In the Queen’s speech the Government promised to “modernise the courts system and help reduce motor insurance premiums’”, including a ban on settling without medical evidence and introducing a fixed tariff for whiplash claims

However, Lord Sumption told the Personal Injuries Bar Association annual lecture that this may not go far enough.

“If the law says that we are entitled to blame other people for rather more of our misfortunes than hitherto, it is really rather absurd to complain about a culture of blame, as if this was somehow a symptom of our collective moral degeneration,” he said.

The number of personal injury claims has risen from about 250,000 a year in 1973 to 1,200,000 in 2013-14, largely due to an increase in claims for road accidents, which account for around 80 per cent of all accidents.As the number of accidents has not increased then it is likely to be in part due to a greater understanding of what can be claimed, Lord Sumption noted.

Studies have suggested that more than a third of the costs associated with paying out insurance premiums are spent on legal and administration fees.

Experts have predicted that more than 90 per cent of claims are against insured parties with a large proportion of the rest made against the state.

“Liabilities that fall to be met by insurers or by the state are effectively socialised across the population at large. We all, or almost all, pay for them in the form of higher insurance premiums or taxes,” Lord Sumption noted.

But he warned that insurers do not have a “bottomless pocket” and in the long term rising claims could see in extreme cases insurers simply withdrawing from exposed sectors, as they did in the US with product liability insurance.

Lord Sumption pointed out: “A system which makes compensation dependent on fault makes little sense if the damages are being paid not by the persons at fault, but by society as a whole… 

“If the cost of compensating people for personal injury falls on society at large, there is no rational reason to distinguish between personal injury which has been caused by some one’s fault, and personal injury which has occurred without fault.”

He argues that rather than creating a safer environment the blame in personal injury law can prompt those responsible for safety to “eliminate all risk, instead drawing a balance between risk and the adverse consequences of eliminating it”.

He concluded: “The law of tort is an extraordinarily clumsy and inefficient way of dealing with serious cases of personal injury. It often misses the target, or hits the wrong target. It makes us no safer, while producing undesirable side effects. What is more, it does all of these things at disproportionate cost and with altogether excessive delay.”

Despite his lengthy criticism of the current system, Lord Sumption concludes: “I have no doubt that it will survive”

The alternative of a fault free system funded by taxation or compulsory insurance would be less wasteful it would have a large cost and the current system “responds to widespread public notions about personal responsibility and the proper function of law”, he noted.