Is the Compensation Bill spot on or an opportunity missed? Neil McLaughlin investigates
The Compensation Bill received Royal Assent on 25 July: a piece of legislation that started life with the aim of regulating claims management activities and that ended up being used in part to reverse a very recent House of Lords judgment.
Lawyers have been surprised that a decision in May worked its way through the parliamentary process in such short time, and the general view among the Forum of Insurance Lawyers (Foil) members appears to be that the government should have paused before pushing the amendment through so quickly.
The Act has now been passed and the mesothelioma clause is in. It is now hoped that government will work with insurers and claimants' representatives to help deliver the best processes by which these claims are dealt with.
What of the original purpose of the Bill?
We should remind ourselves that the general purpose was two-fold: to deal with the public perception of compensation being easy game and to regulate claims management services.
Will we now see the end of unethical claims practices and an end to the perception of easy-money generating real but perhaps doubtful claims?
Overnight eradication of all bad practice may be unrealistic but we can look forward to an environment in which those who carry on as before will find it much harder to stay in business.
Foil's view is that the Act is generally a good one and has the potential to go a long way towards ridding the system of bad practice.
However, that is not to say that Foil believes that all opportunities were taken to deal practical blows against some negative aspects of our compensation system.
The case was advanced for a clause that prevented a defendant being liable to pay compensation if the claimant was engaged in unlawful activity.
Likewise, the case was made for injury claims tainted by fraud to be treated similarly to first-party claims, with the result that the dishonest claimant could lose everything.
The Compensation Act does little if anything to add to paying parties' defences against the exaggerated and dishonest claims on quantum and those battles will be fought by other means. These issues should not be overlooked.
In terms of claims services regulation, it was important that all parties involved in the claims process took part in the Department of Constitutional Affairs (DCA) consultation on the form of the regulations and the code of conduct. That consultation closed on 29 August and was the opportunity to put your points to the DCA and influence the final form of the regulations and code.
Insurers will be interested in the types of claims covered by the regulations, the extent of exemptions, the complaints procedures available to third parties against claims providers and liability insurers' own position when there is third-party capture.
Each insurer will have its own experience of claims management organisations and can make its own contribution to the regime that regulates claims management services. The opportunity is there and dialogue should continue.
On the issue of exemptions, the current position is that trades unions will be exempt bodies. I am uncertain if this extends to services to members and family only, such that services to non-members are regulated. In any event, the logic of an exemption is unclear.
The purpose of the Bill is to regulate the provision of claims management services, that is, the activity is the starting point.
If unions want to carry out claims management activities and receive financial benefit by so doing it is not clear why they should avoid regulation if they are not otherwise regulated by another regulator.
Ultimately, we are likely to arrive at a point where the new legal services regulator has claims services within its basket and, given the quasi-legal nature of claims services, it seems sensible to align the regulation as far as possible.
Thus, a lawyer conducting claims should be regulated by the same regulator and to the same standard as accident management companies, claims management companies and so on.
A situation in which unions sit outside the regulation when everyone else is within it makes little sense.
The union exemption is also causing some concern in terms of claims management companies (CMC) attempting to set up as unions in order to avoid regulation. Anecdotal evidence indicates a couple of early attempts to do so.
Clearly, the legitimate trade union community will take this threat to its reputation very seriously and I have little doubt will monitor the situation very closely. If they fail to do so and the union exemption is abused by a CMC masquerading as a union, the losers will be legitimate unions as well as the wider system.
A word about the apologies clause is useful.
I have heard people say that the clause is unnecessary because we can all do things on a without-prejudice basis so nothing has changed. That misses the point of the clause, which is to make it clear to those whose job is not in claims that they can express regret and say sorry.
The challenge for all of us is to explain the clause to customers and clients to ensure that it takes full effect in practice. The clause is a good one and it will be a shame if it is not used to the best effect. IT
' Neil McLaughlin is the president of the Forum of Insurance Lawyers (Foil)