Cases of neglect and abuse have made headlines in recent years – most notably the tragedy of Baby P. Today, spending cuts could lead to increasing mistakes while legal changes make claims more likely. Insurers of nurseries, shelters and care homes have to be on their guard

Undoubtedly one of the most tragic features of the past 15 years has been the huge increase in revelations involving the abuse and neglect of children and vulnerable people.

Most recently, the scandal surrounding the case of Baby P, where infant Peter Connelly died after prolonged abuse suffered at the hands of his mother’s partner, created a public outcry over the failures of child protection services. Last month, the first published case review of the scandal was unflinchingly critical of government agencies, stating “the child had been failed by every member of staff he had met”.

With big public spending cuts looming that are likely to affect care budgets, many people fear that the number of cases of abuse or neglect is set to increase further.

The high-profile nature of such failings has already led to a rise in claims over the past decade. Investigations of historical cases in particular have prompted a spate of multi-party claims for abuse against religious institutions and care homes dating as far back as the 1950s.

Law firms are warning that this tide is still in flood. Recent developments affecting case law, coupled with the effect of the swingeing public sector cuts, mean the insurance sector is set to see more of this type of claim.

Beachcroft partner Paula Jefferson explains: “There have been two significant legal changes that have had the effect of increasing claims and also increasing the likelihood of those claims succeeding.”

The first change concerns the limitation period: the maximum time after an event that legal proceedings can be brought. Before 2008, claimants had to bring a civil action for physical or sexual assault within six years. This meant that many victims were unable to sue their abusers for damages on the grounds of assault.

In 2008, however, the so-called Lotto rapist case removed this barrier (see box, below). While group actions against institutions are waning, law firms are reporting more historical claims of assault against private individuals.

The second development concerns issues surrounding vicarious liability. Sometimes described as ‘no fault’ liability, vicarious liability allows a victim to recover damages from a third party, such as a local authority employer, based on that party’s relationship with the abuser. This applies even if the abuser’s acts were not authorised, allowed by, or even known to the employer.

The 2001 case of Lister v Hesley Hall paved the way for the argument of vicarious liability in abuse cases. Cunningham Lindsey complex loss specialist Joseph Noel explains that this shift has made it more difficult for defendants facing such claims. He says: “If there is a difficult decision to make, the temptation of the court will be to veer on the side of holding someone vicariously liable.”

Breaches in care

Jefferson says that while it is understandable that the courts want to compensate victims, successful vicarious liability arguments could set a dangerous precedent for other public and employer liability claims.

However, insurers and legal experts believe that, in terms of numbers, more recent cases surrounding the negligence of local authorities have started to eclipse historical cases of abuse. This again is partly because of a shift in the legal landscape. Before the Noughties, the courts had refrained from making social workers and government agencies liable for mistakes made during the course of their employment, arguing that this placed an unfair burden on these workers charged with making difficult decisions about children’s welfare.

However, the Human Rights Act 1998 removed this immunity, and the courts felt compelled to rule that local authorities could now be held liable for breaches in care.

Barrister Steven Ford, a partner at 7 Bedford Row, explains: “Since 2003, the courts have said that there is a duty of care upon which the child can bring a damages claim for negligence if there has been a negligent failure to act by the social services.”

He says the consequence is that local authorities are increasingly held to account for failing to remove a child from an abusive family home. Conversely, there has also been a steady rise in claims against local authorities for removing a child from a satisfactory family home and/or placing them in a foster placement that later led to abuse or neglect.

Unsurprisingly, since Baby P the number of children taken into care has increased. For example, in the borough of Haringey, which was charged with the protection of Baby P, the number of children in care stands at 620 compared with 460 18 months ago. However, Pannone partner and executive officer of the Association of Child Abuse Lawyers, Richard Scorer, believes that increasing budgetary pressures on social workers could lead to more tragic mistakes.

A potential spike

“The number of children on the child protection register is going up and up, and the sheer volume of work that local authorities and social services departments are dealing with has gone up,” Scorer says. “The problem is that resources aren’t going up as well.”

Insurers are only too aware that these conditions could cause a potential spike in claims. Zurich Municipal technical claims handler Alan Hunter says: “There is a concern that, under an austerity programme, we will see budgets and resources cut … we might yet again get to a position where many of the mistakes of the past are repeated.”

It is not just local authorities that are at risk. The private sector – and their insurers – should also be alert to potential litigation. Law firms are warning that insurers of nurseries, shelters, charities and care homes for the elderly should expect a future rise in claims for abuse and neglect.

Shifting the cost

This year a landmark ruling in the case of R (McDonald) v the Royal Borough of Kensington & Chelsea held that a local authority was entitled to reduce its package of care to the elderly. Stephensons partner Kate Sweeney warns that while this approach may reduce costs in the short term for local authorities, it will inevitably transfer more risk to the private sector.

She argues that this decision will force a shift towards cheap options available from private agencies when it comes to care for the elderly, where workers can often be poorly paid and, in some cases, poorly trained. “In the long run, it is just a shifting of the cost. If that elderly person needs care and corners are going to be cut, it is going to create problems,” she explains.

Beachcroft’s Jefferson points out that, as mainstream insurers move towards insuring private sector agencies, most notably care homes for adults, they need to be acutely aware of these concerns and of changes in the legal landscape when underwriting risks.

Furthermore, Zurich’s Hunter warns that insurers must be vigilant in ensuring that their insureds have robust risk assessment procedures in place, which will be unaffected by budgetary concerns. “Unfortunately, you will always find one or two isolated incidents, but what you shouldn’t find is an entire failure of systems,” he explains. “While you can never fully eliminate these risks, you can try to reduce them as much as you can.” IT

Changes in limitation

In 1998 the case of Mrs A v Hoare, dubbed the Lotto rapist case, changed the statute on limitation in assault cases.

In 1989 Iorworth Hoare was jailed for life for the attempted rape of 59-year-old teacher Mrs A.

In 2004, while on day release from prison, Hoare bought a single lottery ticket and won £7m. Mrs A then sued him for her injuries suffered in 1989. However, the law prevented her from seeking damages from Hoare because she was legally out
of time.

In a personal injury or negligence claim, a claimant has three years from the date of knowledge to issue proceedings under the Limitation Act 1980, but the court has discretion to extend this time. For an assault, a claimant had six years to issue proceedings from the date of the alleged incident.

The House of Lords decided such claims would no longer be subject to the six-year limit, and replaced it with a three-year limit that can be extended at the discretion of the court.

"If it were not for that decision, quite a number of claims that we have seen would not have been able to proceed," says Beachcroft partner Paula Jefferson.