The Human Rights Act is now fully in force. Andreas Loucaides says the implications for society and the insurance industry have yet to be seen....

As active underwriter of a syndicate specialising in a wide range of liability-oriented products, October 2, 2000 – when the Human Rights Act 1998 came into full effect in the UK – was potentially a red-letter day for me.

The new act has been widely publicised as heralding nothing less than a revolution, with predictions that a flood of litigation will ensue as individuals take advantage of the opportunity to pursue their grievances in the UK courts.

If this were to occur, then clearly the implications for insurers would be serious indeed. However, closer investigation of the detail of the act reveals a far from straightforward picture.

The act is intended to provide legislative backing to the common law rights of individuals to seek redress against public authorities for infringements of basic human rights, such as:

  • the right to a fair trial
  • the right to respect for private and family life
  • freedom of thought, conscience and religion
  • freedom of expression
  • prohibition of discrimination.

    Previously, UK citizens were required to apply to the European Court of Human Rights, a long process (taking approximately five years) with a low success rate. The UK government has passed legislation on certain specific breaches of human rights, such as discrimination.

    However, until now there existed no general law protecting the rights enshrined in the 1951 European Convention for the Protection of Human Rights and Fundamental Freedoms.

    The 1998 act is primarily intended to provide protection in respect of the acts of public authorities – defined in the act simply as "any person whose functions are of a public nature", for example the NHS, health trusts, local authorities, schools and the courts, including professional disciplinary bodies.

    However, it is considered likely to have wider potential impact. It is possible that the so-called "horizontal" application of the act will enable it to influence relationships between individuals and private companies, notably sub-contractors of bona fide public authorities.

    The full extent and likelihood of this is hard to gauge at present. It will only become clear once the provisions of the act have been tested in the courts. The Lord Chancellor has predicted that it will take about two years for all the implications of the act to be identified. The current position, then, is very much one of uncertainty over the full implications of the new act.

    From an insurance perspective, the position is equally unclear. Much will depend on how the act and convention are interpreted in practice.

    Some commentators have expressed the view that the act is unlikely to have a major impact on employment liability exposures – for example as covered under some legal expenses policy wordings. Employees' rights are already well served by UK legislation such as the Employment Relations Act 1999, the Data Protection Act 1998 and the Working Time Regulations 1998.

    On the other hand, courts and tribunals are included in the definition of public authority and will be required to develop the law in accordance with the principles of the European Convention. Therefore, it is possible that future case law will develop or extend the rights established by existing UK legislation.

    In any event, the increased publicity given to employees' rights as a result of the act may increase demand for employment practices liability or legal expenses insurance. And the need to have appropriate risk management procedures in place will assume even greater importance for employers.

    In contrast, there is only limited formal protection for individuals in respect of infringement of privacy, which has been identified as one area where the Human Rights Act may have a material impact for insurers. Evidence in respect of personal injury claims obtained by covert surveillance may breach Article 8 of the convention (right to respect for private life), but may be justified where sizeable sums are at stake. Policies covering libel and other media-related exposures may also be affected.

    It has been suggested that the act will make it easier for victims of bullying to bring actions against their schools. Article 2 of part II of the act states that "no person shall be denied the right to education".

    Similarly, Article 3 in part I prohibits "torture or inhuman or degrading treatment", which again may encompass many cases of bullying. Although a recent high-profile bullying case against West Sussex County failed, the legal costs of such actions are often substantial.

    Possibly the most important provision of the new legislation is Article 6 which states that everyone is entitled to "a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law".

    Several regulatory bodies and ombudsmen do not comply with the act's requirements in this regard – for example, the financial services ombudsman (whose decisions are mostly conveyed on paper, without a hearing), and adjudicators on cases under the Housing Grants Construction and Regeneration Act 1996.

    The latter do not have to give reasons for their decision, and as the decision could have serious implications for the parties involved, challenges under the Human Rights Act are possible. It will be interesting to see whether Lloyd's changes the way it carries out its own regulatory functions as a result of the act.

    Some commentators have predicted an upsurge in litigation now that the act is fully effective, citing the example of Scotland, where aspects of the act have been in force for over two years. However, of the many cases brought there, only 2% have been allowed, and compensation payments (where made) have been low. It seems likely that there will be an initial increase in many types of claims while the position is clarified, and claims costs may increase – even for those that are defended successfully – because of the need to examine the facts of individual cases in greater detail.

    For the moment, the jury is out as far as the insurance implications of the act are concerned. The courts will define the boundaries of the new legislation over the course of the forthcoming months, and insurers will be monitoring their decisions with interest.

  • Andreas Loucaides is active underwriter of Markel Syndicate 702 at Lloyd's.

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