How can our businesses thrive when the compo brigade rule the roost?

IT can be an expensive business, getting children involved in organised physical activity over the Easter break – or indeed at any time. So should we blame the insurance industry for the extraordinary prices often being charged by the providers of a range of pursuits, be it at swimming pools, for outdoor water sports, or indeed even indoor games in apparently safe, padded play areas?

Excellent facilities – such as the Aqua Dome in Tralee, Co. Kerry – are at risk of closure because about one-quarter of its revenue is set aside to meet insurance costs. That’s before it pays any of its other bills, including staff wages.

To even get insurance, the centre has to meet the first €185,000 of any claims, so it puts aside €2 out of every €10 it charges to put into a reserve fund. Then it puts more money into insuring claims above that level.

Linda Murphy recently broke down in tears at the Oireachtas Finance Committee as she told how her indoor play centre in Navan, Co. Meath, is at risk of closure by the end of this month because of insurance premiums that have gone up 1,000% in the last five years, to €16,500. Her main competitor in the town, which has a population of about 40,000 people, has shut already. She chairs a group called Play Activity and Leisure Ireland, which has 60 members, all complaining about the same thing.

In case you don’t think this impacts on you, be warned: you’re paying for it with higher admission charges when you or your family use such facilities.

Dangerous

The insurance companies insist it’s not their fault. They claim that they can’t make profits by quoting insurance for businesses which engage in activities that could result in injury to members of the public – and subsequent demands for compensation. Many of them won’t even offer quotes or do so at such prohibitively high prices that no business can afford them. Those who do say they are making little or no money in providing the insurance.

Make up your own mind over whether you believe them. However, there are other things that must be taken into consideration.

One is the willingness of people to make claims, the prevalence of the so-called ‘compo culture’. Nobody can have any complaint about people with genuine injuries requiring compensation for loss they have incurred, if those injuries resulted from the negligence or carelessness of the business running the event or service of which they were availing. That’s what insurance is for.

But what about those who got injured through their own fault?

If two children clash heads, despite the supervision of competent adults, when on a bouncy castle, is that the fault of the service provider? Surely the parents who put their children into the playpen knew the risks when they did so?

To take a more extreme case: if somebody hanging off the side of a Luas falls off and gets injured, is that the fault of the Luas operator? Apparently it is partly so. There was a case recently where a teenager claimed damages for injuries received when engaged in what’s called ‘tram surfing’. Rebecca Kelly, now 20 but then 13, settled a High Court action against the Luas operator Transdev for €550,000 in damages.

Here’s what she did: she gripped the edge of the doors as it departed the Fatima stop on the Red Line, fell back on the tracks and hit her head before her friend and others pulled her out of the way of an oncoming Luas tram. Her lawyer accepted the accident was her fault and that she knew at the time that it was a dangerous activity.

According to the settlement reached before going to trial, Transdev agreed to be held oneseventh liable. Apparently it has had to settle a number of cases for not making it sufficiently difficult for idiots to get a grip on the carriages of moving trains. The mind boggles. Surely injuries sustained while doing something you have been explicitly told not to do, or while committing a criminal act, should not be anyone else’s responsibility?

But this is apparently why insurers often settle cases before they go to court, for fear that they end up on the receiving end of judgments like this, added to the enormous costs of paying barristers and solicitors on both sides in reaching that outcome. They feel that such cases can be a sheer lottery – except that if they lose, it is they who end up paying out a fortune.

Even if they win, they almost never recover the costs of having defended the case, because the claimants don’t have any money.

Perjury

And yet because people attempt to protect themselves financially by settling these cases, the law has created a vicious cycle. Knowing that there can be a substantial windfall from winning in court, claimants hold out for high settlements. They are encouraged by lawyers who might take about half of whatever money comes their way. The insurers acquiesce because the costs of an actual court case being heard can be so high… and they usually have to pay it.

This encourages people with relatively minor, or perhaps exaggerated, injuries to have a go at getting a win. If they can find solicitors to take a case on a ‘no-foal, no-fee’ basis – in other words, no payment for the lawyers unless there is an award or compensation settlement – then it is a no-risk scenario for them.

They could, of course, face perjury charges if a judge deems they have lied in an effort to falsely get money.

But in this country, almost nobody is ever charged with perjury – despite numerous instances of claimants having been shown to have lied in court. (In fact, many experts argue that Irish law makes it effectively impossible to prosecute people for perjury anyway.)

The irony is that legitimate claimants often seem to have to wait much longer to get the compensation to which they are entitled – or they simply don’t claim at all. They are less likely to stamp their feet and cause trouble for the insurer. Being nice brings no rewards.

No wonder businesses – paying ever higher insurance – are furious. They don’t get a say as to whether or not the chancers get paid off. They can provide footage from surveillance cameras, evidence of previous claims, information that claimants are scamming the system… and yet because the risk from our legal system is so great, the insurers feel they have no choice but to pay up. And obviously those costs are then recovered through higher insurance premiums for the next year.

Junior finance minister Michael D’Arcy says he wants to bring in laws to make it compulsory for insurance companies to reveal the size of settlements, to notify the insured before a claim is settled and to explain the reason why. They will also have to give the insured far more notice before increasing claims, giving the insured time to shop around.

One of D’Arcy’s problems is that Justice Minister Charlie Flanagan – a former solicitor – does not seem anywhere near as exercised about dealing with this issue promptly. Both seem to be convinced – as, of course, is the legal community – that the insurers are at fault.

Change

Yet if you want a neutral but informed opinion, why not consider the words of Nicholas Kearns, the former president of the High Court. He has seen what’s happening at first hand, and seems unequivocal about where the heart of the problem lies. Mr Kearns, who also previously headed the Personal Injuries Commission, has been damning in his comments about our politicians’ failure to reform the country’s claims culture and the rewards it gives to those who exploit it.

‘I have reached a point, not only in my legal life but in my life generally, where I am convinced a moment has come in this country where something really has to be done about our compensation culture,’ he said. ‘Those who deny that there is any significant problem should go and join the Flat Earth Society or a climate change denier programme.’

In a 2018 report, Mr Kearns found that compensation for personal injury claims in this country was among ‘the most generous in Europe’.

He wants a dedicated Garda unit to prosecute those who bring wrongful or fraudulent claims. Mr Kearns recently spoke at a Personal Injuries Assessment Board conference at which he said there is no constitutional bar to capping awards for minor injuries. This could be important as awards for minor injuries in this country are almost five times those paid in England – and that is then reflected in the premiums charged.

The former judge also wants a judicial council which would provide guidelines on the appropriate levels of damages for personal injury cases.

And, rightly, he wants the insurers to make a public commitment to reducing premiums if award levels do fall – and to then act upon that commitment.

The alternative to action, he said, was ‘that businesses continue to go under at an everincreasing rate, throwing people out of work and diminishing Ireland’s reputation as a place where business can flourish in a post-Brexit world’.

Is that really what we want our legal system to achieve?

The lawmakers, however, are still years away from delivering change.

How many jobs will be lost in the meantime? How much more expensive will the charges passed on to customers by companies be?

It makes no sense. This is an issue that requires immediate action.