Compensation culture vultures

The compensation culture has been on the lips of politicians on both sides of the House: from Stephen Byers to David Davies and, more recently, Lord Falconer. In May, the Conservative Party launched a campaign against the compensation culture, with a review of the Human Rights Act, which they claimed led to "too many spurious claims". Last month, the secretary of state for constitutional affairs Lord Falconer gave the claims farmers "one last chance to get their house in order", or face regulation.While the shadow attorney general and MP for Beaconsfield Dominic Grieve is supportive of self-regulation, he is sceptical of how successful it would be. Once solicitors were able to advertise their work and go out and look for clients, claims farming was going to come on the back of it. So either we have to reverse 15-years' of change within the legal profession, or it's here to stay."I'm always happy to look at how to improve the way we regulate it, but I don't have a ready solution."One issue that has caused much consternation in the industry is lawyers and claims management companies advertising in hospitals. The government wants to discourage NHS trusts from allowing companies to do this. Grieve, however, says this should be controlled through the Law Society. Grieve says while advertising services in a hospital is not undesirable, more aggressive advertising such as asking is not acceptable. "It's a matter of professional ethics." Conditional fee or no-win, no-fee arrangements (CFAs) have come under criticism from the Better Regulation Task Force, which believes they encourage bad claims and drives the compensation culture. The government has rejected this, saying that CFAs ensure access to justice for all and should not be scrapped.

Meritorious caseGrieve, a barrister, disagrees. "Conditional fee agreements encourage litigation. We need to look globally at the interplay between legal aid and the operation of no-win, no-fee, and make an assessment of how we're going to develop legal services over the next 20 years. "We have to take a long-term view to ensure that everyone has access to justice who has a meritorious case, even if they may not have the means to take that case forward. Second, we must ensure that litigation doesn't copy the US, in terms of encouraging people to make what are effectively commercial deals in the expectation of recovering money," he says.But Grieve shares the government's lack of enthusiasm for the task force's proposal to look at contingency fees, which are used in the US. "I need to be persuaded that contingency fees have any validity whatsoever. The US has had many problems relating to the litigation and compensation culture, and some of these are fuelled by contingency fee agreements.

Dubious mechanism"The danger of a contingency fee is that it encourages the litigators to view the case in terms of profits, in relation to the success and size of the claim. This is a dubious mechanism and is likely to erode professional standards. "It's difficult to see why contingency fee agreements should be so attractive to the task force. I can't see that they have a real advantage over no- win, no-fee agreements," says Grieve.Turning to the broader question of the compensation culture, does Grieve think that tacking it will be a vote-winner?While he says it is "not a major political issue" for most people in the country, Grieve argues that it is part of a wider malaise that needs to be addressed. "There is a growing sense in the UK that law-abiding people end up simply paying their taxes, while the unscrupulous appear to derive great benefits. "This creates a sense of unfairness and a danger of undermining the foundations of civil society. The compensation culture is a small component of this. A responsible political party has to take that issue seriously."Grieve says the Conservative Party is carrying out "reviews" looking at the "entirety" of the compensation culture. In addition to the review of the Human Rights Act, the party is also examining the operation of employment tribunals. "We're looking at whether there has to be a proper cost sanction in employment tribunals operated on a more widespread basis. This will ensure that an employer is not forced to settle claims because of the financial burden on him and his business, even though the claim may be unmeritorious."Grieve says that insurers must accept some of the blame for the compensation culture because they are too willing to settle claims when, in fact, they should be more "robust" and defend them."One of the problems insurers have is that they are constantly making assessments of the risks of losing a case, but they don't want to spend money unnecessarily. "My experience, as a barrister, is that many a claim which is unmeritorious can be settled and a small sum recovered by the person concerned. This encourages people to litigate, and the industry must think about the extent to which it wants to resist that type of claim, so not to encourage other people." The industry has to take "a long-term view" about its attitude to defending. Insurers must "defend claims to the end" if they do not believe liability attaches. "If they do that over a five to 10-year period a lot of these problems will disappear," he says. IT